The Keystone Speculator's Housing Market Indicator; US Housing Recession Ongoing for 6 Months

The US Housing Starts yesterday come in at a robust 1.631 million units a big +22% increase the fastest pace in a year. Television pundits proclaim that a strong recovery in housing is underway led by Federal Reserve Chairman Powell that testifies before Congress today. The band is playing and the girls are dancing. Confetti is thrown in celebration and the wine is flowing like water.

Keystone brings a wet blanket to the party. Obviously, one number (the 1.631) is not a trend as the old cliché goes. Second, 4 of the last 5 revisions in Starts are down and the one that was up was only a marginal increase. In other words, that 1.631 million units number may end up as 1.50 or 1.55 million units next month when the revision is announced. Third, the spread in the chart above, that identifies the US housing recessions and recoveries, is the widest yet.

The US housing recession is now 6 months along and counting with the indicator lines diverging from each other (worsening). Needless to say, there is a lot riding on next months Housing Starts number on 7/19/23; it is uber important the Superbowl of Starts.

Here is the link to the prior article that highlights the housing market turmoil this year. The housing data has been more encouraging over the last couple weeks prompting Pope Powell and the tv pundits to proclaim blue skies and rainbows ahead for the housing industry. However, if there was one time of the year where you expect a pop in Starts, it is now, springtime. Duh. Spring is when new construction begins and folks hope to be in their McMansion or new apartment by Thanksgiving (late November).

2/16/12; Housing recession ends and recovery begins due to the Federal Reserve's obscene money-printing to support the corrupt crony capitalism system from 2009 forward

7/17/19; 7-year housing recovery ends and housing recession begins (note this is before the COVID-19 pandemic begins)

1/17/20; 6-month housing recession ends and housing recovery begins fueled by more obscene Fed monetary stimulus and now also Congressional fiscal stimulus during the pandemic verifying that capitalism does not exist; Powell may be thinking that the 6-month housing recession pattern will repeat further encouraging him to say that the housing sector looks good going forward

12/20/22; 3-year goosed housing recovery ends and housing recession begins now 6 months along and becoming worse despite the happy 1.631 million units Housing Starts number yesterday. The Starts on 7/19/23 will provide clarity. 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 Thursday Morning, 6/22/23, at 7:10 AM EST: KBH reports an earnings beat last evening and guides higher. LEN reported positive results last week. It is interesting that the housing recession lingers on for 6 months (there is also an ongoing manufacturing recession), but homebuilders are at or near record high stock prices. LEN, KBH and TOL are at record highs but XHB is not. ITB is trying to print new record highs. All five of these tickers are topping-out with negative divergence over the next couple weeks so they can be shorted going forward say from early to mid-July forward. A weekly downtrend will begin for the homebuilders. The homebuilders benefit in the current situation for several reasons. The stocks were beaten-down so traders stepped-in to buy the bargains. The hype in tech and the AI orgy lifts all boats. The existing house market struggles with no inventory. People have low mortgage rates and do not want to move. Folks that need to move into a house are forced to build a new home (if they can afford it) since there are few existing homes available. The homebuilders are lean and mean operating efficiently. Rates relaxed lower for a couple months providing a tailwind for the builders but in the last few weeks rates are moving higher. Once the homebuilder stocks top-out on the weekly basis in a couple weeks and begin trending lower for several weeks, analysts will focus more on the ongoing housing recession. KBH trades down -2.5% in the pre-market. Pundits and analysts are shocked at the pullback considering the big beat and higher guidance and ask why? Because you are in a housing recession, dummies.

Note Added Thursday Evening, 6/22/23, at 8:40 PM EST: Existing Home Sales are flat on-month (+0.2%) and down -20.4% year-on-year. Lack of inventory (tight supply), inflated prices and high interest rates are to blame. Also low interest rates that are locked-in with people unwilling to move since they will be hit with a higher rate on a new loan. Everybody and his bro, including Pope Powell in his pale green robe, say the housing recovery is in full swing with nothing but blue skies ahead. The United States has the lowest availability of existing homes since 1999; that is nothing to party about Prince.

