Wolf Richter in an interview about these and other hot-button topics on “This Week in Money,” by HoweStreet.com, recorded on October 26:
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Your picture with the hat pulled down low, sunglasses, and scarf looks like you are hiding from the feds.
Good to see I’m not the only one with an overactive imagination, but in my imaginary world, it’s witness protection a la Steve Martin in My Blue Heaven.
Looks to be yachting to me… to a country without an extradition treaty after shaving a few pennies off every transaction from the Feds QE spree.
Wow, great narrative on the playing field upon which, we find ourselves. I’m still listening but would like to comment about the #1 issue you posited:
What will the Fed do next ? Typically, not what they should do.
I think the Fed should increase the FFR by 0.25 pct this week. Frankly, I am afraid that you are wrong about the Fed only controlling the shape of the near term yield curve up the one year and the the term bonds up to the 30, is naive.
I propose that the obese balance sheet of the Fed controls the yield curve, by hook or by crook.
Thus far, with their timid approach to derailing the “strong” stock and housing bubbles, er, markets, the are supporting a much higher inflation target that they claim to want.
Rather than doing their duty of extinguishing the very thought of companies raising prices through raising the interest rate significantly higher than it is now.
Thanks
etch-a-sketch haha
Case Schiller: home prices are up in top cities of the US for 6th consecutive month. No inventory, no crash??
They’re down from their peaks in May/June 2022 in 10 of the 20 cities, and only six set a new high.
Right here, with charts by metro:
https://wolfstreet.com/2023/10/31/the-most-splendid-housing-bubbles-in-america-october-update-10-of-the-20-metros-down-from-their-peaks-last-year-6-metros-set-new-highs/
“ and only six set a new high.”
That’s absolutely nuts.
New all time highs with 7% interest rates?!?!? Excuse me, almost 8% ?!?!?
Who can afford these prices?!?
On very low volume. Not many people are buying.
I thought he was a paraplegic from the picture.
Howdy Lone Wolf. Love these and listened to every word…..
Notes on the to be held Treasury refunding briefing this Wednesday…..
Hi folks……We are going to issuing enough treasuries of every duration to cover our debt …..out the wazoo!
Well, Fred, I think that is bedrock projection of the quantity of issuance will have to be purchase by mom and pop, who have been financially abused, for the past 13 – 15 years.
While a party was waged of drunken spending that ultimately is ending as all such parties end. With debt up the wazoo that needs to be financed under more sober terms.
I should clarify that the bright morning sun will shine equally harsh on both the sellers and the buyers.
Jim Grant of “Grant’s Interest Rate Observer” says interest rates are different from other things in finance in that they move on generational timelines. So we may be entering long term bear market in bonds.
We also know things do not go to heck in straight line. So there is that.
I also read (the transcript from) that interview. Another vote for higher for longer.
Grant’s a pompous ass. He turned me in for getting inside info.
Which, to me, seems like Grant is a good guy, if you were swindling yourself by trading on inside info.
In which case, you are the pompous ass.
cheers
Jim Grant seems to be a soul, destined to be eventually right, like Keynes.
Meanwhile, chastised for being wrong for 10 or 15 years. Now that the economic game plan has swung back to the format that he seems to have based his gloomy outlook upon, he may seem prescient.
Unless, QF is employed, and he will be doomed for another 10 or 15 years.
There’s no housing crash because we’re not in a recession. Duh!
There may not be a REAL housing crash, because Congress is going to step in, when things get bad enough, and throw money at rent & mortgage relief.
I agree with Wolf that finding the bottom will take a good while to find. During the GR, the top (Q1 2007) to the bottom (Q1 2009) took 2 years to play out. And that was during a really big recession with 10% unemployment.
One can easily make the argument that the 15% drop in new home prices really is nothing more than lopping off the FROTH. We really haven’t started the real downturn yet, if one is to come.
To date, all that’s happened is that we chomped into only about 1/3 of builders’ gross profit margins, so there’s a LONG WAY to go before we start seeing builders go under due to economic stress.
I’m getting 6% on my short term CDs with my credit union. Why buy Treasuries when I can get that rate right down the block from me?
You pay less tax on treasuries.
