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US economy returned to growth last quarter, expanding 2.6%

159 points by rafaelc 4y ago

alexb_ 4y ago
>Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment. Thank christ. Please bring on a housing crash ASAP.
- rogerkirkness 4y ago
  Housing investment would be 'housing starts' as in new houses being built. I doubt that prices will be going down if there are more people and the same number of houses. Part of the market for existing houses is sensitive to mortgages. All this means is housing will actually cost more in the future on a total cost of ownership basis. If you're a renter with a ton of cash, this is good, but for literally all other stakeholders in the market is it ultimately not good.
  - newfocogi 4y ago
    Could you explain why this is good for the renter with a ton of cash?
    - bitcurious 4y ago
      Sticker price for houses will fall, so if you're a cash buyer you get a discount. Monthly prices won't, so if you're a mortgage buyer you're paying more to the bank and less to yourself.
    - cjenkins 4y ago
      My understanding is as interest rates go up prices need to come down as people only have $X/month to allocate towards housing. EX: If you have $100 to put towards housing per month you can put $90 towards the house itself and $10 towards interest on the loan in low interest environments, but only $80 towards the house and $20 in high interest environments. If people can only put $80 per month towards the house you're selling that ultimately means the house price can't be as high as when people are able to put $90 per month towards the house. For the renter with a lot of cash this means you can come out ahead if you're able to minimize the loan or outright purchase in cash a house. The renter with a lot of cash gets to benefit from the lower prices from higher interest rates while minimizing the downsides of higher interest rates.
- jvanderbot 4y ago
  We took a hard look at the economy before buying our house. Ultimately, we bought when interest rates were high, but prices had not yet come down. There's no crystal ball, but it sure looks like our investment will go down in value in the next few years, perhaps precipitously. I think of it this way: We bought the house we want for the price we can afford, and will happily enjoy it for two decades without price inflation, even though our salaries will likely go up. So, it's a win, even though we bought at what looks like peak market.
  - kristjansson 4y ago
    Yup, a house is housing first and an investment second.
  - yodsanklai 4y ago
    I've been waiting for the real estate market to crash for 20 years... On the other, my savings are worth less and less.
    - brink 4y ago
      Don't worry, population collapse will fix this in another ~20-30 years. You'll get there.
      - jvanderbot 4y ago
        Depending on where you live, population collapse is either a myth, meme, overblown but remote possibility, or absolute certainty. In most western nations, it's not going to be that big of a deal, I wager. In areas with net emigration, especially those that are not good at sharing true demographics with their leaders, it'll be devastating.
        lotsofpulp 4y ago
        I would say population declines within certain tribes leading to changes in political power, and hence distribution of resources, is the central issue in many societies, especially those with very low birth rates. And the tribes are not necessarily delineated along skin color/region of origin/religion, but even age/education/immigration. You cannot plug and play 50M young people from Latin America into the US or Africa/Middle East/Eastern Europe into Europe, and expect society to not change in ways that the existing population might not like.
- newaccount2021 4y ago
- bergenty 4y ago
  We bought our home last month, past the peak but prices will probably drop below what we bought it for. We did buy all cash and are in this place for the long term so I don’t feel too bad besides the fact that we could have probably afforded more house for the amount we paid if we waited six more months.
- sleepydog 4y ago
  If housing prices go down, but mortgage rates go up, are we still screwed?
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- nobody9999 4y ago
  >Federal Reserve aggressively raises borrowing costs to combat chronic inflation. [emphasis added] Not sure why you used that word. I don't think it applies in this circumstance. Not trying to be pedantic/snarky, I just wonder why you characterize only 18 months or so of higher than has been seen in quite some time inflation as "chronic." Chronic (adj.):[0] 1a : continuing or occurring again and again for a long time 2a : always present or encountered b : being such habitually [0] https://www.merriam-webster.com/dictionary/chronic https://www.merriam-webster.com/dictionary/chronic Edit: I note (after the fact) that the parent poster was quoting TFA and not making that statement themselves. My apologies for attributing that to alexb and not the AP article. That said, I still think it's odd that they'd use the term "chronic."
  - justin66 4y ago
