Home prices are up, inventory is down, lets increase rates a little bit and see what happens. I imagine that’s how the conversation in Jackson Hole went yesterday. With a rate hike coming in September I think I’m officially a believer in this 2020 recession theory. I’m also starting to question whether the Feds are in on it. It’s easy to turn on the news and see that unemployment is at an all-time low. However, there is an interesting conversation about underemployment going on in the background.
David Blanchflower and David Bell, two economic professors at Dartmouth consider underemployment a better indicator of the labor market than unemployment. The term “underemployment” almost immediately makes me think that it must be harder to measure than unemployment. Then again, I have to trust that two professors at Dartmouth have a pretty solid understanding of the matter. According to this article from market watch we have millions of Americans in the workforce who are fighting for full time employment all the while, wages are increasing at a meager 2% a year.
Matt Joy suggested an article yesterday that stated the housing market may be flipping to a buyers’ market. Well, after reading the article you’ll find out that the price cuts are actually only happening at the top end of the market… (sorry for busting your theory MJ) …so if home prices stay up, rates continue to increase, and then we mix that with an unrealistic measurement of unemployment, I’d say we have a decent case for another recession, but what do I know?
Now a spin around the industry… the 10-yr is sitting at 2.848% today, but with Trump’s strong words towards Powell… who knows what will happen. Mortgage default risk is climbing (uh-oh) and another multi-family lawsuit was filed, this time in FL and not because people weren’t occupying the units… but because of construction defaults throughout the property. Yikes.
Until next time,
FG
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.