I guess the question is whether we have a divided Congress at that time. I don’t see much appetite among the GOP to bail out homeowners.
They let it happen during the pandemic.
The precedent has been set, and it really goes back to the GR when Bernanke ushered in the era of QE.
I don’t think you can draw any conclusions about the future from that abberation.
If they don’t, enough of them will be replaced until there is a bailout.
I wouldn’t be so sure. Even under the worst cases, unemployment goes to 9%. Most people will still have their jobs.
There is a housingcrash.
Not a crash in houseprices, but a crash in transactions.
I’m not joining the crowds that are yelling CRASH 2008 style, simply because that’s not the reality.
I expect sideways movements until a healthy balance of supply/demand has been reached, which may takes years or perhaps a decade.
When housing became objects of speculation and when big money purchased hundreds of thousands of homes, shelter stopped being shelter.
When ordinary people cannot compete against cash-buying institutions, this is what you get. Folks being priced out of the market.
I highly doubt higher rates will significantly impact the prices when there’s such a distorted demand/supply ratio.
My conclusion is that unless politicians stop institutional speculation with residential homes, unaffordability will remain at recordlevels.
I agree with Wolf.
Real estate moves slow and any significant changes in price, inventory or supply will take a long time
The oldest Bay Boomers turned 65 back in 2010. During the 20teens they began to retire at rates of 10,000 people a day.
The average retirement lasts about 15 years.
Many boomers stayed in their homes, they didn’t downsize like some of their parents and many of their grandparents did.
Starting around 2025 or so, a lot of homes will going up for sale as the boomers age out, move into assisted living, or pass away.
Perhaps Washington has already started pouring borrowed monies into the real estate market by providing tax payer monies to landlords to convert their empty office buildings into housing units. And the beat goes on.
These are guidelines to agencies mostly on how to leverage existing programs and tax rules and loans to encourage conversion of office buildings to residential. The purpose is to replace those empty offices with a new supply of housing, and thereby contribute to lowering housing costs….
Maybe no housing crash, but rather a slow, downward grind that sucks the financial life out of the next generation….
No crash in home prices but if yield keep going up then a lot of smart investors may want to lock in profit and deploy that money in risk free treasuries. This would put more downward pressure on home prices.
This weekend I was in a new sub division driving around and stopped by to look at home for my friend.
This is 100 miles inland from coast in so cal and carrying cost of new home costing $700K before mortgage is ~$1400 for Special assessment, HoA , Property Tax.
The median income is $45K.
All homes sold out.
Too much liquidity sloshing around.
How do they lock in profits without enough qualified buyers? Cut prices. Momentum is hard to stop
Stocks bottomed in March 2009 when money flows bottomed.
Good comment.
I’m not sure I agree that Congress will act to stop the necessary repricing of the housing bubble because, if they do, it will make matters worse.
Anti-competitive intervention in the marketplace is how the America government has squandered it’s credibility.
Someone earned the credibility, the very foundation that provided us with the unique opportunity in the first place. Unfortunately, the ones that are profiting are the ones that paid the least.
The American grace should not be for sale.
Best regards
dang – a most-eloquent statement (continued embrace of true competition to be lip-serviced, but avoided at all costs after winning a heat race…).
may we all find a better day.
If 5 year Treasury rates move up to 6%, I’d be a buyer since I plan to start collecting SS around that time.
Well, stay short my friend. As Wolf said, the Fed controlled short term interest is 5.5ish up until the one last bill matures, until the one year turns into a bond.
In common understanding, the Fed has no control of the interest rate structure in spite of the magnitude of evidence demonstrating the contrary hypothesis. However, the interest rate structure is mysteriously flat having overcome an obscenely bad portrayal of a wilting flower, dying by natural causes.
In another year, the way things are going, the debt may be close to $35 Trillion. 6% rates on that much debt would cost over $2 Trillion per year. Government holds a lot of short-term debt. That turns over the debt to the new interest rates in a few rapidly.
$2Trillion is about half the taxes collected, at this years rate.
Sounds like a big problem.
Wolf is right. It’s crazy what is happening out there.
Some would say it was crazy what everyone else was doing. Think about it, if you are the one doing something different then you may be the crazy one.