    There is (was, really) an argument in the public sphere as to whether the inflation we're experiencing is merely "transitory," and this plays into the larger debate about how it ought to be dealt with by the Fed and the US government. Use of the word "chronic" is merely someone noting their position on the question of whether our inflation is "transitory." edit: looking at it in context, it's someone noting the Fed's decision on the matter (of course it's not transitory), which also makes sense
    - nobody9999 4y ago
      A fair point. Although I'd posit that there are a bunch of terms that (at least IMHO) would be more appropriate than "chronic": Ongoing Sustained over the past 18 months Recent and continuing I'm sure I could come up with a bunch more, but since my comment should really be directed at the Associated Press (AP) and not GP, and I'm sure the AP doesn't care what I think about their choice of adjectives, I guess it's not really relevant. In fact, when I realized that I was commenting on a quote from TFA, I almost deleted my comment altogether but decided against it.
      - justin66 4y ago
        "Ongoing" serves as a poor rebuttal to "transitory" (something can be transitory and nevertheless ongoing, and the whole point is that we know it's no longer considered transitory) and the others are obviously clunky when you're just trying to imply a minor point. I think you're on your own with this one and the AP did okay, even if I might have phrased it differently.
- teeray 4y ago
  > Please bring on a housing crash ASAP. IMO, there’s too many people making this bet for it to actually manifest. Not sure exactly how it’ll happen, but I can’t help but think banks are eyeballing those war chests people have saved up for crash. They’d much rather those as rent payments than interest payments.
- jandrese 4y ago
  Supposedly the car market is about to crash as well. There was supposedly 2008 like shenanigans in the auto lending segment and the crows are coming home to root. Speculation is that people were buying cars they couldn't afford using the stimulus checks as the downpayment and then immediately asking for a halt on payments due to COVID. With both factors no longer in play people can't afford their cars and are defaulting. This should cause a massive wave of repos and a flood in the used car market. That said, the market can stay irrational longer than you can stay solvent. Car lot managers will be in denial for some time before they actually lower prices to where they should be. I suspect there is some chunk of the economic doomsaying that is literally political propaganda. A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up.
  - yardie 4y ago
    Stimulus checks were what $2000 total. That's less than 10% on a new car and most competent banks look at your monthly payment and DTI to determine how much to loan. > A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up. They've moved from economy to gas and the polls are now on crime. Really anything to stir up FUD.
    - jandrese 4y ago
      Apparently there was a lot of 2008 style "ignoring the fundamentals" going on in the auto lending industry because the banks had tightened up the home lending market and the stupid money needed a new place to go. There is the further instability from the government loan crisis in China combined with continuing zero-COVID lockdowns hurting production. However, I think the China problems are being hugely overblown in the west. China is still a net exporter and has a trade surplus to throw at problems. Unbelievably credulous predictions that the Chinese government is going to topple on its own in the next few months are just plain out of touch.
      - seanmcdirmid 4y ago
- rhino369 4y ago
  >Please bring on a housing crash ASAP. The best outcome is probably just nominal value stays relatively steady while real value declines after factoring in inflation. You don't want people massively underwater on their mortgages.
- altarius 4y ago
  In my opinion, housing is mostly inelastic unless people have to sell due to external circumstances (like being unable to pay mortgage). I don't expect the housing market to decline more than 15-20%, as the more people are "underwater" from their purchase price, the more likely they're to just "wait out the slump". And with low interest rates locked in, many probably don't want to roll their mortgages now. Since we've had such a crazy runup [1] ([2]) in the past few years, a 20% decline still puts many sellers ahead, but I don't think they'd sell at a loss if prices dropped further. SF Case-Schiller is up 25-30% from 2020, and ~50% from 2017, for example. My personal opinion is that once you've bought in you're locked in and along for the ride. If your house is down 20%, so is most likely the house you consider moving to. Unfortunately housing is often seen as an "investment". [1] https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing-Case-Shiller-2022-10-25-San-Francisco-Bay-Area.png https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing... [2]
- twblalock 4y ago
