“Home builder confidence declined for the ninth straight month in September, according to the NAHB/@WellsFargo Housing Market Index (HMI). This month’s reading of 46 is the lowest since 2014 (excepting the COVID crash).”
Please consider the National Association of Homebuilders (NAHB) HMI Data for September.
The NAHB/Wells Fargo HMI is a weighted average of three separate component indices: Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers. Each month, a panel of builders rates the first two on a scale of “good,” “fair” or “poor” and the last on a scale of “high to very high,” “average” or “low to very low”. An index is calculated for each series by applying the formula “(good – poor + 100)/2” or, for Traffic, “(high/very high – low/very low + 100)/2”.
Each resulting index is first seasonally adjusted, then weighted to produce the HMI. The weights are .5920 for Present Sales, .1358 for Sales for the Next Six Months, and .2722 for Traffic. The weights were chosen to maximize the correlation with starts through the following six months. The HMI can range between 0 and 100.
NAHB HMI Components
NAHB HMI Component Details
Amusing Look Ahead
- The red line (what homebuilders think will happen looking 6 months ahead) is amusing.
- In March, looking 6 months ahead, the index was 70.
- Fast forward to September and the actual traffic was 31 and present conditions 54.
Acceleration to the downside happened in May with a 9-point drop in present conditions and an 8-point drop in traffic.
The overall HMI also dropped 8 points in May.
Real Consumer Spending
Real consumer spending also plunged in May and has generally fallen since.
For discussion, please see Factoring in Revisions and Inflation, Retail Sales Remain Very Weak
I made a point of falling retail sales in May noting warnings from Walmart and repeat warnings from Target.
Based on expectations of a housing crash I forecast a recession starting in May, and still see things that way.
If consumer spending and housing remain weak, as I expect, we will have a third quarter of negative GDP.
Expect a Long Period of Weak Growth, Whether or Not It’s Labeled Recession
Label it how you like, but the net result is a Long Period of Weak Growth, Whether or Not It’s Labeled Recession
Stocks are not priced for any of this.
Meanwhile, please ponder my question What’s the Likelihood of a Fed Policy Error in the Opposite Direction?
This post originated at MishTalk.Com
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Mish
stupid does. Vi, the income velocity of funds, falls (reflecting money demand)
while Vt accelerates, the transaction’s velocity of funds (reflecting an
increase in money flows). Vt was used in American Yale Professor Irving
Fisher’s truistic “equation of exchange”. N-gDp is a subset of money
flows.
Federal Reserve Bank of St. Louis and past member of the FOMC (the policy arm
of the Fed) as cited in the WSJ April 10, 1986:
money growth ever became the primary priority of the Fed. I think that there
was always and still is, a preoccupation with stabilization of interest
rates”.
WSJ article was quoted as saying that he “believes in principle the Fed should
pay interest on reserves held against deposits on rounds of equity” and “as a
matter of principle favors payment of interest on all reserve balances”.
anyone who works extensively with monetary data” (Friedman, 1956, p. 21).
he had printed on his car license plate. The transactions’ velocity of money
has sometimes moved in the opposite direction as income velocity, as in
1974-1975 or 1978.
et al., 1976).
statistical stepchild. I.e., virtually all the demand drafts that were drawn on
DFIs, the CUs, S&Ls, etc., cleared through DDs – except those drawn on
MSBs, interbank & the U.S. government. That is all “new payment
methods” clear through transactions’ deposits, i.e., thru the payment’s
system…
Economists are
nuts. We have Karl Marx’s rentier capitalism. Why do you think murder rates are
rising? Social behavior is pre-programmed.
George
Bailey’s “Its a Wonderful Life” was derived by putting savings back to work,
where velocity was 2/3 and money was 1/3. The banksters seeking to gain a
larger portion of the loan pie, drove up Reg. Q ceilings, inducing nonbank
disintermediation. The economic engine is now being run in reverse.
rising? Social behavior is pre-programmed.”
competition in a market and the greater the degree of private unregulated
monopoly power over prices and output, then the higher the amount of unit
prices, the greater the tendency for restricted output and employment and the
smaller the degree of downward price flexibility.
Under these conditions, unless money expands at least at the
rate prices are being pushed up, output cannot be sold and hence the workforce
will be cut back.
actual or “administered” prices (oligopoly, monopsony, and monopoly
elements) would not be the “asked” prices, were they not “validated”
by M*Vt (money Xs velocity), i.e., “validated” by the world’s Central Banks.
We necessarily
have regulated capitalism. That’s why we have the Sherman and Clayton Acts.
“Section 7 of the Clayton Act prohibits mergers and acquisitions when the
effect “may be substantially to lessen competition, or to tend to create a
monopoly.”
Antitrust actions
should be conducted on the basis of the most economical size of plant. That is,
limit corporations to a size that would achieve minimum unit costs at optimum
rates of output. Outlaw the conglomerate and holding companies beyond the first
degree, and severely restrict vertical as well as horizontal corporate
aggregations. That is to say, prohibit corporations from conducting unrelated
activities under a single corporate roof, from expanding in order to broaden
their share of the market or from controlling their suppliers through ownership
or legal devices.
We’re down about 12% in sold listings across both states for the past six months, and fewer listings in general. A partner mortgage broker just this week said she’s never been LESS busy since 2008. After tomorrow, give it a month lag, going in to slow season, the number will only increase in days on market/not sold. Price “adjustments” won’t matter, especially in middle class communities where most are sitting on 2.5%-3% refi’s.
Real Estate usually makes up 15%-20% of your states economy (YMMV) when you figure all the people involved. Here it comes…
Until we get to 100% of builders cutting prices, then we’re not in a “real” real estate recession. Rather, it’s just builders still trying to maximize profit rather than trying to stay in business. MND shows the 30YFRM at 6.42% today and there’s still not broad price declines after four months of above 5% 30YFRM.
That should remind us all how much money is still chasing real estate. It’s like the broader economy. We’re not in a real recession until there’s broad job losses. At this point, there’s no telling if or when we’ll get to that point just like having 100% of builders cutting prices.
We are no where near a real recession. It’ll take a lot longer to counter act $11T in stimulus plus the $2T FJN has enacted this year alone.