That being said, I think what is happening is crazy, I always have since I realized that I was eligible for the Vietnam draft. Which, actually, was the most rational thing that has happened since then.
Yeah, it’s been crazy because, I sometimes think, that every human being is nuts, basically.
Gifted with the curse of self reflection.
Tesla price cuts has mucked up Hertz business plan a bit too.
———————————————————-
Hertz is pumping the brakes on plans to electrify more of its rental car fleet after EV repair costs came in higher than the company anticipated, and after Tesla price cuts reduced the resale value of the majority of electric cars in its fleet by about one-third.
CEO Stephen Scherr said on the company’s third-quarter earnings update on Thursday, “our in-fleeting of EVs will be slower than our prior expectations.”
The rental car company reported lower than expected margins for the period ending September 2023, and the CEO said EV repairs were one challenge. “Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. On a unit basis, we achieved productivity gains across most categories of auto. The exception remained vehicle damage costs, particularly those on our EVs.”
Musk frequently says that electric cars require less maintenance than counterparts with internal combustion engines (including plug-in hybrid electrics). That’s a big potential selling point for electric cars, and a reference to items like motor oil, oil filters, engine air filters, transmission fluid, spark plugs and other items requiring annual maintenance or scheduled replacements.
But electric vehicle owners can face unique maintenance needs, as well. Nikhil Naikal, CEO of Kinetic, a startup that is not affiliated with Hertz or Tesla but provides repairs for electric and autonomous vehicles, told CNBC on Thursday:
“The reality of electric vehicles is that they can be 1,000 pounds heavier or more than gas vehicles, and they move faster, with higher torque. Since they’re extremely zippy and heavier, it’s just physics — the ability to overcome inertia so quickly is going to effect their suspension systems, the brakes and steering columns. It’s counter-intuitive, but even with fewer moving parts they are susceptible to requiring more maintenance. They especially require tire-swapping, because the tires wear out more quickly from that high torque and weight.”
I hope that Hertz keeps Tesla in their fleet. I’m currently renting one of their Model Y in SoCal for a couple weeks (first time driving a Tesla). It is vastly exceeding my expectations. Fabulous car! Tesla has jumped to the top of my list for a new ride when I was dead set on an ICE sports car.
After nearly 60 years of driving ICE cars/trucks/motorcycles (everything imaginable, too), I am smitten with my new 2023 Bolt EUV. And it’s certainly not just about the less maintenance and driving costs, but I actually love the thing.
Marcus…same. Only car I try to rent. There is a reason the Model Y is one of the best selling car in the US. They are great. Best infotainment system by miles, and I say that as someone that loves simplicity and ease of use.
The majority of the populace is mechanically (and electrically) ignorant.
EV’s can sell a promise of reliability via elimination of scary/complex sounding components, but they fail to state they add a lot of component complexity (motor controls and battery management systems are main ones…although they encompass a lot of subsystems)
Not to mention many of the components in ICE’s are pretty reliable, transmissions being a major outlier that most EV’s solve.
Anyway it almost like Mercedes selling the reliability of their cars because they have the same systems as Toyota.
EV’s can promise reliability but when you look at actual data on a car you want to buy now…get the “most complex one”…a Toyota hybrid
That’s because reliability is driven by both design complexity as well as good execution across the product life cycle. Life cycle costs are also very low if you get one of their new plug-in hybrids.
Gaston,
“Toyota hybrid?”
Yes. This morning I put another year’s license plate tabs on my 2013 Lexus RX450h. In a few weeks I’ll switch over the wheels and tires for winter. It is a good all-around machine.
I have been driving EV for last 10 years and for last 4 years solely EVs.
I didn’t incur absolutely any maintenance issue on any of my EVs other than just tire rotation.
Even the brakes last forever because of regen.
Now a days a car come with lot of non repairable parts irrespective of EV or not.
“The reality of electric vehicles is that they can be 1,000 pounds heavier or more than gas vehicles, and they move faster, with higher torque.”