  It would be hard for housing to crash unless the current supply and demand situation changed dramatically. An increase in supply so large that it would cause prices to crash would take years to build. In fact, inventory is lower than normal in some areas because people who might otherwise sell are holding out for better times, sometimes by renting out their properties and capturing today's unusually high rent prices instead. A drastic decrease in demand is not going to happen because of mortgage rates. High mortgage rates have already taken a chunk out of demand yet housing has not crashed. The only way I can see demand dropping so much that prices crash is a major recession with mass unemployment, which knocks a large number of potential buyers out of the market entirely because they lost their incomes.
SantalBlush 4y ago
The EU has a similar committee to the NBER, which identifies EU business cycles. They also do not use the colloquial "2 quarters of decline in GDP" definition, though at least 2 quarters of decline is often seen in those recessions that they do identify. [0] >Most of the recessions identified by the Committee’s procedures consist of two or more quarters of declining real GDP, but declining real GDP is not the only indicator used. As an example, the Committee has identified the period from the first quarter in 1980 to the third quarter in 1982 as a recession, even though real GDP was growing in some quarters during that episode and that real GDP was higher at the end of the recession than at the beginning. As another example, the Committee did not declare a recession for 2001 or 2003, even though the data at the time appeared to show a decline in economic activity (though not for two quarters). Subsequent data revisions have erased these declines. Those claiming a US media conspiracy to redefine the term "recession" have a political axe to grind, and nothing more. The NBER identifies recessions in the US, they have done it for a long time, and they will continue to do so. [0] https://eabcn.org/dc/faq https://eabcn.org/dc/faq
- pavlov 4y ago
  It’s shocking to me how many people in America are hoping for the national economy to do poorly so that their party could win the next election. This isn’t just limited to one tribe. The same doesn’t exist in Europe AFAICT. I don’t believe anybody is hoping that Putin would shut down the gas pipes for good so that their favorite politician could win an election next year.
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  - modriano 4y ago
    I don't think that's exactly right. I think everyone wants the economy to do well, but most people's ability to gauge the economy is very limited, so they defer to other information sources to tell them how the economy is doing even if they're personally doing fine [0]. If you look at employment over the past 20 years [1], you'll see that Obama took office when the economy was in freefall and after about 9 months the economy turned around and started growing steadily until someone let COVID run wild in the US, at which point the economy fell off a cliff. But the right wing media isn't going to (and never would) say Obama handed Trump a very strong economy and Trump was the first president to oversee a net loss of jobs in over 80 years. The right wing media also won't mention that Trump was all in on making the money printer go brr so that his reelection didn't also have to overcome an explosion of poverty in addition to explosions in death and unemployment. But the right wing media isn't interested it accurately describing reality; it's goal is to secure power for right wing politicians, and to have a shot of doing that in a democracy, right wing media has to conceal the inconvenient facts that show Democrats are actually better stewards of the economy, produce lower rates of violent crime, and are consistently better at delivering improvements to the net and median quality of life of residents of the US. [0] https://www.nytimes.com/2022/07/15/business/economy/inflation-economy-polling.html https://www.nytimes.com/2022/07/15/business/economy/inflatio... [1] https://data.bls.gov/timeseries/ces0000000001 https://data.bls.gov/timeseries/ces0000000001
importantbrian 4y ago
This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market.
- bagels 4y ago
  The fed said interest rates will keep being raised until unemployment rises.
  - glial 4y ago
    Which is so strange and violates two of their three mandates - maximum employment and moderate interest rates.
    - dasil003 4y ago
      You don't want to fuck around with inflation because at a certain point it becomes a self-fulfilling prophecy (ie. merchants raise prices pre-emptively just because they internalize inflation at a high steady state).
    - CPLX 4y ago
      So strange. It’s almost as if they’ve picked a side in the conflict between supporting labor or capital.
      - roflyear 4y ago
        HN is capital not labor.
        CPLX 4y ago
kgc 4y ago
Does inflation factor into this number?
- SantalBlush 4y ago
  Yes, this is real GDP, meaning adjusted for inflation. [0] [0] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
- deleted 4y ago
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- kyleyeats 4y ago
  Yes, and the suspiciously low inflation numbers we're given are just low enough to indicate there's growth.
