Friday Update September 30, 2022

It's the last day of the month and I'm so excited for the 4th quarter.  I get stoked about the 4th quarter because it means the new year is right around the corner and I get to make a bunch of resolutions that I won't keep.  6 pack abs, sobriety, a healthy work life balance.  All that shit will be forgotten by the second week of January.  What are your goals going to be?

Today we have 1,698 single family existing homes on the market.  Flizzzzzzat over the last 2 months.

568 price cuts over the last 7 days is right in line with what we've been seeing.

Median price for September up to now is $459,900 on 1,115 total sales.  Sold to original list price ratio at 97.5%.  This ratio is more in line with 2011 than with 2021.  

Last September we had 1,741 closings which means sales are down 36%.

August median pricing came in at $479,900.  Pricing peaked in May at just over $500,000.

Any agents that tell you we're not in at least a market correction, and more realistically probably a recession, are either oblivious, complete idiots, or both.

Two graphs and that's it I promise.  These are fun ones though.

The graph above shows the yield on 10 year US treasuries over the last 25 years.  The interest rates that we have today alone are not the problem.  The problem is how fast rates rose.  The last time we had rates spike like this was in 1981.  The rate of change is a real problem because it scares the shit out of investors, and when investors are scared they don't invest.  And when they don't invest rates continue to go higher to try and entice them to invest, but that reinforces the fear and so they don't invest.  And so rates go higher wiping out the markets in the process.  Which creates more fear, which reinforces itself and you get this vicious little cycle that leads to no liquidity in the markets.  Over the last decade this hasn't really been that big of a problem because the markets had a buyer for everything, the Fed, but now the Fed stopped buying.  What an amazing set of powers these fools have to create buying frenzies as well as selling panics.  You know, the things they're supposed to allegedly prevent. 

Now to the interesting part.  The graph above shows the yield on the 10 year British bonds.  The new British government came out and said they're going to fight inflation by lowering taxes and printing money.  This is indeed as stupid as it sounds.  Matter of fact one of the smartest investors of the last 50 years, Ray Dalio, had this to say about their decisions and I quote:

"The panic selling you are now seeing that is leading to the plunge of UK bonds, currency, and financial assets is due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand.That makes people want to get out of the debt and currency. I can't understand how those who were behind this move didn't understand that. It suggests incompetence. Mechanistically, the UK government is operating like the government of an emerging country."

Completely undettered by the opinion of one of the world's greatest economic minds the morons proceeded to announce that the Bank of England will buy as much of the UK's debt as is necessary to stabilize the bond market.  In lamen's terms they said they will print as much money as it takes to monetize as much governement debt as they need, and to hell with logic, inflation and people's living standards.  I'm super sure this will work out well.

Basically we find ourselves in this predicament in the Western world where there is so much debt in the system that we are faced with two options.  Allow rates to go up where the market feels its fair, allow for the panic selling, allow for massive deleveraging and defaults, and take the risk of doing irreparable damage to the economy.  Or continue to subsidize the debt bubble by printing more and more money until the people lose faith in the currencies.  In either case I feel like having real estate, that's paid for, is as good of a hedge as we can get.


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