Note Added Friday Morning, 6/23/23, at 11:05 AM EST: Treasury Secretary Yellen pooh-pooh's the talk of recession. Janet looks under the buffet table and opines, "Nope, no recession here." She looks behind the curtains and announces, "No recession here, either." Yellen says the house construction and retail sales data remains strong and the labor market is resilient. Well, she needs to look at Unemployment Claims over the last 3 weeks. Meanwhile, Eurozone PMI's sh*t the bed some falling back into contraction. Ditto Japan. The eurozone manufacturing weakness sends the euro lower and US dollar index higher sinking US stocks. European chemical companies are taken to the shed behind the garage and beaten mercilessly. If the economy does not need resins, chemicals and paints, well, you do not have a recovery, you have a sick economy going forward. As they said in The Graduate, hello Mrs Robinson, you look lovely today, the key word is "plastics." Profit warnings from the chemical industry are bad news. The services sector is rolling over in Europe (generally, right now in the US and Europe, goods are disinflationary and deflationary while services remain inflationary but probably for not much longer; services will roll over and join goods). Automaker Ford announces new layoffs. How's those glorified golf carts (EV's) going, buddy? What idiot buys an EV when there is a gas station on every corner? The auto golf carts do not work in a power outage or natural disaster. Buy yourselves some good walking shoes if you buy an EV. In a power outage, you will be stuck at home unable to go anywhere, with a 1-ton hunk of junk sitting in the garage, unless you walk. A gasoline car can get you coast to coast effortlessly if you decide to take a trip on a whim. An EV requires pre-planning of your trip; 'good luck wit dat EV, sucka', as they say in the Bronx.

Note Added Saturday, 6/24/23: Federal Reserve data indicates a 71% chance of recession the highest numbers ever and in the past, a recession has occurred within 12 months every time. This activity has been ongoing so the recession will be here, say, by April 2024 or sooner. Thus, the US will be in recession either now going into and through Q3, or Q4, or Q1 2024. Choose your poison. The chart above hints that the recession will be here sooner not later so Q3 (July, August, September) and/or Q4 (October, November, December). Keystone will end up with nothing in his Christmas stocking this December not even the typical chunk of coal. 

Note Added Sunday, 6/25/23: The US PMI is 53.0 slipping lower but remaining above the 50 level that separates economic expansion from contraction. The manufacturing recession continues with the US Manufacturing PMI at 46.3. Services PMI is holding-up at 54.1 as long as America's upper middle class and privileged elite, that screwed everyone else over the last five decades, keep spending money.

Note Added Thursday, 6/27/23: The Case-Shiller index falls year-on-year for the first time in 12 years. The home-price reset phenomena is over. Home prices are dropping. New Home Sales pop +12.2% on-month and +20.0% on-year. People that need a home, and have the money, have to build one since folks are remaining in their houses enjoying a low mortgage rate (they do not want to move and end up with a far higher mortgage rate). Analysts and television pundits proclaim a housing recovery is in progress and there is nothing but blue skies and rainbows ahead.

Note Added Wednesday Morning, 6/28/23, at 6:16 AM EST: The Ford layoffs include engineers. Not good. Google is laying off employees. The tech layoffs are mounting including Mister Softy (Microsoft), Scamazon, Google and dozens of smaller firms and start-ups. When the economy fades, the start-ups and other research-type projects are first to get axed and the employees on these projects are sh*t-canned. If you are working now, make sure you do not charge any time to overhead; if you do, you will be laid off. If you have a few hours of time that cannot be charged to a client or customer, ask your boss for more work since that may keep you off the layoff list a bit longer. Even if the work is not there to give you, the boss will remember that you showed initiative and he may keep you around a bit longer. Banking giant UBS, merging with Credit Suisse, announces that one-half the workforce at CS will be canned. Ford, General Motors and other automakers are laying off workers. When the engineers are axed, that signals recession. The engineers and tech jobs are high-paying so consumer spending takes a hit. What people forget about at the start of recessions, is the impact that layoffs have on society and the workers that still have jobs. The day after a company announces layoffs and kicks workers to the curb, the boss calls a meeting for the workers remaining and tells the b*tches to pick up the pace and perform the work of the sh*t-canned workers and not moan about it. Anyone complaining will be next in line to be axed. Neighbors and relatives hear that smart Johnny lost his job and wonder if their jobs are in jeopardy. People will cut back on spending for fear of losing their jobs even if they have a secure job. This pullback accelerates the recession and things fall apart quickly. It typically starts going downhill fast with the recession monster starting to growl strongly when you hear that engineers, accountants, tech workers, programmers and other highly-paid employees are canned.

Note Added Wednesday Evening, 6/28/23, at 7:36 PM EST: Federal Reserve Chairman Powell, at the central banker meeting in Portugal, proclaims, "....it's so uncertain right now, in my view, the least unlikely case is that we do find our way to better balance with without a really severe downturn." Huh? Powell continues, "I think there's a, there's a, significant probability that there will be a downturn as well though, but that is not to me the most likely case." Say what? Can you make sense of that? Whatchu talkin' 'bout Willis? Powell is a traditional two-handed economist. On the one hand, and then on the other hand.... If he expects a recession, why is he raising rates? The world is in uncharted waters but each central bank claims to own the correct map for the path forward.