  - roflyear 4y ago
    Everything is a conspiracy.
    - kyleyeats 4y ago
      No, everything is 40% more expensive.
      - vkou 4y ago
        Houses aren't. :) (Inflation watchdogs only come out when he price of butter rises, not when the price of their house does...)
      - roflyear 4y ago
        Some things are 40% more expensive. People are also making a lot more money. Wages are up.
    - deleted 4y ago
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SevenNation 4y ago
> Overall, the outlook for the overall economy has darkened. The Fed has raised interest rates five times this year and is set to do so again next week and in December. Chair Jerome Powell has warned that the Fed’s hikes will bring “pain” in the form of higher unemployment and possibly a recession. Those hinging important economic decisions on the "Powell Pivot" are going to have to wait longer. There's no way a pivot is happening into a combination of positive economic growth like this, strong jobs market, and sky-high CPI increases. There are maybe three factors that will cause a pivot: 1. Inflation falls to match the Fed funds rate 2. A rapid housing market decline starts to cause disruption throughout the rest of the economy. 3. The bond market starts choking.
everybodyknows 4y ago
Direct link to the primary source, Department of Commerce: https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
JPKab 4y ago
"The U.S. economy grew at a 2.6% annual rate from July through September," Annual rate. That means the AP headline is deceptive, because it actually grew .6 percent. Capital is getting more expensive. Of course a recession is inevitable. I really hate the partisan capture of once neutral newsrooms. The headline is deceptively optimistic.
- lame-robot-hoax 4y ago
  So when they report on inflation (which is always portrayed in annual terms, not month over month), are they being overly pessimistic?
  - nigrioid 4y ago
    Still optimistic.
eloff 4y ago
This is terrible news. Without a recession to curb inflation, the fed will have to get far more extreme with interest rates to get inflation back down. I thought that rates might top out around the end of the year, but now the fed may have to keep raising aggressively well into next year. Mortgages and the housing market are going to get slammed. This is going to get much worse than I previously expected.
- georgeecollins 4y ago
  But inflation is already lower in this report. I am not forecasting the future-- I have no idea-- but its not clear that inflation is getting worse.
  - eloff 4y ago
    I missed that, that's a huge ray of hope! It looks like it's already getting below real interest rates. That's excellent!
- ferrocarraiges 4y ago
  That sounds like the opposite of terrible. We are long overdue for some bloodletting in residential real estate markets.
roamerz 4y ago
mgamache 4y ago
The Yield curve, Mortgage Rates, Bonds and Asset Prices are all in bad shape. Combined with rapidly falling income (due to 15%+ real inflation) it's a disaster in the making. Homes will likely fall 30-35% in adjusted value in the next 12 months. A lot of people's net worth is in their homes. This will be the largest post WWII drop in home prices. Don't forget the strong dollar is crushing economies around the world, who are our trading partners (and creditors).
- adam_arthur 4y ago
  The Fed has two choices. They either need to engineer a quick and sharp recession, or give up the inflation fight and drop short term rates. With option one the US can fund debt liabilities on the long end. With option two, the short end. Otherwise the US government will become insolvent within a few years. To me it’s clear they’re choosing option one.
  - mgamache 4y ago
    Right, I just don't know how it's 'quick'. So much of inflation is supply side and not controlled by the Fed. They have to crush it hard and it may last a decade.
    - adam_arthur 4y ago
      Quick to begin, not to end, I should add. I agree it would likely be a pretty severe recession. Letting inflation run wild for a decade is probably the less painful path all else equal, but for legacy reasons Powell won’t choose that route. He would be remembered as a failure, just as Arthur Burns is. I would add that goods inflation is actually coming down, it’s much more about services inflation now which is labor supply driven, primarily. Services make up a majority of the CPI and aren’t impacted by logistics for the most part.
- onlyrealcuzzo 4y ago
  This is the dumbest "recession" because it comes on the dumbest asset pump. The S&P is still up 13% from pre-pandemic. That's slightly below historic the historic average, but nothing to be alarmed about. Home prices are still WAAAAAAY above historic averages. Even if they drop 20%, they'll still be way up. The only people that will get hosed are speculators. You didn't "lose" money if you lost "unrealized gains".
mensetmanusman 4y ago
There is less stuff to buy, demand remained high due to stimulus, prices rise accordingly, huge amounts of boomer retirements line up to keep unemployment low, record high corporate profits, economy growing… this is like a boom and a bust at the same time.

