America’s property market suggests recession is on the way | Hacker News Reader

America’s property market suggests recession is on the way

economist.com

54 pointsmfiguiere95 comments

Worth noting, if you don’t follow this type of news closely, that The Economist publishes a piece saying a recession either is or isn’t happening every few weeks.

Isn't that true? At every point we are either heading towards a recession or not and it's a magazine dedicated to the economy and business.

True, but in economics (I guess in life, too?), timing is everything.

It's "boy cried wolf", otherwise.

It's "boy found wolf tracks, but no wolf came that night, so people called the boy a liar".

It’s “boy found wolf tracks in the woods where everyone knows there’s wolves already but is sure this time the tracks mean they’ll attack.”

There are two lessons in the boy who cried wolf.

Every day the boy would cry wolf and eventually the towns people stopped believing him. Then a wolf came and the boy had already lost his credibility so nobody believed him. Then the wolf ate all the sheep.

The first lesson is the boy’s, don’t burn trust by crying wolf.

The second lesson is the town’s. They let the boy desensitize them to wolves and now all their sheep are dead.

There's too many "boys crying wolf" talking about economics for any of them to be trustworthy.

You are either cautious and follow responsible financial principles or you don't.

No amount of "boys crying wolf" will sway you one way or another, when 99.99999% of the time they're wrong anyway, or worse, they have a vested interest in you following along with what they're saying, and they want you do it it at this <<exact>> moment.

Well, you just inspired me to look up the story, and the sheep are scattered, not dead, because obviously a single wolf wouldn't eat all the sheep.

It would be an odd story if the lesson is "always believe people who don't tell the truth."

At every point in time we are both heading for a recession and heading for an expansion, differing only by time window.

The Economist publishes a piece saying a recession either is or isn’t happening every few weeks.

If you actually read those articles you'll tend to find they don't actually say "a recession is (or isn't) happening". They actually say "These specific factors indicate a likelihood of a recession (or not) in this particular area based on the following assumptions".

This seems like a pretty pedantic reply. Yeah they have a vague CYA after the click bait headline. The OP is clearly responding to the fact that the original click bait headline and the tenor of the article intimates a much higher certainty than an unqualified 'slight indication' might convey. It's like GPT Chat where the syntax is flawless and the writing is authoritative regardless of its relation to reality. There is maybe a reason that a bunch of upper crust people in London, who are really interested in finance, weren't able to get high paying jobs in working in finance.

Exactly, this is what clickbait is. Attention grabbing headlines making bold claims, with articles that have more measured statements.

Publications know that most people just read headlines, walking the headlines back in the article is disingenuous.

(Note this is usually not the writers fault, headlines are chosen by editors to maximize engagement)

It's not just the economist. So many finance publications have been predicting a recession for years. I guess their logic is that sooner or later they'll be right. The Peter Schiff school of economics.

Well as long as people are spending and the US unemployment rate is low, this article means nothing. I guess they never heard of Interest Rates or Working from Home or real wages increasing (though slowly) :)

Anyway, I am starting to believe these "recession is on the way" articles as the top 1% trying to cause one so they can prevent the slow movement from slave wages to almost livable wages.

Who stands to benefit the most from a recession? I am curious because this talk has consistently been rubbish.

Everyone who wants in on the ground floor of of the next boom

I think there’s a more likely explanation that the longer an expansion cycle goes, the more time people spend wondering when it will stop/reverse. The more people who wonder about it, the more market there is for articles talking about the inevitability.

The primary reason the unemployment has remained low is due to so many people primarily baby boomers, leaving the work force.

High inflation means that interest rates on all loans have to be higher for banks to earn back their principal. I'm not even counting the Federal reserve needing to race their core interest rate which they will. When capital becomes more expensive businesses are more likely to fail and less likely to be started.

Inflation leads to higher interest rates and lower lending. Reduced lending leads to economic contraction. Wage gains in real terms are primarily due to a supply and demand curve for labor. Most industries are having any wage gains erased by inflation.

This isn't a new phenomenon with the exception of the first contraction in the labor force participation rate in decades. Inflation of this nature is only halted by reduced economic activity. Without it, it continues until real wage growth is sharply negative.

