The Keystone Speculator's Housing Market Indicator; UNITED STATES SLIPS INTO A HOUSING RECESSION 12/20/22

THE UNITED STATES SLIPS INTO A HOUSING RECESSION STARTING 12/20/22.

Wow. Take cover. Protect the women and children. Look out Mama, there's a white boat comin' up the river.

The Keystone Speculator's proprietary Housing Market Indicator signals a US housing recession starting yesterday, 12/20/22. Let it be said, let it be written, let it be done.

2/16/12; Housing Recession Ends and Recovery Begins

7/17/19; 7-Year Housing Recovery Ends and Housing Recession Begins

1/17/20; 6-Month Housing Recession Ends and Housing Recovery Begins

12/20/22; 3-Year Housing Recovery Ends and Housing Recession Begins

The 3-year housing recovery was fueled by obscene monetary (Federal Reserve) and fiscal (Congress) stimulus during the pandemic.

Merry Christmas and Happy New Year! This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 1:16 PM EST: New Home Sales sh*t the bed down -7% in November, a turkey, now down for 10 months in a row, so this data reinforces the housing recession call.

Note Added 5:00 PM EST: Neil Dutta at Renaissance Macro Research says there is no recession in sight going forward.

Note Added Thursday, 12/22/22, at 10:45 AM EST: Tony Dwyer of Canaccord says the US is not going into a recession. These analysts must have purchased their crystal balls at a different store than Keystone.

Note Added Tuesday Evening, 12/27/22: The Case-Shiller house index reports prices falling for 4 consecutive months through October. November is likely 5 months and December 6 months. Home prices fell in all major US cities in October.

Note Added Wednesday Evening, 12/28/22: US Pending Home Sales take the pipe dropping for six consecutive months and the second lowest ever (the index started in 2001). The Fed's higher interest rates are putting the squeeze on the housing market.

Note Added Tuesday Morning, 1/17/23: Economist Ken Rogoff warns that the US housing market faces another -10% drop over next couple years.

Note Added Thursday Morning, 1/19/23: Housing Starts drop -1.4% in December to 1.382 million. November's starts are revised lower. The December decline is a near -20% drop in multi-family starts while single-family starts are up +10%. America's wealthy, that screwed everyone else with the help of the Federal Reserve over the last few decades, are still buying McMansions with their effortless stock gains in the rigged crony capitalism system. Keystone's Housing Market Indicator continues signaling a US housing recession starting 12/20/22 one-month ago.

Note Added Friday Evening, 1/20/23: Existing Home Sales fall -34% year-on-year down for 11 consecutive months. December is the worst home sales since 2008. First-time home buyers and young buyers continue having trouble affording a house. Other data shows credit card defaults rising; not good. People are using credit cards to pay bills, now they cannot pay the credit cards. Car loan delinquencies are up +27% year-on-year. People are losing their jobs, and their fancy cars. Demand is falling in the housing market since people are pinching pennies these days to get by and hopes of saving for a down payment for a home with a white picket fence are hopeless.

Note Added Thursday Evening, 1/26/23: Goodyear is cutting jobs; no tires means no rubber means demand for earth-moving machinery and trucks is weak. Construction of any house, building, road or other project begins with moving the earth and workers showing up in trucks; the lack of need for tires is telling; the builders are not that busy. Pending Home Sales are up +2.5% in December stopping the 6-month slide and the best since October 2021.

Note Added Thursday, 2/16/23: US Housing Starts are down -4.5% to 1.31 million the lowest since June 2020. Both single and multi-family units are hit about equally. The prior month's 1.382 million Starts shown above are revised lower. The housing recession, that started a couple days before Christmas, is now 2 months along. In addition, some rubber and tire makers announce headwinds going forward which is not a good omen for the automakers or earth-moving and construction equipment companies. It is a mild winter in the States. Here in the beautiful Laurel Ridge Mountains of southwestern Pennsylvania, it was over 70 degrees F (21C) yesterday, and today is nice, ridiculous temperatures for February in the middle of wintertime and yet, many construction guys are sitting at home.

Note Added Tuesday, 2/21/23: HD takes the pipe falling -4% in the pre-market. Home Depot reports flattish guidance going forward disappointing stockholders. It is especially disturbing since springtime is coming and people should be pumped-up about remodeling their homes or buying new ones; they look limp instead of being pumped-up. HD finishes the day down -7%.

Note Added Ash Wednesday Morning, 2/22/23: Wall Street analysts, economists and central bank officials are singing in unison that a recession is not in the cards going forward. The PMI Services Index pops above 50 so the services sector is being waved as the banner of great times ahead. US Existing Home Sales are at the lowest level in over 12 years but hey, look at that services sector.