That’s when you compare a Model 3 with a Corolla. But if you compare a Model 3 with a BMW 3-series that has the same performance, the Tesla is barely heavier or not heavier. All these weight comparisons have to be between vehicles in the same class of size and performance, rear-wheel drive, four-wheel drive, or front-wheel drive, etc. But that wouldn’t fit the anti-EV narrative. People who compare a Model 3’s weight to a Corolla’s weight are morons.
But agreed, EVs have a lot more instantly available torque than ICE vehicles, so most owners will be careful using it, but with a rental car, it would be fun finding out what that feels like time after time, wouldn’t it? And that can create all kinds of maintenance issues because your tires won’t last as long, and people are tempted to get in trouble, etc.
…probably a difficult one to sort, at present (NOT anti-EV, here), but will/are road-maintenance funding issues arising from declining tax revenues from future ICE fuel sales being adequately addressed at the local, state and Federal levels?
may we all find a better day.
Yes, and this is being solved by DMVs charging extra fees for EVs.
My Minnesota tab fees were $65 for my truck in March and the same for my SUV a couple weeks ago. For an EV in Minnesota, there is an extra $75 annual fee.
The only way to get the suspension damage described above would be to drive the car like a 17 year old muscle car maniac. I’ve put over 20K miles on my used 2018 Model 3 LR RW bought over two years ago, and the only maintenance has been a new 12 volt lead acid battery for $107 (the newer cars use Lithium Ion 12 volt batteries that last longer). It could need tires next year with 30K miles (the dealer put on new tires when purchased).
Well now, three years ago, one would have lost money on the very same bet that electric cars would fail. Now, as the world transitions to electricity
some are still selling the false narrative even going so far as too cite comments by the foremost EV salesman as evidence that EV is a dying industry. Surely he wouldn’t go so far as to dissolution his competitors.
Especially with the questionable “facts” you have presented.
In another year, the way things are going, the debt may be close to $35 Trillion. 6% rates on that much debt would cost over $2 Trillion per year. Government holds a lot of short-term debt. That turns over the debt to the new interest rates rapidly.
$2Trillion is about half the taxes collected, at this years rate.
Sounds like a big problem.
Wolf is right. It’s crazy what is happening out there.
This is why deficits go parabolic far sooner than people think and project with their models. They assume a low unchanging interest rate and they assume taxed income will grow proportionally with the debt. The deficit directly causes inflation that causes higher rates that causes even more massive deficits in an increasingly rapid cycle and this also forces their tax base out of business trying to service their debt.
Agree this is a problem but respectfully disagree with your numbers. Per WSJ article Feb 2022 Cochrane interview, when Fed interest rates hit 5% the interest payment on us debt will be $1 trillion per year.
It was $667 billion fiscal 2023.
Per my previous post the individual is buying over 70 percent of the treasury issuance.
Consumer savings rate now half pre pandemic.
Eventually the individual will not be buying as much treasury issuance.
My pea brain says that will mean higher Fed rates, or at least higher for longer. My lizard primal instinct fears the higher rates, they lead to higher interest debt payments.
This crowds out capital formation and has potential for creating a spiral of out of control government spending that devalues the dollar when Fed decides to print the money and drive rates down.
I still believe in US. Self correction via different polity with combination of fiscal restraint, and likely higher taxes.
Bottom line is the course we are on needs correction.
Good Report.
Washington DC would be a great place for these $10,000 EVs since everything is close by in a small area. It would help make the air cleaner as well since many of ICE vehicles are not regularly inspected. I don’t know how importing these inexpensive cars from China would go over with the Big Three auto manufacturers and their unions. Why not have them built here in the USA and charge a little more and keep the jobs here?
Would you personally buy a $10,000 small relatively bare vehicle? We had a really hard time selling $5,000 2-dr hatchbacks back in the day. We sold something like 200 trucks compared to 1 one of those econoboxes in a month.
Would you personally buy a $10,000 small relatively bare vehicle?
Yes
That’s all I’ve bought over the last 30 years. Dealers have a small margin on these so they don’t like to sell them.
Great for driving in DC with the narrow streets and French grid street plan, and lack of parking. People here all have small cars. When I take a long trip I rent a car.
