Bassman Warns Of ‘Full-On Recession’ From Housing ‘Halt’
I am not sure how fast the Fed will start to cut rates because CPI will not decline meaningfully for a while, but we are going to be in a full-on recession by then as the housing market will have come to a nearly complete halt.
A Commentary by Harley Bassman
Quipped my good friend and ex-Merrill Lynch sparring partner David Rosenberg: "Cycles die; and you know how they die? The Fed puts a bullet in their forehead."
Last month I penned "Soft Landing," and if you printed out a hard copy, my ad
You know it is dark times when Harley Bassman doesn’t use colors with obscure names on his charts. It certainly feels like something is going to break soon, and I think we will be lucky if it is “just” a halt in housing.
Oh, he did. I removed the colors on this one because I couldn’t recreate them faithfully with the limited palette I use. 🙂
H-Man, Great article by Harley with a ton of insight about the housing market.
The fact that housing prices aren’t totally collapsing with these mortgage rates (well, not yet anyway) seems to me to be a pretty good indicator that housing prices will have another substantial rally as soon as rates go down.
As has been mentioned countless times here and elsewhere, the Fed can’t do anything to create supply. New housing will dry up once everything currently in process is complete and we’ll end up even farther behind on housing supply once we cycle through those units. New housing isn’t like manufacturing TVs. It takes years of planning, especially in the places that need housing the most. If there is a housing halt and workers leave the industry, that will only make that timeline worse.
Then you add in the number of people who are waiting on the sideline until rates come back down and you have a recipe for rapid appreciation.
What series is Bassman referring to in writing “With a 5yr-5yr rate near 3.5%”? For https://fred.stlouisfed.org/series/T5YIFR I see 2.2%
He’s talking about swaps. And he’s using it as a neutral proxy (I think).
Harley is on my list of people who I really pay attention to.