Note Added Ash Wednesday Morning, 2/22/23: Home Purchase Mortgage Applications are down -3.5% year-on-year January-to-January although there is increased activity over the last month.

Note Added Thursday Morning, 2/23/23: Home Prices retreat -5% in H2 2022. The average home price falls from 433K peak in May 2022 to 383K a -12% drop. Areas such as Miami, other parts of Florida, Tennessee and South Carolina see rising house prices. Americans are running away from the wokeness to places that shun wokism and also folks are leaving high tax areas seeking low-tax states and cheaper places to live. Prices drop in New York and San Francisco since these areas are turning into high-crime dumps. People do not want to move nowadays since they have a low mortgage rate acquired during the Fed's money-printing days. Wells Fargo, a big mortgage writer, cans hundreds of mortgage brokers so obviously, the real estate market is taking a hit. This just in. A commercial real estate lender associated with Pimco misses a payment. Missing payments is never a good thing.

Note Added Monday Morning, 2/27/23: Existing Home Sales are up +8.1% month-on-month but remain down -24% compared to January 2022 (year-on-year). 

Note Added Tuesday, 2/28/23: The Southern California region reports an all-time record low in home sales down -43% year-on-year. 60% of Americans are living paycheck-to-paycheck. Johnny Paycheck.

Note Added Wednesday, 3/1/23: Mortgage Applications to buy new homes drop -6% week-on-week. Mortgage demand continues falling for the third consecutive week at a 28-year low as interest rates sneak higher.

Note Added Thursday, 3/2/23: Blackstone defaults on a real estate bond. In other retail news, small retailers that typically do not access the capital markets are in or falling into trouble (default rates rising). The extra benefits in the SNAP food program during the pandemic ends; families will face more difficulty putting food on the table because of Biden's stupid war on the oil and gas energy complex. It is utter stupidity touting glorified golf carts (EV's) as the path forward for America when natural gas is the fuel of the Gods.

Note Added Friday, 3/3/23: 60% of Americans say they have less money than one year ago. Only 12% say their savings grew over the last year (upper middle class and elite privileged). Builders are providing incentives to home buyers to keep the building gig going. This stuff never ends well.

Note Added Tuesday, 3/7/23: Silicon Valley Bank is failing; a bank run is occurring. It will be the second largest bank failure in US history. There may be contagion risks ahead. A whiff of 2008-2009 is in the air.

Note Added Wednesday, 3/8/23: The ADP Jobs Report loses 16K construction jobs. Say what? With the spring construction season at hand, construction workers are sh*t-canned? Construction employment drops -49% month-on-month. Some of this is seasonal but it gets your attention. A real estate and property gauge in China collapses -20% in the last 10 weeks.

Note Added Thursday, 3/9/23: Construction job openings are down -250K on the JOLTS the biggest drop ever. Unemployment Claims are 211K with the 4-wk MA now up to 197K claims per week on a 6-week uptrend. Rising claims are a characteristic of the coming recession. Check.

Note Added Friday, 3/10/23: The US Monthly Jobs Report shows construction jobs at 24K in line with the monthly average but it is springtime and building season is about to begin so more jobs would be expected. Wages are growing at only 3.6% annually retreating from the higher inflation stuff months and a year ago at over 5%. For inflation to be taking hold, wages need to be growing at 4.5%, even anything over 4% would at least hint that higher inflation is ahead. However, if wages remain this low, inflation will quickly retreat and the people worried about inflation will become worried about recession.

Note Added Monday, 3/13/23: The Silicon Valley Bank collapse continues. Signature Bank is next. Regional banks are getting smacked hard in the stock market. Regionals do the bulk of the lending for residential home mortgages.

Note Added Tuesday, 3/1423: Credit Suisse is in trouble the stock price falling like a stone so the entire global banking system is in turmoil. First Republic is now in trouble in the US and may be the next bank domino to fall.

Note Added Thursday, 3/16/23: US Unemployment Claims are 192K less than expected but the 4-week MA that has been moving higher for the last 1-1/2 months remains at 197K claims per week. Housing Starts are 1.45 million higher than expected and a +10% increase over last month's number that is revised a touch higher to 1.321 million units. It is springtime so a pop in Starts would be expected but the US housing recession as per the chart above is 3 months along beginning the fourth month. The US is going to need a lot more than 1.45 million units going forward to break the developing downside mojo with housing. In spring, which begins Monday in the northern hemisphere, the US builders have the wind at their backs. If they cannot pull the housing sector together now and over the next couple months, the US will be in serious trouble.

Note Added Tuesday, 3/21/23: Property developers and real estate stocks are heading south. SPG (Simon Properties) and BXP (Boston Properties) have crashed over the last few weeks. US Existing home Sales jump +14.5% the biggest rise in 2-1/2 years. However, the median home price is down more than -20% compared to a year ago. One-quarter, and almost 1 in 3, existing home sales are all-cash deals. Humorously, that means the mafia, corrupt politicians, tax cheats and drug dealers are living in the McMansions.