Thanks. I’ve gotten professionally burned by betting on the $5,000 Ford Festiva in the early 1990s. Those were sturdy basic Korea-made hatchbacks that Ford imported, held up forever, 50 mpg with a 5-speed stick, and dealer-add-on AC. Manual everything else. We couldn’t sell them, took forever, lost money on them.
It’s really simple there destroying the dollar because no country wants reserve currency status it’s a huge ball and chain .China has publicly stated there not interested
“Shake in it’s boots”, those were your words that shook me. The global economy would shake in its boots if we had a bad recession in the U.S.. I am not expecting that any time soon.
I am betting on the current strong irritating inflation which is really more normal compared to the last 100 years. Still I am always ready to put a balancing short on the trading side of my portfolio to balance out my long term hold dividend investments.
We are in a supply constrained world which will generally give us inflation as far as my eye can see.
The market is roaring on the “no more rate hikes” narrative. At first, “pivot” was driving the market. Now “no more rate hikes” is the new pivot. There is just way too much money still sloshing around, and it will continue to slosh, and slosh, and slosh……
Actually, I think today was, perhaps, the biggest sucker rally in a great while. An anemic wall street market, selling their overpriced stock to the suckers buying before the market retreats towards it’s correct valuation point, some 40 – 50 pct below where it is now.
Remember the “12-18 months for rate hikes to be felt” BS? Yeah, how’d that work out? It’s almost like it’s just made up like “transitory.” The FED is losing the inflation battle, and they don’t give a sh!t.
the story is now 18 to 24 months. That’s what the ECB said
IMHO, the Fed is scared to death of a REAL housing crash. So far, we’ve just knocked off the froth from new home prices & bit into builder’s gross margins by maybe 1/3.
Why blow the bubble if you’re scared of the bust? Are they just “whinging it?” All bubbles, with history as our guide, crash spectacularly. It appears as if we have a FED cabal of rapaciously greedy, narcissistic madmen who have decided that they can somehow engineer entirely different results than history has proven.
Blowing bubbles then destroying the currency in an effort to prop them up is the absolute worst policy a central bank could endeavor. Period. And that’s who we have in charge. Jerome Powell and his entire board should have been removed from office.
In all fairness, inflation has come down quite a bit… It is still uncomfortably warm, but it was previously flaming hot. The housing market has definitely reacted as prices are down a hair, but volume fell off a cliff. Commercial real estate is hurting real bad both in terms of pricing and volume.
So rate hikes and QT are having an impact, but don’t worry, the Fed will happily abandon their new found scruples faster than you could type “QE” when we really start feeling the lagging effects of their actions. They pulled nearly a half-trillion out of their rears when only a few banks recently faltered, and far as they’re concerned it worked like a charm. Just wait until something big really breaks. Wolf likes to say the biggest thing already broke, but clearly the Fed wasn’t very worried about breaking price stability when they manifested $5T in the blink if an eye. They new exactly what they were doing and they will eventually do it again. Not yet while jobs are still strong. But whole $5T buys a lot of false prosperity, even $5T doesn’t last forever, especially while QT slowly unwinds some of it. The Fed is doing the right thing for now with rates and QT, but we should never fully trust an addict when their poison of choice is always just a button click away. When times get tough, addicts relapse. Folks who are marrying what they think is a changed Fed are probably going to get left at the alter.
“They pulled nearly a half-trillion out of their rears when only a few banks recently faltered, and far as they’re concerned it worked like a charm.”
yes, and two months later, they’d yanked the money back out and QT blew it all away. That’s the New Regime: If there is a problem, the Fed responds with short-term liquidity; and a couple of months later, that money gets sucked back out. That’s how the Fed had done it for decades before 2008, and now they’re returning to the old model. QE is likely dead.
We are in a period of fiscal dominance, where Congress has decided to spend its way into oblivion to mask the recessions and buy votes. The Fed is Congress’s b*tch, of course they are going to monetize it all. Inflation is the only option left – and wars.
When you pour over $10 trillion in monetary and fiscal stimulus on the economy in a brief window of time, massively distorting then breaking pricing and creating an inflation inferno, simply returning to historical rates is not sufficient to quell the inflation and heal the economy. You need just as large an overreaction to the opposite direction to revert. Otherwise, you entrench the inflation. They are entrenching inflation on purpose.
