Housing – The Canary In The Coal Mine

The other day I used the above phrase — the canary in the coal mine — and a person said, “What does that mean?”

Miners carried canaries in special cages into the depths of underground coal mines because the canary was more sensitive than humans to deadly gases like carbon monoxide.

If the canary died, then the miners hauled ass and, hopefully, revived the canary.

It is a harbinger of bad things which brings us to the US housing market.

The Bloody Housing Market

The equity that owners possess in their home is often the biggest asset an American owns. So, this is very important to the health of the US economy. Here are the facts, Jack:

 1. Housing prices — even in hot markets like Austin By God Texas where almost 50% of homes sold for less than their asking price last month — are dropping.

Here is an interesting chart that shows just that — asking prices dropping. This is different than sales prices.

Housing prices on existing listings are dropping, but perhaps more importantly brokers are telling sellers to list their properties at more realistic levels. Ouch.

 2. Thirty year mortgage rates are priced at 7 – 7.5% and will trend upward with all other interest rates. The interest rate on the bellwether ten year Treasury is at than 4% — four times what it was on Inauguration Day.

 3. To gain some perspective, thirty year mortgage rates on Joe Biden’s Inauguration Day were a record 2.52% — we are looking at mortgage rates that are 3X that amount and they are headed to 10% +.

Bottom line it, Big Red Car

Bottom line: one more indicator of a faltering economy driven by higher inflation, higher interest rates, and energy chaos.

If you think we are not currently in a recession, think again.

This gets much, much, much worse. Ask somebody who lived through the Jimmy Carter years how bad this gets.

Let me tell you how the progress goes:

First, massive inflation — check

Second, higher interest rates to dampen inflation – check, but you haven’t seen anything yet. Interest rates – the Prime Rate – went to 20.5% under Carter. Also, check.

Third, it begins to work, the economy cools off and unemployment sets in. Already US companies are cutting hiring and conducting layoffs. This gets much worse. Check.

Just like during the Carter years, the US has oil insanity, but this time instead of an Embargo, we have self-inflicted wounds. Joe, Joe, Joe – you blew it, pal. You squandered our energy independence. Check.

Added bonus — the incredibly strong USD makes exports riotously expensive and other countries cannot afford to buy American made goods thereby further deepening the pain as manufacturers have to make adjustments — more unemployment.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car who lived through the Jimmy Carter debacle and I can smell the fire approaching.

BTW, Jimmy Carter was a decent, kind man — former Georgia Governor, peanut farmer, and Naval Academy grad — who drowned in the overwhelming duties of the presidency. He has been the best ex-President in US history. None of this offsets the massive damage he did to the US economy.

Joe Biden is not a decent, kind man and has done far more damage to the US economy.

Be of good cheer and prepare for the onslaught.