Note Added Friday, 3/24/23: Homebuilder DR Horton provides a gloomy outlook going forward. Your radar goes up when you hear this because a non-optimistic homebuilder is as rare as hen's teeth. They are in the business of building and selling houses so you never hear a discouraging negative word; it is always rosy happy talk encouraging you to buy before it is too late. Therefore, the gloomy homebuilder comments are concerning reinforcing the belief that the US housing situation remains dicey. The US HUD and Census Bureau reports that sales of newly constructed homes are up +1.1% but down -19% year-on-year. There are less existing homes on the market helping to levitate new home sales by a hair. Something has to give. Either the housing recession turns into a mini-event and the good times roll again, or, the housing recession worsens and rolls over into Hades going forward as more highly-paid tech workers are given pink slips.

Note Added Tuesday, 3/28/23: S&P Case-Shiller Index says home prices have fallen for 7 consecutive months. Prices drop in high-crime cities like San Francisco, Portland and Seattle. In separate polling, more analysts are worried about the US commercial real estate sector going forward.

Note Added Sunday, 4/4/23: There are a growing number of analysts and television pundits waxing worry over the commercial real estate market. Refinancing problems and contagion risks are on the table. Over 50% of commercial mortgages will be renegotiated over the next 2 years. Wow. Rents are going up everywhere. Are boarded up strip-mall stores in our future? Vacancy rates for commercial real estate (CRE) are near 20% and increasing. $1 trillion in real estate debt must be restructured over the next 20 months. As they say in the Bronx, "Good luck wit dat."

Note Added 4/15/23: Howard Marks, bigtime Wall Street investor that runs Oaktree, is concerned about the commercial real estate market. He says the bank failures may contribute to a credit crisis.

Note Added 4/17/23: Bloomberg reports that Brookfield defaults on $161 million office debt. Commercial real estate problems escalate. Blackstone and other investment companies and banks own a lot of commercial real estate in their portfolios.

Note Added 4/18/23: US Housing Starts fall -17.2% year-on-year and are down -0.8% month-on-month to 1.42 million units. THE HOUSING RECESSION THAT STARTED AT CHRISTMAS AS PER KEYSTONE'S METRIC IS IN ITS FOURTH FULL MONTH AND WILL BE STARTING THE FIFTH MONTH IN 1-1/2 WEEKS. THE METRIC HAS WORSENED EVERY MONTH SINCE CHRISTMAS SO THERE IS NO SIGN OF RELIEF. THE SEPARATION AND DISTANCE OF THE LINES ABOVE ON THE CHART ARE WIDENING (WORSENING) THROUGH TODAY'S DATA. Most people continue standing around picking their noses asking, "Housing recession? Huh? What? The guy on tv said don't worry about it."

Note Added 4/20/23: Existing Home Sales drop -2.4% on-month and are down -22% on-year. All US regions repot year-on-year decreases in sales. Redfin sys median home sale prices are down -3.3% year-on-year the biggest reduction in a decade. Pending home sales and new home listings are the lowest since the pandemic. Wall Street pundits keep saying real estate is fine, no problemmo. Of course they do since they own boatloads of property purchased at low rates that are now becoming higher rates. The Conference Board Leading Economic Index is down -1.2% warning of worsening economic conditions and likely recession.

Note Added 4/21/23: Renaissance Macro Research's Neil Dutta, an uber bull, proclaims, "Recession is not in the data." Dutta opines that real estate and homebuilders are fine. He decrees, "Housing is reaccelerating." Dutta expects single-family home building to increase ahead. "The housing market is working." He should pass around whatever he is smoking. Dutta says there are no worries for a couple quarters (for 6 months almost the remainder of the year). The Future's So Bright, I Gotta Wear Shades as Timbuck 3 sings.

Note Added 4/21/23: Big Lots stock, BIG, collapses -13%. Overstock, OSTK, drops -6%. Both companies say furniture sales continue trending lower now cutting into margins and profits. People do not need furniture since they are not buying a new house or moving (people are frozen in place unwilling to exchange a locked-in low mortgage rate for a much higher rate in a new house).

Note Added 4/27/23: Short-sellers are attacking the Blackstone and Starwood REIT's expecting problems ahead.

Note Added 4/30/23: Warren Buffett's right-hand man at Berkshire Hathaway, 99-year old Charlie Munger, proclaims that trouble is ahead for the commercial property market. As property prices retreat, and rates rise, the mountains of bad loans at banks will become a problem. Munger does not expect a 2008-style fiasco for the commercial housing market, but it will be problematic going forward. Other analysts say there are very few, if any, new commercial loans occurring. Munger decrees, "We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There's a lot of agony out there. A lot of real estate isn't so good anymore." Munger sounds like he was watching old Hee-Haw reruns and singing "Gloom, Despair and Agony On Me." ..

