Winds of Change

Did you ever have one of those weeks where you feel like you were punched in the mouth at every turn? School is back in session as is financial media, and in the past week I did more appearances than I did in the whole month of July. Those videos got play and with that play comes increased attacks. Even though you know the attacks are incoming, it nonetheless can leave you feeling completely drained.

When I was the boss in corporate, I would marvel at the way people would appropriate me and assign meaning to actions that were meaningless. You are typically dealing with their false “idea” of who you are, based on assumptions and expectations, and not reality. This ‘idea” about who you are is often used to confirm and bolster their self-affirming narrative. There are times when navigating those ideas and expectations can become completely destabilizing which is why I’m incredibly grateful for my faith. What I’ve always done in times like this - after spending countless hours trying to suss what is actually happening, painstakingly examining my assumptions, words and actions - is put my head down and solider on, hoping and praying that eventually truth will prevail. Before 2015 truth seemed to prevail in Corporate America, but somewhere around then people seemed to stop caring about the truth. I made it 4 more years before packing it all in.

I recently saw this video on social media about a woman’s husband losing his job after 17 years of faithful service, and it hit hard. Our social contract has been broken as companies no longer have any loyalty to their employees and spend every dime they have to support an unrealistic stock price. What departments like Human Resources actually do is to ensure nothing gets in the way of that mission. In this video, you learn the contractors were creating a crappy product cheaply which did not meet specs, with no concern for quality. When the employee repeatedly noted that the product was defective, three of the contractors conspired against him and Poof! There goes 17 years of faithful service down the drain.

Is it any wonder that almost anybody with a pulse wanted to use housing to get rich “as seen on TV”? Wages were not keeping pace with expenses and each year it felt you had to do even more and more to just keep your job. I’ve said this before, but by the time I left Corporate America I was doing the job of 3-4 people. On Friday, Challenger released layoffs for August, and it was not pretty.

The much-anticipated jobs report also came in rather chilly setting up for a funky fall indeed. There was much speculation as to whether the numbers would look rosier due to data manipulation, but Trump has now qualified that he meant jobs would be great later down the road. For a deep dive into the jobs report, I recommend

K. Pow

’s latest stack which features this graph:

See how Average Weekly Hours trended up after the GFC while wages were fairly stagnant until our little spurt post-COVID which has disappeared with a whisper? That little spurt convinced many that everyone was getting rich and spurred luxury building of apartments and homes all over the country. Hopefully I don’t have to state the obvious. This week I had that sickening feeling as I watched layoff announcements pop up everywhere. Although I believe that these job losses will ultimately force the hand of those holding on to unprofitable investment properties and 2nd homes no longer needed, it’s appropriate we remind ourselves “just don’t f*cking dance.”

The bond market has responded, and mortgage rates dropped to 6.29% as of this writing, their lowest since Aug/Sept last year. As previously discussed, if rates stay here or go lower, we will start to see inventory increase non-seasonally again. Florida’s snowbird selling season begins next month. A rate cut in September is now a given. How will the bond market respond to that cut? The housing sector and motivated/distressed sellers are hoping it plays nice, unlike last year. The problem? All those cancellations we keep hearing about are likely due to folks not qualifying or looking at that final price tag, which includes your insurance quote, and getting cold feet.

Rates would have to go meaningfully lower to do more than modestly increase sales. My hope is that we do get a boost to sales as only then will we have price discovery. Every week I look at each of the markets I track, and price cuts are accelerating. Until they sell though we won’t see those numbers and awareness will continue to be postponed. It feels as if we are getting closer. As many have said, and I agree, when the anger comes at you the fastest and most furious it is usually because you have struck a nerve. The escalation this week of attacks on my person, instead of the data, is yet another sign that conditions are changing. Luckily Corporate America trained me well how to withstand - so no pity party here.

For today’s post we will make a stop in the Midwest. I have been confounded by Chicago for months now, but I have not had the time to stop and look as you all had other cities ranked as more pressing. My curiosity has moved this up the line. Additionally, we will look at the Top 5 City Summaries for July sales, price and inventory as well as cities where we are seeing motivated and distressed selling. Many of you will be surprised to see the major metropolitan which came in at #1 for YOY decrease in prices for cities with a population over 500K that was profiled here in the Spring of 2024. Hint: it’s not in FL, TX or CA.

Time to take a peak…