159 points by rafaelc 4y ago

>Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment. Thank christ. Please bring on a housing crash ASAP.

rogerkirkness 4y ago
Housing investment would be 'housing starts' as in new houses being built. I doubt that prices will be going down if there are more people and the same number of houses. Part of the market for existing houses is sensitive to mortgages. All this means is housing will actually cost more in the future on a total cost of ownership basis. If you're a renter with a ton of cash, this is good, but for literally all other stakeholders in the market is it ultimately not good.
- newfocogi 4y ago
  Could you explain why this is good for the renter with a ton of cash?
  - bitcurious 4y ago
    Sticker price for houses will fall, so if you're a cash buyer you get a discount. Monthly prices won't, so if you're a mortgage buyer you're paying more to the bank and less to yourself.
  - cjenkins 4y ago
    My understanding is as interest rates go up prices need to come down as people only have $X/month to allocate towards housing. EX: If you have $100 to put towards housing per month you can put $90 towards the house itself and $10 towards interest on the loan in low interest environments, but only $80 towards the house and $20 in high interest environments. If people can only put $80 per month towards the house you're selling that ultimately means the house price can't be as high as when people are able to put $90 per month towards the house. For the renter with a lot of cash this means you can come out ahead if you're able to minimize the loan or outright purchase in cash a house. The renter with a lot of cash gets to benefit from the lower prices from higher interest rates while minimizing the downsides of higher interest rates.
jvanderbot 4y ago
We took a hard look at the economy before buying our house. Ultimately, we bought when interest rates were high, but prices had not yet come down. There's no crystal ball, but it sure looks like our investment will go down in value in the next few years, perhaps precipitously. I think of it this way: We bought the house we want for the price we can afford, and will happily enjoy it for two decades without price inflation, even though our salaries will likely go up. So, it's a win, even though we bought at what looks like peak market.
- kristjansson 4y ago
  Yup, a house is housing first and an investment second.
- yodsanklai 4y ago
  I've been waiting for the real estate market to crash for 20 years... On the other, my savings are worth less and less.
  - brink 4y ago
    Don't worry, population collapse will fix this in another ~20-30 years. You'll get there.
    - jvanderbot 4y ago
      Depending on where you live, population collapse is either a myth, meme, overblown but remote possibility, or absolute certainty. In most western nations, it's not going to be that big of a deal, I wager. In areas with net emigration, especially those that are not good at sharing true demographics with their leaders, it'll be devastating.
      - lotsofpulp 4y ago
        I would say population declines within certain tribes leading to changes in political power, and hence distribution of resources, is the central issue in many societies, especially those with very low birth rates. And the tribes are not necessarily delineated along skin color/region of origin/religion, but even age/education/immigration. You cannot plug and play 50M young people from Latin America into the US or Africa/Middle East/Eastern Europe into Europe, and expect society to not change in ways that the existing population might not like.
newaccount2021 4y ago
bergenty 4y ago
We bought our home last month, past the peak but prices will probably drop below what we bought it for. We did buy all cash and are in this place for the long term so I don’t feel too bad besides the fact that we could have probably afforded more house for the amount we paid if we waited six more months.
sleepydog 4y ago
If housing prices go down, but mortgage rates go up, are we still screwed?
- deleted 4y ago
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nobody9999 4y ago
>Federal Reserve aggressively raises borrowing costs to combat chronic inflation. [emphasis added] Not sure why you used that word. I don't think it applies in this circumstance. Not trying to be pedantic/snarky, I just wonder why you characterize only 18 months or so of higher than has been seen in quite some time inflation as "chronic." Chronic (adj.):[0] 1a : continuing or occurring again and again for a long time 2a : always present or encountered b : being such habitually [0] https://www.merriam-webster.com/dictionary/chronic https://www.merriam-webster.com/dictionary/chronic Edit: I note (after the fact) that the parent poster was quoting TFA and not making that statement themselves. My apologies for attributing that to alexb and not the AP article. That said, I still think it's odd that they'd use the term "chronic."
- justin66 4y ago
  There is (was, really) an argument in the public sphere as to whether the inflation we're experiencing is merely "transitory," and this plays into the larger debate about how it ought to be dealt with by the Fed and the US government. Use of the word "chronic" is merely someone noting their position on the question of whether our inflation is "transitory." edit: looking at it in context, it's someone noting the Fed's decision on the matter (of course it's not transitory), which also makes sense
