Could the housing data get any worse? Absolutely, and it will. In fact, it already has. The current lack of activity is already bad news for July’s stats just waiting to be printed. Pending home sales down 20% is a shocker. How about a 2-month total of -50%. It has already happened and is getting worse. The Fed is getting its way. Housing, the economic leader, has been beheaded.
HOWEVER, IT IS EASY TO SEE THE TREES THAT MAKE UP THE FOREST AND IT IS EVEN EASIER TO SEE THE FOREST THAT’S MADE UP OF TREES, BUT IT ISN’T SO EASY TO SEE BEHIND THE FOREST.
The entire planet is teetering on the brink of social chaotic, mayhem induced by extreme financial guesses and assumptions. I realize how negative that must sound, and I am sorry to have to spell it out without making it warm and fuzzy.
To me, it seems clear that the financial strategies used to handle the ebbs and flows of economic cycles for the past 50 years, no longer have the same efficiency. Evidence of that is the velocity of current inflation and the extreme dosage of remedy being used to bring it under control.
One might expect when experiencing a rapidly rising fever, the treatment is more medicine. That makes sense if you know what is causing the fever. At some point we must realize the source of the pain, or in this case the volatility of the consumer. Consumers are behaving irrationally because they are afraid. They were afraid of dying horrendous deaths from COVID, so they scattered to the suburbs and the government paid their way.
Now consumers are afraid, because the day of reckoning has arrived. Uncle Sam has cut off the kids’ credit cards. No more free money or cheap loans.
The Fed spoiled its children and let them run wild for too long. Now they see the error of their ways and want a do over. That puts us all in a pickle; the Fed, consumers, banks, every small business, every large business, and every iron in the fire because the Iron Fist is coming down hard. Consumer behavior is more responsive. There is no blueprint.