Exactly so. That’s why Volcker went to 20% Fed Funds rate in 1982. He had to. The real (non-Chinese) CPI he had was showing 16% inflation. Much like we have now, with a government that tells us it’s only 4-5%. People know differently.
Currently, the annualized interest expense is $981B. There’s ~$7T in treasuries maturing by the end of FY ’24. I don’t think it’s going to be $2T once we hit $35T by the end of FY ’24, but $1.3T is a real possibility.
https://fred.stlouisfed.org/series/A091RC1Q027SBEA
Sheesh. What matters is interest expense in relationship to tax revenues. Interest expense by itself else is irrelevant.
https://wolfstreet.com/2023/08/30/curse-of-easy-money-us-government-interest-payments-v-tax-receipts-average-interest-on-treasury-debt-debt-to-gdp-in-q2/
I think there are different ways to view that chart. One can say, interest is near average as a percentage of tax receipts, and another could say, look at the current trajectory, where is interest headed?
It’s the latter. It also shows at what level Congress gets serious about the deficit, and we aren’t there yet.
Sorry crash bros. The housing and stock market crash you desire is not going to happen. Even if it does happen, the government will do whatever it takes to either prevent it or greatly decrease it’s negative effects.
@Nimesh Patel: Methinks you are whistling past the graveyard…LOL
Bears are rekt, $SPY 450 EOY [rocket and moon emojis]
/s
I think you’re right. Dow is up 500 points today. That’s gonna show those crash mongers.
MW: Dow edging closer to bearish ‘death cross’ signal: What it would mean for stocks…
IMO, what it means for stocks is that they will eventually run out of suckers to sell them too and the asking price will fall.
You better buy more before they become undervalued.
Stock market crash, maybe not. Housing crash, it absolutely will happen. Potential sellers are not going to hold on to their houses forever waiting for 4% rates again.
The prices are dropping as we speak. Many of the same FOMO buyers who bought in 2020 to 2023 period are already putting their homes up for sale. The listings are full of them.
FOMO is transitioning to FOBB (Fear of Being Bagholder).
“Sorry crash bros…..”
Getting a little nervous about your lack of Airbnb bookings, huh?
I’m also seeing tons of rentals sitting unrented. Makes me ecstatic.
Yep. These people don’t understand landlording, or math for that matter. A single month’s vacancy eats up the entire profit for the year. Multiple months vacancy will bury them for years. When you greed out and try to force a rent that’s higher than what the market will bear, with no takers, you “Herpderp” yourself into bankruptcy.
For the first time in a long while, I am also seeing rental signs in yards, townhomes, duplexes, etc. AND a fair amount of MF housing will be coming online in the next year. Good.
Depth Charge, exactly. That’s the beauty of Zillow (their asinine Zestimates aside), that you can see the price history.
I’m seeing apartments that were purchased during the FOMO craze of the past two years for $550k that were worth maybe $300k pre-2020. Now these idiots are trying to rent them out at obscene prices far higher than the market will bear, because of course “I’m an investor, and have to cover my costs!”
Never is there any thought in these people’s heads that maybe they shouldn’t have bought at the peak of a bubble.
Then I’m seeing some other fool trying to sell a 5,000 square foot house at peak bubble prices, and this clown just rented it out so it’ll be rented from 12/1/2023 to 12/1/2024. So this moron expects someone to pay him bubble prices AND have to deal with a tenant for the next year and not even be able to move in?
These are all cracks appearing in the market, and I’m loving it.
The crash is already happening in slomo liek watching wall paint drying:
Please read this:
https://wolfstreet.com/2023/10/28/feds-qe-giveth-feds-qt-taketh-away-nasdaq-back-to-dec-2020-sp-500-back-to-apr-2021-russell-2000-hits-3-year-low/
https://wolfstreet.com/2023/10/25/prices-of-new-houses-15-from-peak-inventories-rise-but-sales-hold-up-on-lower-prices-massive-mortgage-rate-buydowns/
Just remember: Nothing goes down or up in a straight line.
I don’t want deflation at all that is much worse than 2 percent inflation deflation freezes purchases as one thinks they can buy the same discretionary product next month for less . Then we are quickly in recession and maybe global depression.