  - nobody9999 4y ago
    A fair point. Although I'd posit that there are a bunch of terms that (at least IMHO) would be more appropriate than "chronic": Ongoing Sustained over the past 18 months Recent and continuing I'm sure I could come up with a bunch more, but since my comment should really be directed at the Associated Press (AP) and not GP, and I'm sure the AP doesn't care what I think about their choice of adjectives, I guess it's not really relevant. In fact, when I realized that I was commenting on a quote from TFA, I almost deleted my comment altogether but decided against it.
    - justin66 4y ago
      "Ongoing" serves as a poor rebuttal to "transitory" (something can be transitory and nevertheless ongoing, and the whole point is that we know it's no longer considered transitory) and the others are obviously clunky when you're just trying to imply a minor point. I think you're on your own with this one and the AP did okay, even if I might have phrased it differently.
teeray 4y ago
> Please bring on a housing crash ASAP. IMO, there’s too many people making this bet for it to actually manifest. Not sure exactly how it’ll happen, but I can’t help but think banks are eyeballing those war chests people have saved up for crash. They’d much rather those as rent payments than interest payments.
jandrese 4y ago
Supposedly the car market is about to crash as well. There was supposedly 2008 like shenanigans in the auto lending segment and the crows are coming home to root. Speculation is that people were buying cars they couldn't afford using the stimulus checks as the downpayment and then immediately asking for a halt on payments due to COVID. With both factors no longer in play people can't afford their cars and are defaulting. This should cause a massive wave of repos and a flood in the used car market. That said, the market can stay irrational longer than you can stay solvent. Car lot managers will be in denial for some time before they actually lower prices to where they should be. I suspect there is some chunk of the economic doomsaying that is literally political propaganda. A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up.
- yardie 4y ago
  Stimulus checks were what $2000 total. That's less than 10% on a new car and most competent banks look at your monthly payment and DTI to determine how much to loan. > A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up. They've moved from economy to gas and the polls are now on crime. Really anything to stir up FUD.
  - jandrese 4y ago
    Apparently there was a lot of 2008 style "ignoring the fundamentals" going on in the auto lending industry because the banks had tightened up the home lending market and the stupid money needed a new place to go. There is the further instability from the government loan crisis in China combined with continuing zero-COVID lockdowns hurting production. However, I think the China problems are being hugely overblown in the west. China is still a net exporter and has a trade surplus to throw at problems. Unbelievably credulous predictions that the Chinese government is going to topple on its own in the next few months are just plain out of touch.
    - seanmcdirmid 4y ago
rhino369 4y ago
>Please bring on a housing crash ASAP. The best outcome is probably just nominal value stays relatively steady while real value declines after factoring in inflation. You don't want people massively underwater on their mortgages.
altarius 4y ago
In my opinion, housing is mostly inelastic unless people have to sell due to external circumstances (like being unable to pay mortgage). I don't expect the housing market to decline more than 15-20%, as the more people are "underwater" from their purchase price, the more likely they're to just "wait out the slump". And with low interest rates locked in, many probably don't want to roll their mortgages now. Since we've had such a crazy runup [1] ([2]) in the past few years, a 20% decline still puts many sellers ahead, but I don't think they'd sell at a loss if prices dropped further. SF Case-Schiller is up 25-30% from 2020, and ~50% from 2017, for example. My personal opinion is that once you've bought in you're locked in and along for the ride. If your house is down 20%, so is most likely the house you consider moving to. Unfortunately housing is often seen as an "investment". [1] https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing-Case-Shiller-2022-10-25-San-Francisco-Bay-Area.png https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing... [2]
twblalock 4y ago
It would be hard for housing to crash unless the current supply and demand situation changed dramatically. An increase in supply so large that it would cause prices to crash would take years to build. In fact, inventory is lower than normal in some areas because people who might otherwise sell are holding out for better times, sometimes by renting out their properties and capturing today's unusually high rent prices instead. A drastic decrease in demand is not going to happen because of mortgage rates. High mortgage rates have already taken a chunk out of demand yet housing has not crashed. The only way I can see demand dropping so much that prices crash is a major recession with mass unemployment, which knocks a large number of potential buyers out of the market entirely because they lost their incomes.