By the way, if you're a reader of HN, you are almost certainly in the "1 percent" globally.

>The primary reason the unemployment has remained low is due to so many people primarily baby boomers, leaving the work force.

I know quite a few people in the tech sphere who, under other circumstances, might have taken some late career job (or just happily continued in their current role) who are taking their vests, retiring somewhat early, and maybe do a bit of consulting on the side. There are fewer opportunities and a lot of work environments are under a lot of financial stress these days.

Not to mention all the bureaucracy surrounding Jira, Agile and other items, I may end up on that train too.

Years ago, word of mouth directly from the user was good enough. Now, changes have to go through several levels of bureaucracy before it can even be looked at.

Left the "industry" early for similar reasons. It used to be fun when it was looser, more bottom up. I was spoiled perhaps — but I can tell you the job ain't what it used to be.

A lot of companies grew a lot, there's a lot of economic stress/caution, budgets are tight for things like travel, a lot of scrutiny around goals/performance measurement/financial metrics/etc. While there are certainly pockets of interesting activity, I see larger companies certainly battening down hatches. Was talking to someone just last night who is counting down the days to their next vest then they're out. I have to believe a lot of employee survey results at the moment are a train wreck.

I wonder though about the younger engineers who are just entering or have only recently entered the field. Do they even know what it used to be like?

I have met new engineers though that seem to enjoy the current structure of modern software engineering with all its unit tests, code reviews, lint, etc. Perhaps they would not have enjoyed the more freewheeling era that I thrived on.

I suspect a lot of engineers who grew up in a very process-oriented environment would find the way things were often done a couple decades ago to be utter chaos. It depends on the size of the company as well, of course, but a lot of process-oriented tooling like git, ticketing systems, CI/CD, etc. have become pretty widespread standard practice.

Yes, it was utter chaos, and we liked it that way because we were the ones driving the clown car, ha ha.

Depends on company size and culture really

This. It makes me feel like dog shit at work to have to vet everything through a buckshot path of stakeholders. Often, they aren't even stakeholders. Creative? Have ideas? Good luck.

Ladle on top of this working with tight-ass (would a smile or joke hurt?), pedantic burnt out devs (no wonder women don't want to code) and I'm faced with an emotional struggle almost every day. My favorite words seem to be: "fuck this."

> might have taken some late career job (or just happily continued in their current role) who are taking their vests, retiring somewhat early

The primary force pushing people to not cash out tech stock and soft retire is because tech stocks peaked two years ago, and most are struggling to recover. I think working conditions and consulting opportunities are secondary concerns to most people in that position.

As long as someone isn't all or mostly in and holding one or two large tech company stocks, if they've been in non-startup tech for the past few decades, they should be in pretty good shape. But there's no guarantee Facebook stock is going to recover in 3/4/5 years.

The fact is that between the salaries at many companies and stock appreciation the past decade+, many people are in a position to soft retire as you put it and they're doing so. And it's clear from talking to them the fact that their jobs aren't much fun any longer has a lot to do with it.

The combination of a 30 year career in software, being a little smart about money, and not being unlucky about unexpected expenses is usually good enough to soft retire. In your early 50s. A lot of people do it.

I was responding to why some people would choose not to do it. S&P500, Dow, and Nasdaq peaked 2 years ago. I know that's influenced people in my sphere to keep up the grind.

Fair enough. Like many of their companies, people are probably inclined to be a little more cautious in at least choosing the exact timing of their departure. I know one person who was going to leave their job at the beginning of the year but decided to take a few months until their next vest to transition their replacement.

> Anyway, I am starting to believe these "recession is on the way" articles as the top 1% trying to cause one so they can prevent the slow movement from slave wages to almost livable wages.

It's safe to discard this theory because it's not possible to have that kind of control through "the media" or otherwise. What's accurate is that articles like this get clicks and that's why they come into existence. This article is just a vehicle for advertising, and for every one you can find you can find an article from the same source that states the opposite or some other tangential theory.

You are assuming the person you replied to thinks there's a cabal or conspiracy. Alternatively, the 1% could be using mass media to project their viewpoint simply because most of the mass media is owned by the 1%.

