The economy is officially in a recession (see Atlanta Fed GDP Tracker Shows the US Economy is Likely in a Recession) but many regime economists are behaving as carnival contortionists, desperately twisting words and facts in an effort to ignore the reality. Such academic tricks mean little for consumers paying double and triple prices for gas, diesel and food compared to 2020. They feel the pain and so-called experts unskilled in the Jedi mind trick are failing to convince the public that the pain is not real.
But we do not have to rely on statistics to realize there is a recession. Just look at what is happening to home sales and car re-possession. Forbes had this cheery headline more than a month ago–Pending Home Sales Plunge To Lowest Level In Nearly A Decade—Worst Could Be Yet To Come. Guess what? It has gotten worse. Here is a headline from yesterday (Monday)–The Deal Is Off: Home Sales Are Getting Canceled at the Highest Rate Since the Start of the Pandemic:
Nationwide, roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month. That’s the highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic. It compares with 12.7% a month earlier and 11.2% a year earlier.
You do not need an advanced degree in math to understand where we are headed. If interest rates continue to rise (and they will based on current Federal Reserve policies), the number of home sales will continue to fall. That has a ripple effect throughout the economy, starting with realtors making less money, which means home inspectors and companies pushing new loans and refinances will make less money and need fewer people. Then there are the secondary effects. Folks moving into a new home generally will make improvements ranging from cosmetic touch ups (paint, new flooring, curtains and furniture) to a full blown renovation. That work will start drying up as well.
Companies devoted to selling loans are now laying off workers–Loan Depot is a “prime” example (sorry for the mortgage rate humor):
Nonbank lender loanDepot is making what appears to be the largest series of cuts in the mortgage industry this year, eliminating 4,800 jobs over the course of 2022.
Overall, the California-based lender is implementing a program dubbed “Vision 2025” to save between $375 million and $400 million annualized, including headcount reduction, process optimizations, real estate consolidation and reduction in marketing and third-party spending.
The company will go from 11,300 employees at the end of 2021 to 6,500 by the end of 2022, loanDepot said in a filing with the Securities and Exchange Commission on Monday. The workforce reduction will result in the lender paying $3.5 million to $4.5 million in severance and benefits in the second quarter and $25 million to $28 million in the year’s second half.
The growing number of unemployed courtesy of cutbacks among mortgage lenders is long and growing and not confined to just one geographic region (thanks to the Truth About Mortgage site). Here is a partial list:
Wells Fargo to cut 107 jobs in Des Moines area (7/6/22)
Redwood Trust acquires Riverbend Lending (7/5/22)
AnnieMac Home Mortgage acquires OVM Financial (6/30/22)
First Guaranty Mortgage Corp. files Chapter 11 bankruptcy (6/30/22)
Mid America Mortgage, Inc. to rebrand as Click n’ Close (6/25/22)
First Guaranty Mortgage Corp. cut 428 jobs in Plano, TX (6/24/22)
Barclays to acquire Kensington Mortgages (6/24/22)
Chase to cut 1,000 home lending jobs (6/22/22)
HomeLight acquires Accept.inc (6/16/22)
Notarize let go of 25% of staff (6/15/22)
Compass to cut 10% of its workforce (6/14/22)
Redfin to slash nearly 500 jobs (6/14/22)
Flagstar Bank cut 20% of mortgage staff (420 jobs)
Rocket Mortgage offering buyouts to 8% of staff
Knock to reduce its workforce by approximately 46%
Better Mortgage to cut additional 3,000 jobs in United States and India
Zillow Offers shut down, 25% of staff to be let go
If you believe this is a sign of a strong, growing economy, you are certifiably nuts.
The other flashing red light is the surge in re-possession of automobiles. There are several articles describing this unfolding catastrophe. My fav is Barrons–Car Repos Are Exploding. That’s a Bad Omen. (we called this No Shit Analysis at the CIA):
Lucky Lopez is a car dealer who has been in the business for about 20 years. In recent meetings with bankers, where he bids on repossessed vehicles before they go to auction, he has noticed some common characteristics of the defaulted loans. Most of the loans on recently repossessed cars originated during 2020 and 2021, whereas origination dates are normally scattered because people fall on hard times at different times; loan-to-value ratios, or the amount financed relative to the value of the vehicle, are around 140%, versus a more normal 80%; and many of the loans were extended to buyers who had temporary pops in income during the pandemic. Those monthly incomes fell—sometimes by half—as pandemic stimulus programs stopped, and now they look even worse on an inflation-adjusted basis and as the prices of basics in particular are climbing.
Housing and cars are not inconsequential, bit players in a nation’s economy. It those sectors are in trouble it is reasonable to project that other sectors will follow. We should act like a sane coal miner who spots the canary perched in the mine gasping for breath. That is God telling you to run for your life.
The combination of recession and inflation–i.e., stagflation–carries a real risk of a depression. The economic upheaval described above is not confined to the United States. It is global. Shortages of food and fuel and other commodities are creating severe economic retractions. Just ask the folks in Sri Lanka about the swell results for their “green” economic revolution. I hear the Sri Lankan President at least used a bicycle to flee the country. At least that does not have much of a carbon footprint (yes, I know, he boarded a ship, but I like the image of him peddling furiously to escape the mob).
It’s probably going to get worse for farmers too. Some sample questions from farmers.gov
Q – I accepted and returned form FSA-2601 for the American Rescue Plan Act (ARPA) program, what is the status of those ARPA payments?
A – Returned signed notification letters are still being accepted and processed by FSA. However, preliminary injunctions issued by multiple federal district courts have halted ARPA Section 1005 payments.