SantalBlush 4y ago

The EU has a similar committee to the NBER, which identifies EU business cycles. They also do not use the colloquial "2 quarters of decline in GDP" definition, though at least 2 quarters of decline is often seen in those recessions that they do identify. [0] >Most of the recessions identified by the Committee’s procedures consist of two or more quarters of declining real GDP, but declining real GDP is not the only indicator used. As an example, the Committee has identified the period from the first quarter in 1980 to the third quarter in 1982 as a recession, even though real GDP was growing in some quarters during that episode and that real GDP was higher at the end of the recession than at the beginning. As another example, the Committee did not declare a recession for 2001 or 2003, even though the data at the time appeared to show a decline in economic activity (though not for two quarters). Subsequent data revisions have erased these declines. Those claiming a US media conspiracy to redefine the term "recession" have a political axe to grind, and nothing more. The NBER identifies recessions in the US, they have done it for a long time, and they will continue to do so. [0] https://eabcn.org/dc/faq https://eabcn.org/dc/faq

pavlov 4y ago
It’s shocking to me how many people in America are hoping for the national economy to do poorly so that their party could win the next election. This isn’t just limited to one tribe. The same doesn’t exist in Europe AFAICT. I don’t believe anybody is hoping that Putin would shut down the gas pipes for good so that their favorite politician could win an election next year.
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- modriano 4y ago
  I don't think that's exactly right. I think everyone wants the economy to do well, but most people's ability to gauge the economy is very limited, so they defer to other information sources to tell them how the economy is doing even if they're personally doing fine [0]. If you look at employment over the past 20 years [1], you'll see that Obama took office when the economy was in freefall and after about 9 months the economy turned around and started growing steadily until someone let COVID run wild in the US, at which point the economy fell off a cliff. But the right wing media isn't going to (and never would) say Obama handed Trump a very strong economy and Trump was the first president to oversee a net loss of jobs in over 80 years. The right wing media also won't mention that Trump was all in on making the money printer go brr so that his reelection didn't also have to overcome an explosion of poverty in addition to explosions in death and unemployment. But the right wing media isn't interested it accurately describing reality; it's goal is to secure power for right wing politicians, and to have a shot of doing that in a democracy, right wing media has to conceal the inconvenient facts that show Democrats are actually better stewards of the economy, produce lower rates of violent crime, and are consistently better at delivering improvements to the net and median quality of life of residents of the US. [0] https://www.nytimes.com/2022/07/15/business/economy/inflation-economy-polling.html https://www.nytimes.com/2022/07/15/business/economy/inflatio... [1] https://data.bls.gov/timeseries/ces0000000001 https://data.bls.gov/timeseries/ces0000000001

importantbrian 4y ago

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market.

bagels 4y ago
The fed said interest rates will keep being raised until unemployment rises.
- glial 4y ago
  Which is so strange and violates two of their three mandates - maximum employment and moderate interest rates.
  - dasil003 4y ago
    You don't want to fuck around with inflation because at a certain point it becomes a self-fulfilling prophecy (ie. merchants raise prices pre-emptively just because they internalize inflation at a high steady state).
  - CPLX 4y ago
    So strange. It’s almost as if they’ve picked a side in the conflict between supporting labor or capital.
    - roflyear 4y ago
      HN is capital not labor.
      - CPLX 4y ago

kgc 4y ago

Does inflation factor into this number?