That’s a good thing. Our economy shouldn’t be based on consumption, but on production.
BAHAHAHA!! Delusional!!
Wolf,
You and others have mentioned the possibility of larger Treasury auction sizes which I guess will raise yield. Will this help the FED in not raising the fed funds rate? Is it likely the Treasury is working with the fed?
Yes, higher longer-term yields are what’s needed to impact the economy. They’re finally rising, which is what the Fed needed to happen all along.
Casino (oops, I meant market) is betting on the Fed not raising rates. Still going to be higher for longer though, even if they don’t raise.
MW: US Treasury Yields end higher as Treasury releases fourth-quarter financing estimate
DM: Is this the death of the second home? Sales of US vacation properties fall by three-quarters from their pandemic peak – as soaring mortgage rates deter buyers
Sales of vacation homes have fallen by nearly 75 percent from their peak during the pandemic as soaring interest rates and limited housing stock deters would-be buyers.
Sales of ALL existing homes have plunged. See the gazillion articles here about this. Why should vacation homes be an exception?
Looks like a bear market rally to me. Lower lows and lower highs. Trend is down. I say get the quarter point over with for now. We might need more hikes.
Casino always rallies before big events like Fed this week and jobs report. Meaningless rally.
Headline in my local Swedish morning paper (Svenska Dagbladet) the other day: Office collapse in the United States: ”an apocalypse”.
Of course, I already knew that, since I read Wolf Street on a regular basis.
Volvo P-1800,
Did you see the news from 5 September in Åkersberga?
BIS Records founder & CEO, Robert von Bahr, sold his company after running it for 50 years. He sold to Apple Music for three reasons. First, he turned 80 and felt like it was time to relax a bit. Second, the sale came with the condition that all employees, including himself, would be retained under new ownership.
But the most important reason was to get BIS’s amazing catalog out to a much larger audience.
Apple Music Classical charges $10.99 a month for downloading. High resolution files & the SACD format BIS uses of 96 K sampling rate and 24 bit rate are now ready to stream.
As I commented recently, Best Buy will no longer sell DVDs and Blu-ray DVDs after this Holiday season. It seems everything is moving away to being streamed nowadays.
Congrats to Mr. von Bahr & BIS!
I saw, and I must admit I have mixed feelings. I’ve been promoting BIS for decades and have hundreds of their CDs, Sibelius, Schnittke … Hope it works out, it’s such a great label. Apologies to Wolf for OT.
When I commented on my neighbor who plays in the Minnesota Orchestra, and mentioned his reaction to hearing a Mahler symphony he played on in SACD for the first time at my home in September 2021, I sent Wolf two discs of the MN Orch. on BIS. So Wolf has Bruckner’s 4th & Sibelius’ 2nd (my fave) & 5th.
But besides having all of the MN Orch’s SACDs from BIS in my library, in February ’23, I placed an order for a few discs and disc sets directly from BIS in Sweden. Lo and behold, a few hours later, I got a thank you email directly from Robert. He sent me a photo of the package he’d personally put together to ship out for me, and complimented my choices of recordings I’d selected. Saying the Bartok piece was sensational, which it is, and that our tastes coincided.
That was an amazing level of customer service. To have the founder and CEO replay back to a new customer directly is a testimonial to his style of business.
One thing is for sure, Robert Suff, who is the producer of much of BIS’s recordings, is simply the best classical music producer that there is. The musicians of the Minnesota Orchestra all love working for him, and are very proud of the results they make together.
As an audiophile and music lover, streaming represents a new phase of the business, I reckon. But even though I have yet to join in on Hi-Res streaming, it is the way a lot of people listen to music.
“Business, Finance and Money.”
@vecchio gatto veloce
Good for you! I can recommend their recordings of Allan Pettersson’s symphonies, nos. 7 & 8 are amazing!
I heard a tidbit from a credible knowledgeable 30 something today, who said he and his many friends are prime home buying age and have zero intention of buying a home. The prices are so out of whack, they’ve absolutely ruled it out and it’s not even on the mind anymore. The rent v buy equation favors rent so extremely, they won’t change their mind until home prices not only drop, but crash.