Note Added 5/1/23: A business model estimates the probability of US recession at 67%. The housing recession, as illustrated above, and a manufacturing recession, is clearly underway but the broad US recession keeps hanging out with Godot. The analysts that keep pushing off a widescale recession further into the future have been correct so far, but like any trend, it is a trend, until it isn't, and it may be an abrupt ending. 

Note Added 5/11/23: US Jobless Claims hit a 1-1/2 year high. Money-market funds are at all-time record highs. People lose confidence in holding money in banks.

Note Added 5/12/23: Sweden is moaning about its commercial real estate market. The loan industry is in trouble. Appraisals drop. Some European banks are impacted. Is contagion starting to wash-up on American shores? China's property market is toast. 1 in 4 Chinese young folks are unemployed and since the CCP (that controls the Chinse people) are filthy liars, it is likely one-third or more of the young Chinese folks out of jobs. Do not look toward commie China to power the world economy forward. In the United States, take the $6 to $8 trillion commercial real estate market and say 25% will need write-downs; that will crater illiquid banks. -20% write downs create insolvency, and yes, bank runs.

Note Added 5/14/23: The Fed's recession risk indicator hits levels greater than November 2007 right before the subprime crisis blew-up. According to a new poll, less than 50% of Americans think now is a good time to buy a house. The same result occurred last year and this attitude towards home-buying has not happened in decades. Americans now owe $1 trillion on credit cards. In the 1970's, when credit cards came into public use, they were called "magic plastic" and many warned that the cards would create big problems down the road. Well, we're at the end of the road.

Note Added 5/15/23: Zillow proclaims that house prices will rise +5% over the next year. Zillow has no credibility due to overestimating prices. Prior estimates were not even close and the CEO sells a home 40% lower than Zillow's prediction of its worth. 

Note Added 5/16/23: The NAHB reports that builder sentiment is at a 10-month high rising for the last 3 months. When have you seen a negative home builder? They are in the business of selling homes. Capich? Builders cite problems such as lack of availability of good building lots, regional bank issues, the Federal Reserve raising rates, tightening demand on construction loans, and high building costs due to inflation. Home Depot reports an earnings miss for the first time in many years. HD stock drops -5% ending the day down -2%.

Note Added 5/17/23: Housing Starts are 1.4 million in line with estimates. The prior month revision is reduced to 1.37 million units from 1.42 million reflecting a +2.2% rise in Starts month-on-month (Starts would be negative on-month if the revision did not occur). Housing Permits are down -1.5% on-month. Keystone's Housing Recession Indicator worsens with the two key lines in the chart above further diverging. The Housing Recession is 5 months along now beginning the sixth month. Starts are swayed by multi-family units over the last few months (townhouses, condos, rentals). Single-family construction is impacted by inflation. Costs to build single-family units are high and it is difficult to sell at elevated prices into an economy that is weakening. Other home-building headaches are listed in the previous message. The spinmeisters can paint a happy face on the housing numbers all they want but the multi-month housing recession worsens. Homebuilder stocks remain on a multi-month rally many at 12 to 15-month highs (XHB, TOL, KBH, etc...). Wow. DHI (D R Horton) is at an all-time record high. Investors and traders are buying the homebuilder stocks seeing inflation subsiding going forward (homes will be cheaper to build), rates will move lower, supply remains short and demand remains strong. Many stay busy with some construction in the multi-family units. The bulls are chasing the homebuilding stocks higher believing in a huge rebound in the housing market ahead. Sounds like a lot of hope for the future but nothing concrete to back up the optimism in the short-term. As stated above, Keystone's Housing Recession Indicator now begins the sixth month and is the worst reading of the last 5 months.

Note Added 5/18/23: The US Census reports that 90 million American households are struggling to pay bills and monthly expenses. They are not house hunting instead scrapping to get by. The rich became filthy rich courtesy of the Federal Reserve over the last 14 years and the poor became poorer. Payback in the coming years will be ugly.

Note Added 5/19/23: US Home Sales are down for two consecutive months and home prices report the biggest drop in over a decade as per the National Association of Realtors (NAR). Existing Home Sales are down -3% month-on-month and down -23% year-on-year. Home sales in the western United States are down -31% year-on-year. Wow. 

Note Added 5/22/23: JP Morgan Chase (JPM) CEO Dimon says commercial real estate loans could threaten some of the banks. Dimon proclaims, "You're already seeing credit tighten-up." Dimon says construction loans, and loans on office properties and certain locations, will be off-sides in the months ahead.