SantalBlush 4y ago
Yes, this is real GDP, meaning adjusted for inflation. [0] [0] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
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kyleyeats 4y ago
Yes, and the suspiciously low inflation numbers we're given are just low enough to indicate there's growth.
- roflyear 4y ago
  Everything is a conspiracy.
  - kyleyeats 4y ago
    No, everything is 40% more expensive.
    - vkou 4y ago
      Houses aren't. :) (Inflation watchdogs only come out when he price of butter rises, not when the price of their house does...)
    - roflyear 4y ago
      Some things are 40% more expensive. People are also making a lot more money. Wages are up.
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SevenNation 4y ago

> Overall, the outlook for the overall economy has darkened. The Fed has raised interest rates five times this year and is set to do so again next week and in December. Chair Jerome Powell has warned that the Fed’s hikes will bring “pain” in the form of higher unemployment and possibly a recession. Those hinging important economic decisions on the "Powell Pivot" are going to have to wait longer. There's no way a pivot is happening into a combination of positive economic growth like this, strong jobs market, and sky-high CPI increases. There are maybe three factors that will cause a pivot: 1. Inflation falls to match the Fed funds rate 2. A rapid housing market decline starts to cause disruption throughout the rest of the economy. 3. The bond market starts choking.

everybodyknows 4y ago

Direct link to the primary source, Department of Commerce: https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...

JPKab 4y ago

"The U.S. economy grew at a 2.6% annual rate from July through September," Annual rate. That means the AP headline is deceptive, because it actually grew .6 percent. Capital is getting more expensive. Of course a recession is inevitable. I really hate the partisan capture of once neutral newsrooms. The headline is deceptively optimistic.

lame-robot-hoax 4y ago
So when they report on inflation (which is always portrayed in annual terms, not month over month), are they being overly pessimistic?
- nigrioid 4y ago
  Still optimistic.

eloff 4y ago

This is terrible news. Without a recession to curb inflation, the fed will have to get far more extreme with interest rates to get inflation back down. I thought that rates might top out around the end of the year, but now the fed may have to keep raising aggressively well into next year. Mortgages and the housing market are going to get slammed. This is going to get much worse than I previously expected.

georgeecollins 4y ago
But inflation is already lower in this report. I am not forecasting the future-- I have no idea-- but its not clear that inflation is getting worse.
- eloff 4y ago
  I missed that, that's a huge ray of hope! It looks like it's already getting below real interest rates. That's excellent!
ferrocarraiges 4y ago
That sounds like the opposite of terrible. We are long overdue for some bloodletting in residential real estate markets.

roamerz 4y ago

mgamache 4y ago

The Yield curve, Mortgage Rates, Bonds and Asset Prices are all in bad shape. Combined with rapidly falling income (due to 15%+ real inflation) it's a disaster in the making. Homes will likely fall 30-35% in adjusted value in the next 12 months. A lot of people's net worth is in their homes. This will be the largest post WWII drop in home prices. Don't forget the strong dollar is crushing economies around the world, who are our trading partners (and creditors).

adam_arthur 4y ago
The Fed has two choices. They either need to engineer a quick and sharp recession, or give up the inflation fight and drop short term rates. With option one the US can fund debt liabilities on the long end. With option two, the short end. Otherwise the US government will become insolvent within a few years. To me it’s clear they’re choosing option one.
- mgamache 4y ago
  Right, I just don't know how it's 'quick'. So much of inflation is supply side and not controlled by the Fed. They have to crush it hard and it may last a decade.
  - adam_arthur 4y ago
    Quick to begin, not to end, I should add. I agree it would likely be a pretty severe recession. Letting inflation run wild for a decade is probably the less painful path all else equal, but for legacy reasons Powell won’t choose that route. He would be remembered as a failure, just as Arthur Burns is. I would add that goods inflation is actually coming down, it’s much more about services inflation now which is labor supply driven, primarily. Services make up a majority of the CPI and aren’t impacted by logistics for the most part.
onlyrealcuzzo 4y ago
This is the dumbest "recession" because it comes on the dumbest asset pump. The S&P is still up 13% from pre-pandemic. That's slightly below historic the historic average, but nothing to be alarmed about. Home prices are still WAAAAAAY above historic averages. Even if they drop 20%, they'll still be way up. The only people that will get hosed are speculators. You didn't "lose" money if you lost "unrealized gains".

mensetmanusman 4y ago

There is less stuff to buy, demand remained high due to stimulus, prices rise accordingly, huge amounts of boomer retirements line up to keep unemployment low, record high corporate profits, economy growing… this is like a boom and a bust at the same time.