Q – If FSA is not taking adverse actions, why did I receive a letter saying that FSA will accelerate my loan and foreclose on my property?
A – These letters also include language explaining that if servicing rights are not exercised, or if the account is not brought current, FSA will accelerate the account and proceed to foreclosure.
Eric Newhill says
Agree. All of the signs of impending economic doom are all around us. Though, with regards to the housing market, I think it is worse than you say. That is b/c a lot of people recently bought homes at the peak of the historic price increases. They will be stuck. They won’t be able to sell their homes for what they paid. In fact, the homes will be worth less than the mortgage. As inflation increases on basic goods, every day earning people will default on mortgages and banks will be taking real estate back at a loss (funny that all of the real estate and lending people I talk to said that can’t happen again, but here we are). Banks the begin to fail (again).
Also, people being upside down in their homes means they will be less able to sell and move to where the jobs are.
Looking at the overall picture, IMO, we have begun to enter unprecedented economic times – and it is being driven by idiots in government. It’s basically what happen to Russia circa 1917 or, more recently the once prosperous Venezuela. Same ideology/same result.
Bill Wade says
The people of Sri Lanka now own nothing but somehow they don’t seem happy. The New York Times says, “things have never been better”. Twice already in my life I’ve seen every third house up for sale here in Florida, looks like it’s going to happen again.
The Rich still own land in sri lanka , they got plenty of assets , they just need a new govt
My local Ford dealer lot is near empty and has been for a year now with no end in sight. Most of the sales guys when I bought my truck two years ago are gone – the owner’s son was sitting the sales desk when I dropped by yesterday.
The supply chain problem is not fixed, and as diesel runs out, I think the risk is a great depression as in Italy or Germany or Russia after the collapse of the USSR- though without the soviet social net. These experiences were very different from the US experience of the Great Depression – and I grew up on stories of it from my grandpa.
Accompanied by the isolation of the west (which largely doesn’t make anything anymore) from the majority of the global economy and resources and manufacturing, our leaders seem cursed to ensure we live in very interesting times.
And did I mention foregoing fossil fuels without an alternative?
Time to mention backyard chickens?
just a small taste of what american can expect when they try to make war with china. Suddenly the shortage will widen and everything stops due to majority of items , small items , are from china..
Just a glaring misstep by democrat white house to push for war constantly in media even after thr genie of american economic problems got out. Yet these incompetents still use their puppet biden to say another stupid things like “american must suffer a bit so we can defeat russia” drivel..
Question 1. Why the rush to push russian provocation at this time of economic mess and obvious blowbackk from sanctions to US and EU own economu ?
And then the hope of american to put republican on white house and congress , i mean are they just plain ignorant and stupid and do not see how the ukraine war was bipartisan joint dem + rep efffort to make war with russia ? why these american still think voting one or the other will save US of A
Question 2 : What can republican do even if they won nov vote ? the insane stimulus money printing was under republican trump due to covid pandemic , and now the mess matured during democrat administration. Other than playing blame game and rhetoric what else can republican do to stem the economic ride to the bottom ?
Question 3 : Even if the whole biden white house admin was removed and replaced by republican admin and president TODAY , what can republican president do to stop the economic mess ?
The Republicans will do nothing as usual except roll over and go along.
There will no Red Wave in November and I don’t really want one. Right now our only hope in the US is a total collapse of the federal government, inevitable since the whole thing is unsustainable anyway. If the Republicans do anything at all it will only be to prolong the pain.
The US federal government is a parasite on our body, sucking our lifeblood while offering nothing of any value in return. It is superfluous and unnecessary. The Dems will kill it and I say good riddance.
The 50 states have functioning administrations – well some of them anyway. The rest are leeching off the big leech.
Let it collapse. There is enough productive capacity and people to put it all back together minus the parasites.
I dont get the american’s mindset of buying stuff they dont need with credit card debt. It is like they forgot the saying “live within your means”. Americans tend to think they are christian nation and that God bless them , but there is no such thing as God is not respecter of nations and God will bless his own sheep not fake sheeps..
The delusional american form of christianity mixed with worship of military and lust for money showed the sick brand of christianism in US today , as bible said “they only have the form of godliness but their hearts are black on the inside”
I got sick when these fake christians constantly blather “God bless america” during their public events , this is blasphemy just like the wording on wermacht soldier’s belt “God with us” nonsense..
America is ripe for a charismatic leader that will woo everyone , otherwise known as antichrist
economic collapse underway will work from the periphery to the center. from sri lanka now underway to other places similar to the EU … the next big fish to rot in the sun. right now capital is pouring out of europe to the usa because of higher rates and safety driving the dollar much much higher.
somewhere down the road 2023 or early 2024 the FED will reverse course pour new money into the system like no tomorrow. the dollar will implode but not before it goes first much higher killing our exports.
by 2025-2026 what is happening to sri lanka will arrive in north america.
prepare now if you can……..the higher dollar is giving us a respite from the worst not yet here. if you live a big city and stay you will deeply regret it by 2026.
small towns…rural areas…. away from large metro areas where the animals will run wild once things truly fall apart will be the difference between living and maybe not.
Americans have been living beyond their means for a long time. Basically the people were the beneficiaries of the ability of the Fed to print unlimited amounts of money and spread it all over the world. The US has been exporting its inflation for decades. For some crazy reason people wanted dollars so the US printed them up by the container ship load.
China took these green slips of paper and gave the US stuff in return, but being smart put them to use while they still had value, while the US frittered it all away on non-productive nonsense.
The true cost of this irresponsibility is only now starting to be felt