Friday Update February 3, 2023

Sorry I missed last week.  Something, something busy or whatever.  Unacceptable.

We've got 1,228 single family existing homes on the market today in El Paso County.  Inventory starting to climb as we approach Spring, I imagine this trend will continue upwards as the days get longer.

Here locally year to date we have 700 units closed in our MLS with a median sold price of $444,995.  Same time frame last year we saw 1,104 sales at a median sold price of $450,000.  Striking difference between the two is the list to sold price ratio last year was over 100% and this year is about 96%.  This sums up mathematically what we all know, last year buyers were fighting for houses and paying over list, this year buyers are a lot more conservative.

Last year you guys will recall that mortgage interest rates went from around 3% at the beginning of the year and ran to over 7% right before the midterms.  Things have calmed down substantially since November as our governement remains ineffective and does not present a serious threat to corporate interests.  Rates on mortgages have fallen from over 7% to somewhere between 5-6% today for most borrowers.  Historically speaking these rates are decent with this specific range of rates mentioned in books dating back thousands of years as fair and decent.  Decent rates combined with today's median home price however don't necessarily yield payments that are affordable to many.

Considering the drop in sales volume it is somewhat remarkable to me how resilient pricing has remained.  Days on market has increased dramatically, the amount of concessions that sellers are willing to put up to help buyers with closing costs is up a lot, but pricing on the median is only down 5k, or less than 1.5% year over year.  That's not good but when you take into account how pretty much every other asset has performed over the last year its actually a win.

On the macroeconomic level I feel like we have a shit storm brewing and the data that we're getting is super conflicting.  We have the highest level of layoffs since September of 2020 reported earlier this week which sounds bad.  Then today the jobs report comes out beating projections by almost triple on new job creation.  Like how do those two stats coexist within the same week is strange to me.

We had the Fed this week bump the funds rate up another quarter point.  Their speech this week slightly shifted gears from inflation to employment as their top priority.  So how those two stats from this week will play into their interpretation of the economy is anyones guess.  Yields on the 10 year treasury sank to 3.35% yesterday and rebounded to 3.52% right now.  These are relatively big moves and often swing mortgage rates with them.  So while rates are better and more stable than 2 months ago they're still kind of volatile and this can be seen in our local housing market with kind of like ebbs and flows of buyers.  Like waves of buyers coming in and going out as rates fluctuate.  Small, indecisive waves these days.

The biggest signal that's got me scratching my head and wondering WTF is causing all this FOMO in the stock market lately is the yield curve.  There are a lot of curves that are way more interesting to look at than the yield curve but few curves have so much impact on global economies.  Like maybe the Kardashian curves come close to it, but do not exceed it's significance in my opinion.  Let's look at a graphy poo.

This is the short term version since 2018 showing the small yield curve inversion in 2019 right before that one thing that gets my reach limited when I mention it in these blogs.  You know the thing?  That happened?  The gray line is the shortest recession in American history that was caused by that thing.

Now zooming out.

This is as far back as the Fed data goes on these yield curves.  But do notice the pattern that everytime there is a yield curve inversion it is followed by a period of economic downturn aka recession.  We have the deepest inversion on record right now.

We also have credit card balances increasing steadily while the savings rate hit a historic low.  All this while the unemployment rate hits the lowest level since 1969.  It's confusing.

We have crude oil prices dropping since July with gasoline prices again climbing over $4 a gallon.  That's confusing.  But it reminds me of 2008 ish.  Number picture.

That rapid climb followed by a rapid drop basically shows this effect of gas prices on the American consumer.

I fully recognize the fact that I'm a negative Nancy and often fail to see the upside in things.  Maybe I look at statistics and expect rational outcomes in an irrational world.  I don't know.  Look at another graph with me.

This is natural gas over the last 25 years.

Notice the similarity to the pattern of leading up to the 2008 crisis.  

I don't know guys.  I don't know what to make of all this conflicting data.  I don't know what to make of Chinese spy balloons over Montana.  I don't really know what to make of this ever growing conflict around Europe, Asia and the middle east.  I don't know much except that it doesn't seem like the right time to take on a shit ton of leverage and hope for the best.  Kind of seems like a good time to have some reserves, live within your means and pick your battles.  But then again there's never much of a time that it doesn't make sense to live that way.

In short guys I don't think the worst of this economic cycle is behind us yet, I do not believe we've found a bottom in the housing or the stock market, and I think being ready for some bad news is probably a good idea.  But guys, I also didn't buy bitcoin at 3k, did not invest heavily in Tesla on any of the opportunities that I had, and am still waiting on silver to go to the moon.  So you know, I don't know guys, make good choices and don't do too many drugs ok?