Friday Update March 17, 2023
Hey look another dumpster fire! Oh wait, no, that's just the most recent crisis that we need to keep up the charade that this financial system is somehow sustainble. More on too big to fail problems shortly.
Here locally right now we have 758 single family existing homes available for sale today. Roughly the same as last week and so far no spike in inventory for the Spring. For sure keeping an eye on it.
Our sales numbers seem to be showing some signs of positivity that I'm super hesitant to trust. Median sales price rose for MTD to $462,000. One month ago it was at $441,000. One year ago it was at $475,000. Basically flat all things considered with some areas hurting to move inventory and other areas still seeing multiple offers. We have 525 units closed so far in March to 692 this time last year.
This week we got CPI and PPI numbers as well as a bunch of manufacturing indexes. CPI now has fallen to 6% annual, so 6% inflation where we hit over 8% just a few months ago. But still much higher than the 2% goal the Fed states they want to adhere to. Meanwhile PPI actually came in negative signaling deflationary pressure in the producer prices. All of the manufacturing numbers came in down right atrociously bad. The only thing really showing any kind of expansion is the Fed's balance sheet! What? No seriously.
What's that teeny tiny little hockey stick on the far right there?
Oh look its 300 billion dollars that got bought up by the Fed just this week! So that takes roughly half of the last year's QT cycle and undoes it in a week. This is somehow supposed to inspire confidence in the financial system. We're fighting inflation and printing money at the same time. It's like I'm gonna quit drinking tomorrow ok? But until then I want to see how fast this car goes before the buzz wears off. So stupid.
Speaking of stupid. Imagine you bank at like Vectra, or First Republic or any of these smaller to mid level regional banks. And you see the news over the last couple of weeks about SVB and Signature and so on. So you decide man I think my money would be safer at Chase or Wells Fargo. So you pull your money out of Vectra, so do many others, and it depletes their reserves quickly forcing them to either fire sell assets or maybe cease to exist. The fact that a few people making withdrawals can cause that is an illustration of how stupid our fractional reserve banking has become but that's a side note.
What is insanely stupid is this. You take your money out of Vectra and put in into an account at Chase. Then this week Chase and Wells and Bank of America and a bunch of others take these deposits and put 30 billion USD right back into First Republic Bank that is failing. Like its a sign of commaraderie or something. But to me its like hey asshole, I took my money out of that bank because I don't trust it there, and now you gave it back to them?? This is very dumb and I can't wait to see how this shakes out. Also dumb is that the Fed set up a special rescue facility for banks on Sunday which is already 60% depleted. In 5 days. Solid.
Real estate related this has been pretty good but not great for interest rates. 2 weeks ago the 10 year yield hit 4.1% and mortgages were once again in the 7s. Today it's around 3.4% with mortgages in the high 5s and low 6s. So that's nice. It's all nice and shaky with the volatility in the bond market having not seen anything like this since either 2008 or 1987, depending which bonds you look at.
The 3.4% level has been super bouncy for the 10 year notes, not sure why. We hit 3.4 in December, January, February and now.
The yield curve remains inverted with 10 year and 3 month at negative 102 bps which actually tighted up a lot this week. The 10 year and 2 year is 42 bps apart which is the shallowest inversion on those two in a number of weeks. Remember its not until the yield curve rights itself that we find ourselves seeing all the problems clearly. For now we have lots of unknown uknowns which is why my advice to anyone with a short term time horizon is to rent.
Maybe it's just me but I'm seeing a lot of bottom of the barrel scraping going on right now. Like deals being forced that just shouldn't be happening. People getting into weird loan types to buy up houses because they won't qualify on regular financing. My TC says something like half of her deals in the last few months terminated, which usually would be a number closer to like 15-20%. Just shaky, shaky, wobbly weird times in the market.
Now hey, if you have to sell a house and buy a replacement, and like you really have to do it. Do it. You're in the same market and there is no benefit to waiting or acting immediately or whatever, you're in the same marketplace and it's a wash. But boy if you're trying to buy a house now with the idea of just refinancing next year, yea, maybe don't?
I have a mortgage with a local credit union here that I'm super happy with. On their website they put out like a little bulletin about how they don't invest in Crypto and have nothing to do with the banks that failed over the last week. And I though to myself, "self, what a relief". Not really, but then they kept saying more things. The part that got me was when they said that 98 cents out of every dollar that their members deposit is then loaned out to their members in the forms of mortgages, auto loans, and HELOCS. They're like proud of this fact. So for any immediate cash needs and operating expenses they're running on 2 % reserves. That my friends is fucking stupid. This is how you take the mentality of the 40% of Americans who can't afford a $400 emergency and apply it to banking.
In a nutshell and very much with my tinfoil hat on this financial system deserves to fail. One day it will. And the longer we delay the inevitable the more pain we will endure once it does.
Next week I'm gonna try and dive in more nerdlike as I bet we get some fascinating news between now and then. And according to a lot of my local colleagues here it's a seller's market again! No need to worry just sign here.
Have a great St Patty's day and do something awesome.
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