THE LOCATION STRATEGY TOP 10

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HOUSING DROPS

Existing home sales in the US dropped for the 11th consecutive month in December, with a 1.5% decrease from the previous month, and a record 34% drop year-over-year. This was worse than the worst drop during the Great Financial Crisis. Sales of single-family homes fell by 1.1% from the previous month to a pace of 3.6 million, the lowest since the end of 2010. Additionally, existing condominium and co-op sales decreased by 4.5%. This marks the longest streak of monthly sales declines in history and brought the Existing Home Sales SAAR to 4.02mm, the lowest since November 2010, even worse than the worst month of the COVID lockdowns.

U.S. new-home construction continued to fall in December, underscoring deterioration of the market amid high building costs and elevated mortgage rates. Housing starts declined to an annual pace of 1.382 million last month, down 1.4% from November. For the year as a whole, starts slid to 1.553 million from 1.601 million in 2021, marking the first annual decline since 2009.

Both of these declines took place as mortgage rates declined for three straight months:

RECESSION FORECAST

Historically, recessions start about 17 months after the 2s/10s Treasury curve has inverted for three months. So far, we are roughly nine months away from that point.

JOB LOSSES ARE UNDERSTATED

We've covered problems with job reports for several months now. Companies announcing major layoffs must report them because of Worker Adjustment and Retraining Notification ACT. Goldman recently constructed a timely WARN notices measure to uncover layoffs. To account for reporting delays, the bank's economists adjusted their measure for the average number of days between when notices are dated and when they are posted on state government websites. The analysis suggests that WARN notices were well below their pre-pandemic levels between April and August of 2022 but have risen relative to the pre-pandemic seasonal norm in the last few months. The notices we have observed so far this month are consistent with a roughly 21k monthly rate for January, somewhat higher than the 19k average in 2017-2019.