A consensus is developing, and it’s influencing behavior.
At the same time, more and more owners and investors are running the numbers and eyeballing opportunities to cash out overpriced RE and invest proceeds in guaranteed income streams.
Both these trends appear to be gradually strengthening.
Living in a Quonset hut is about the only thing that makes sense these days. Sadly housing prices wont crash, they will flatline outside of major metros experiencing exoduses, and rents will march upward until they meet. There will always be a few buyers to meet the few sellers sick of the horrors or renting with loud neighbors and broken appliances the landlord will never fix. That will keep the market generally at its current level while rents play catchup. Expect 10% rent inflation next year as reality sets in that renters cant escape.
You sound like you’ve lost touch with reality.
Deeply in touch with reality. An 8% vs a 3% mortgage on a 400k properly means a roughly 50% increase in monthly payments. Housing prices are not going to drop 50% any time soon, forcing gridlock in both the buying and selling side of the market. With this gridlock youll only have sellers who are forced to sell, and with no recession little outside of deaths and long distance moves forcing this, and buyers who simply can afford the premium to escape the hell that is renting. From June 2022 to June 2023 we only saw a national drop of 1.5% in average home price, and yet the mortgage payments increased substantially in that time, so effectively the buyer is paying MORE. There is still upwards pressure in the end price of the market. In my state (NH) prices actually increased 6.5% yoy. Unless something magically shifts the balance of buyers and sellers in the opposite ratio of where they stand currently, prices will stay where they are, or go up. What will force people to sell? Nothing that I can see on the horizon. Your mileage may vary, city centers will see an exodus as they die due to WFH and expansion of urban decay. But nationally, on average, the same surplus of buyers relative to sellers that existed during the covid years exists today, even with the reduced pool of both due to higher rates. The backlog of millennials who started their careers during the GR and are still looking for their first home is massive. They will remain the largest group of homebuyers for some time, and as they age into their 40s their motivation to overpay will only grow.
Yep, you’re living in a fantasy.
Good chat. Call me when the numbers change.
Herpderp, it doesn’t require people to be forced to sell, only to realize that the bubble prices from 2022 aren’t coming back. Not every single family homeowner can rent it out at a profit. At some point, these people will cut their losses. It’s just a question of when.
You are also ignoring the fact that many new houses are being built.
As energy prices are higher here in the UK, our Quonset huts would be only dimly-lit..
What’a being overlooked or neglected is this:
1970 – 10 year treasury bonds 7.35%
1975 – 10 year treasury bonds 7.99%
1980 – 10 year treasury bonds 11.43%
1985 – 10 year treasury bonds 10.62%
The peak was in 1981 – 13.92%
Look for yourself – https://www.govinfo.gov/content/pkg/ERP-2011/pdf/ERP-2011-table73.pdf
My point is we always expected 5% +/- inflation growth every year.
Once that concept was discarded; then the hurt began (unless you were a savvy bond investor).
By 1986 10 year treasury bonds were nearly half their peak 7.67%.
Today, those who are the current mover and shakers politically have no desire to restrain the economy thus the treasury bond yield.
I’m hoping for 10%
20-30 year bonds
2-10 year notes
52 week (or fewer) bills
Great job of realistically summarizing the current state of the economy in just a few minutes.
i believe interest rates are going to be very transitory towards a slightly higher range until plateauing right about the time they break something. Just like the time before and the time before that, and the time before that
Low interest rates already broke the biggest thing the Fed is in charge of: price stability. The arrival of inflation is huge. All prior assumptions are out the window.
What happened to TSLA’s 3rdQuarter Financials Review?
No coverage?
I don’t generally cover Tesla’s financials. But they’re pretty good. I think the stock is way overvalued. But I love Tesla for how it has cut its prices to muck up the legacy automakers stupid strategies. They had it coming. Price cuts is what this economy needs the most!
122 comments and no outrage on the pick-up truck cartel?
We are a strange lot.
Maybe they didn’t listen that far, LOL
Maybe like me they don’t listen at all and just read comments, assuming it’s just an oral summary of everything written here the past few weeks. Similar to the podcasts, no new data presented, just trying to educate a wider audience and step back to give a big picture.