That too suggests a conspiracy though.

Since the 1% are unlikely to be the ones writing the actual articles, you're going to have to have co-conspirator reporters, writers, editors, publishers. Being coerced by the 1% would in itself be quite a story, ha ha.

Perhaps though you can imagine though a more subtle, undetectable way in which the 1% are able to project their viewpoint via the media that doesn't involve co-conspirators.

Like the person you replied to though, I think Occam's razor suggests instead that these articles get clicks.

I don’t think that people pleasing their bosses is such a big conspiracy.

It isn't. It is though when you go from pleasing their bosses to "their 1% oligarch boss says to publish this article that a recession is coming so that workers wages will go down".

It doesn't suggest conspiracy. It suggests organizational structure. Reporters don't get to cover anything they want. They get paid to cover certain topics and are supposed to stay in their lane.

Editors are gatekeepers of what gets printed as part of their job description. Editors get paid more than reporters, and they report to people who get paid more than them. A major type of bias is what doesn't get reported.

The coersion is their paychecks, which isn't a big story.

You are making the same mistake as the person I replied to. It's not a conspiracy. It's institutional.

It's very lazy thinking. People are scared and confused about the world and the easy thing to do is create a nebulous group ("elite", "1%", etc.) to attack as the source of their problems. It's a tale as old as time.

Not to mention the so-called "viewpoint of the 1%" appears to change almost daily, is contradictory, and often times critical of the very 1% that controls "controls the media".

"Mass Media" must also include Twitter, Meta, Google, Apple Music, Spotify, and other sources of content, news, analysis, etc. How many people does the 1% have in on their scheme?

Way better off figuring out how your local representative is taking $5,000 grift payments to expedite some shoddy development that'll collapse in 10 years or cause cancer than to spend time dwelling on such nonsense.

I'm talking about institutions and incentives, and you're accusing me of inventing a boogyman...

Go find your favorite mass media source and you'll see contradictory interviews, contradictory articles, etc. because the point is to get clicks, not drive some cabal's agenda.

I already said there is no cabal...

Maybe it doesn't have a measurable effect but the other day there was an economist on Bloomberg saying that "we need a recession" that it would be "good thing", I was a bit surprised to hear this sentiment being expressed so explicitly.

Edit: I can't find the video now but I found another recent video expressing a similar idea: https://www.youtube.com/watch?v=63aDL326IFA

You do "need a recession".

Without one you cannot reduce inflation not the kind that we have right now. Inflation driven by an external price shock like the Arab oil embargo in 1970s is one example of one that can be alleviated without recession by bringing on supply.

This current state of inflation is direct result of a massive increase in the money supply caused by the government shoveling money out hand over fist. That money was printed. People were being paid without producing any goods. More money same amount of goods equals inflation.

A reduction in gross economic activity is the only way to halt the wage price spiral.

Every law passed by the federal government that increases spending including the IRA is actually making current inflation worse. (While there is something to be said for the IRA making investments that could ease inflation in the future there's absolutely nothing they are doing to help it now but plenty to make it worse.)

The belief that you can reduce inflation without a recession is based on wishful thinking with no examples in history. I studied applied economics in college and the first code I ever wrote outside of the class was inflation simulations in the early 2000s. At that time we thought that loose monetary policy was a thing of the past and we would never have such an irresponsible group of people advising economic policy. But unfortunately we did thanks to an obscure and unproven theory called MMT. It's the string theory of economics in the sense where a bunch of passionate people have dedicated their careers to it and nothing good has ever come of it.

> the top 1% trying to cause one so they can prevent the slow movement from slave wages to almost livable wages

Interesting. I've had the same thought for some time but hadn't seen anyone else voice this concern until now.

Unemployment rate lags the economy, not leads. Meanwhile savings rate is dropping and consumer credit is hitting new highs

Wouldn't savings rate dropping in a low unemployment environment mean increased demand? I guess if it is just servicing higher interest debt demand could still be going down.

Real median household income has been in decline since 2019: https://fred.stlouisfed.org/series/MEHOINUSA672N

This recession is going to play out differently than expected. Certain parts of the economy seem to be doing well, whereas others, such as the property market, show signs of recession. As a result, it does appear there will be a very shallow recession overall.

IMO we'll see sectors fall and start to recover at varying times and its going to be difficult to assess the economy in aggregate. Rates will continue to bleed out non-productive companies but large zombies might be able to survive. An additional rate hike in July is now close to consensus so I think behind closed doors the Fed and others are very concerned about large bankruptcies and contagion - using rates more aggressively to accelerate the burn might help to level things out.

> whereas others, such as the property market, show signs of recession

I'm not even sure the article supports that much:

> But recently, signs of an early and largely unexpected rebound have emerged, prompting concerns that higher rates are not having the desired effect. New-home sales jumped in January to a ten-month high. Surveys gauging the confidence of both homebuilders and homebuyers have improved. America’s property companies have reported more visitors to their show homes. “We have seen the momentum build week after week,” notes Sheryl Palmer, chief executive of Taylor Morrison, one of the country’s biggest homebuilders.

It seems more like the property market is doing unexpectedly well.

So does inversion of the 2-10 year yield curve. Currently -0.88%, an extremity last reached in 1981.

https://fred.stlouisfed.org/graph/?g=10DLP

The body of the article doesn't really support the headline; it's a lot more "might, might not, no one knows and the past few years have been weird".

Nobody ever knows. It's odds making. The odds were above 50% late last year, then dipped in Q1 now they're trending up again.

This. If anyone really knew, they’d be getting rich investing rather than writing articles.

Just posting this as I think it may be useful to gain some perspective for this type of articles. An article from 2000 indicating soft landing: https://www.wsj.com/articles/SB969020894934426807

Because they papered over the landing with newly created dollars — which isn’t really happening this time because they beat that horse to near death.

Plus you have a lot more going on this time around which isn’t really helping with an orderly landing.

I do not know what may or may not happen as if I knew, I’d become very rich. My point here is that the article from 2000 indicates soft landing when the landing definitely was not soft at that time. Just wanted to show the value of such articles.

Outside of tech it was relatively soft

There's mixed perspectives on this because in aggregate top line terms it was relatively soft but in distributional terms both the 2001 recession and the subsequent expansion up to the Great Recession were abysmal for all but a very narrow slice at the top (which—on a higher level than the particular housing-related financial shell games that get the most focus, whuch really were just one of the ways the underlying dysfunction was papered over with debt—is pretty much the main cause of the Great Recession.)

>the 2001 recession ...was abysmal for all but a very narrow slice at the top

On what are you basing this conclusion?

Well, apart from the US:

1. In Japan, the crisis resulted in a prolonged period of economic stagnation, known as the "Lost Decade," which lasted from the early 1990s to the early 2000s. The country had already been struggling with a banking crisis and a property market crash, and the dot-com bubble burst only made things worse.

2. In Europe, the crisis led to a slowdown in economic growth, particularly in Germany, which was heavily dependent on exports. The country was hit by declining demand from the United States, which was one of its biggest trading partners.

3. In emerging market economies, the crisis led to a decline in investment flows and a slowdown in economic growth. Countries like Brazil, Mexico, and Argentina were particularly affected, as they were heavily dependent on foreign investment to finance their economic growth.

Overall, IMO the 2000 crisis had rather a significant impact on the global economy, leading to a decline in economic growth in many countries. I wouldn't call it "soft landing".

The 2000 dotcom crash resulted the "Lost Decade," which lasted from the early 1990s to the early 2000s? Are we talking about the same thing?

I used the word "prolonged"

And they were right, the 2001 recession was so soft some economists don't even consider it to actually be a recession.

Outside of the tech bubble it was pretty much business as usual.

https://archive.is/0oGD9

ChatGPT changes everything. Normally with the high rates and the continued inflation we'd head to recession. But ChatGPT is our get-out-of-jail-free card. In the next few years there will be a burst of economic activity driven by new GPT bots. We have already started seeing it. But this stuff is exponential, like Covid. By the end of this year we'll see GPT applied to countless things. By next year we'll see lots of companies establishing GPT departments.

We are not heading to a recession, we are heading to 4% growth. Sustained over a few years.

I definitely admire your optimism, I gotta say. It is very cool and is certainly able to produce some mind blowing artifacts, but it feels like it's going to absolutely obliterate some jobs and not really create too much new stuff. It will increase productivity in a handful of fields though. My predictions:

Obliterate: Copywriters

Increase Productivity: Programmers, Lawyers

Create: ???

Your predictions are in line with my predictions.

When you say "increase productivity", what do you think "productivity" means? It means dollars. Increased productivity is increased GDP.

Also, when you say "programmers". That's not just a tiny corner of the economy. It's quite a huge one. And I can see cases where the increase in productivity can be of a factor of 10 or more. I don't know about you, but I've been involved in many (too many) migration projects in my life. That's something a good GPT bot should be able to handle. How many migration projects don't take months or years? With a good GPT assistants one could envision weeks instead of months.

Or how about adding unit tests to a large codebase? Or pointing at security vulnerabilities? Or commenting on the code architecture and giving improvement suggestions? Or even maybe carrying out the improvements themselves.

All these things are dreams right now, but ChatGPT is just a baby. Literally 3 months old.

You mentioned lawyers. But how about CAD designers. I have some friends who design interior furniture. What if they could get a first draft in a few seconds instead of hours? What if the subsequent drafts could also take seconds instead of hours?

What about advertising? Here, I just asked ChatGPT to come up with ideas for a hypothetical home brew low carb beer, it gave me 10 answers in a matter of seconds. Here's a few:

    "Drink up, buttercup - this low-carb brew won't give you a beer belly!"
    "Because who needs carbs when you have beer?"
    "Who says you can't have your beer and drink it too? Try our low-carb option today!"

As for create? Wow, sky is the limit there. I wrote a fairy tale for my 5 year old daughter a few days ago. Something with unicorns and pixies and an owl and some friendly talking trees. Of course, it was all ChatGPT. I won't bother you with some more quotes, but you can try an exercise like this on yourself, and then maybe you'll reconsider your question marks in the category "Create".

Chat gpt is identically helpful to most chat and phone support staff that are underpaid but still paid and have zero power to solve anything as they are required to follow narrow scripts and have zero ability to make exceptions.

For example Chat gpt can easily replace all of UPS chat staff that UPS does not allow to actually see data or do anything to help.

Will it be useful to customers, not at all. But UPS will no longer have to pay the people that they want to be intentionally useless in order to have a fake facade of customer service.

I doubt it.

ChatGPT is an amazing innovation. But it won't be long before a company gets blowback because of something their ChatGPT customer service said.

Absolutely, the only thing we need is a way to get rid of the excess hominid biomass.

Productivity is definitely going through the roof though. Can't wait to see the NYSE ticker results.

So in part folks playing financial wizardry with mortgages to get people to buy homes that they wouldn’t otherwise afford or be willing to buy. What could possibly go wrong?

It's described as financial wizardry, but isn't it the same thing we've had for decades? Mortgage/discount points? Pay a little extra in exchange for a lower interest rate. https://en.wikipedia.org/wiki/Discount_points

> Second, buydowns fly in the face of what the Fed has been trying to do: tamping down on property purchases to bring demand and supply into better balance.

This is an editorial, so the rigor is unclear. Is it actually the Fed's intention to reduce the demand for housing by raising interest rates? If so, it is short sighted to reduce short term demand for housing in a way that reduces the long term supply of housing.

does this mean i may be able to scoop up a home cheaper? obv rates will be high, but if you have the credit and $$, should be a good opportunity for the financially patient/responsible.

right - like the lengthy comment on this topic on an earlier day lamenting "you can only buy three" new houses.. A fellow and his two buddies would have a fun ritual of going to new home sales lots and buying with good credit as many houses as they could together on the first day. Then, they unwind the position to actual buyers for a profit.. good times! </s>

I've been of a mind that the only way to "win" is to buy land instead and build on it. I see too many large, conglomorate home builders — perhaps two of which will divvy up entire subdivisions and rake in the profits for themselves.

