by Larry Johnson
The economy is officially in a recession (see Atlanta Fed GDP Tracker Shows the US Economy is Likely in a Recession) but many regime economists are behaving as carnival contortionists, desperately twisting words and facts in an effort to ignore the reality. Such academic tricks mean little for consumers paying double and triple prices for gas, diesel and food compared to 2020. They feel the pain and so-called experts unskilled in the Jedi mind trick are failing to convince the public that the pain is not real.
But we do not have to rely on statistics to realize there is a recession. Just look at what is happening to home sales and car re-possession. Forbes had this cheery headline more than a month ago–Pending Home Sales Plunge To Lowest Level In Nearly A Decade—Worst Could Be Yet To Come. