Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-April 2025 A brief excerpt: This 2-part overview for mid-April provides a snapshot of the current housing market. Policy and 2025 Housing Outlook. Since then, policy and the outlook have taken a turn for the worse. One point I made in March was: And another factor is the recent stock market volatility. Ten percent corrections are common, a further sell-off will have a negative wealth effect for potential home buyers. Stock markets are now down around 20% (with crazy volatility). And it is likely this will negatively impact home sales. Recession Watch over the weekend (not predicting a recession yet because the U.S. economy is very resilient, was on solid footing at the beginning of the year, and the tariffs might be lowered or reversed). And I discussed some of the data I’ll be watching in Recession Watch Metrics. tells the tale. Since both inventory and sales have fallen significantly, a key for house prices is to watch months-of-supply. The following graph shows months-of-supply since 2017. The following graph shows months-of-supply since 2017. Note that months-of-supply is higher than 6 of the last 8 years, and at the same level as in 2017. Months-of-supply was at 3.5 months in February compared to 3.6 months in February 2019. It appears national months-of-supply will be above pre-pandemic levels this summer, and likely above 5.0 months (putting some pressure on prices). There is much more in the article.

These headwinds will persist for the next decade or two. The stock market is rallying hard after a brutal sell-off--not an uncommon occurrence. As we savor our winnings in the ship's first-class casino, it's not a bad idea to step out onto the deck and gauge the weather. There are headwinds. Not zephyrs, not gusts, just steady, strong headwinds. 1. Presidents Trump and Xi view each other an as existential challenge to the future prosperity of the nation they lead. Neither can afford to lose face by caving in, and each has a global strategy with no middle ground. 2. Global trade / capital flows are all over the map. Uncertainty is the word of the moment, but perhaps the more prescient description is unpredictability: if enterprises have no visibility on the future costs of trade, commodities, labor and capital, they have little choice but to avoid big bets until visibility is restored. 3. The American consumer is tapped out. Credit card charge-offs are rising, auto loan defaults are rising, air travel is faltering--there are many sources of evidence that consumers--especially the top 20% households whose spending has propped up the economy--have reached financial and perhaps psychological limits. 4. The Reverse Wealth Effect is kicking in as stocks and other assets roll over into volatility and potential trend changes into declines rather than advances. The top 10% who own the majority of income-producing assets and risk assets are seeing $10 trillion of losses followed by recoveries of $5 trillion. Swings of such magnitude do not support confidence in the stability of current valuations or offer visibility on the odds of future capital gains. Just as enterprises must respond to poor visibility by reducing risk, households respond to increasing volatility and unpredictability by reducing borrowing and spending. Stable gains in asset valuations fuel the Wealth Effect, encouraging consumers to borrow and spend more because their wealth has increased. The Reverse Wealth Effect triggered by losses, volatility and low visibility encourages reducing risk, borrowing and spending. 5. There will be no "save" by the Federal Reserve or massive new Federal fiscal largesse. Tariffs and reshoring manufacturing are inflationary, so the Fed no longer has the freedom to create a few trillion dollars out of thin air to juice risk assets. The federal government's borrowing-and-spending spree threatens the integrity of the nation's currency and economy, so the the unlimited checkbook has been put in the drawer. 6. The two decades of deflation generated by China has ended. Central banks could play in the Zero-Interest Rate Policy sandbox because inflationary forces were all offset by the sustained deflationary forces of China's export machine and credit expansion. Now every economy, including China's, faces inflationary tides from a number of sources. 7. The sums required to rebuild America's industrial base will pinch speculative borrowing and consumer spending. Now that both the Fed and the federal government are restrained from borrowing and blowing additional trillions, private capital will have to be enticed into long-term investments in Treasury bonds and reshoring. The ways to incentivize long-term investing rather than consumption and speculation are recession and deflating asset bubbles. Both re-set expectations, risk appetites and incentives. Everyone with direct experience of manufacturing and supply chain networks is telling us that reshoring will be a costly, long-term project, requiring the rebuilding of the entire ecosystem that's been lost to hyper-globalization's offshoring and hyper-financialization's predation. Note that all credit-driven asset bubbles pop. Yes, the market is rigged, but that doesn't mean it always goes up or it's easy to catch the declines. The dot-com bubble lost 80% of its peak valuation despite assurances that was "impossible." 8. Demographics are not supportive of risk-asset expansion. Courtesy of @Econimica, consider this chart of the year-over-year change in high and high-middle-income populations globally. The change is now negative--fewer folks are entering these categories. In response, global debt has soared, in effect offsetting the decline of consumer demographics with borrowed money. As the global Boomer population retires and needs at-home or institutional care, they will sell their assets to fund these soaring expenses: stocks, bonds, real estate--all will go on the auction block to raise cash. The older cohort of investors is also more risk averse, as they know they don't have a decade or two to recover from a catastrophic decline in their assets' valuations. None of these dynamics can be reversed. These headwinds will persist for the next decade or two. New podcast: The Coming Global Recession will be Longer and Deeper than Most Analysts Anticipate (42 min) My recent books: Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site. 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The life and times of one of the most skilled tycoons of South East Asia: Robert Kuok. This is the fourth case on the rise of a tycoon in the Asian Conglomerate series.

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios. mortgage purchase applications index. FOMC Minutes, Meeting of March 18-19

Trump continues to dismantle crypto enforcement while expanding his personal crypto empire