I'm no historian but it seems there's been a trend over the past century of entire markets becoming inaccessible to the average person. I'm not going to do the topic justice with my poorly worded rant but I'm thinking about how, for example, the "A&P's" made it impossible for mom and pop to open a grocery store (short of a niche kind of Indian Foods Market or whatever).

Various big players have divided up each of the industries and mercantile opportunities leaving the rest of us with little more than food trucks, small restaurants, nail salons, etc.

It's fascinating to me the rare opportunities of commerce that have briefly graced the middle class before being swallowed up — things like the book store, the record store, the drive-in movie theater, the personal computer, the video rental store....

I’ve been kind of halfassedly watching the properties in the town I bought my house and the last time I checked, probably a couple weeks ago, all the bargains were snapped up after being on the market for a while.

Maybe something changed with the local economy that I don’t know about but it seems that people might be snapping up houses while they can still afford them.

Obviously pure speculation on my part as I only pay attention to one smallish city.

—edit—

Turns out pure baseless speculation and probably a bug in Zillow because the bargain houses are still there.

Hard to put your finger on Realtor corruption. Not listing houses and selling to their own contacts etc...most home sales go through a monopoly.

For me it seems that some people really want to have that recession happening, even though there is no actual reason it must happen organically. Like, some media and investors really want to talk everyone into having a recession, that might actually occur if just enough people believe it and behave accordingly.

And I have no idea why people might want that. I mean, we do have some smaller growth for various reasons right now, but there is no _shhrinking_ going on, which would be the important thing to call something a recession, right?

> And I have no idea why people might want that

If you can anticipate the market movements, you can profit from that (and vice versa). So maybe those investors have placed big bets on a recession but it isn't happening — and they just desperately want it to happen anyway.

There's been huge amounts of inflationary money printing. The macro market indicators are all showing that the amount of leverage, borrowing, debt, all factors point to an imminent crash. What's keeping major players from collapsing is more borrowing, creative accounting, innovative means of hiding debt, and an artificial stay on margin requirements and bills due.

In, "home economic" terms, the mortgage is long overdue, behind on car payments, cell phone bills, and we're eating on credit cards. We're using our student loans to make minimum payments to keep the bill collectors happy for now, we're working on a debt consolidation loan with the bank at a reasonable rate, but it might not come soon enough. We're clearly on a knife's edge, and we don't know if things will work out. What's very clear is that this is not sustainable.

https://archive.is/yiBV1

The risk is commercial real estate and corporate debt. I believe this was mentioned during the last Fed minutes.

I thought we were already in a recession, does this mean a recession in the property market or overall?

The US has had consecutive quarters of GDP decline in 2022, historically a very strong correlate with a declared recession.

The National Bureau of Economic Research has not declared that the U.S. economy is in a recession, so officially/definitionally the US is not determined to be in a recession.

That raises the question if it's a political action. If Q1 2023 is a third consecutive quarter in GDP decline, that would seem to strongly signal a recession.

Is there a formula that is followed to officially/definitionally determine is the US is in the recession? I'm not even sure how to search for the answer to this next question but I presume somewhere there has been a process used by the government in the past, so we can at least tell if current government is charting their own process.

The negative GDP growth quarters were Q1 and Q2 2022. We already had a reversal and positive GDP growth for Q3 and Q4 2022. That would seem to portray that everyone who wanted to call a recession after Q2 2022 were premature.

https://www.bea.gov/data/gdp/gross-domestic-product

White House description of how NBER determine's recessions https://www.whitehouse.gov/cea/written-materials/2022/07/21/...

By what definition? GDP growth was around 3% for Q3 and Q4

if you say it often it might happen!!! what we are seeing however is that as people can't get loans anymore there are more renters which makes rent more expensive and ultimately owners richers which will then make people buy more houses even tho loans have higher rate,

Actually I heard somewhere rents are staring to fall. Not sure if I believed that article.

But it also said there are a lot of new rental units about to hit the market in 2024 YMMV

Another thing, I know some people in one of the "Tier 1 Cities" who's rent has not increased in a few years. But, these people never missed a rent payment and was never late, so it could be due to the landlord liking that.

I thought it was the 2nd derivative that was falling. Rents were still going up, but not as fast as they were previously.

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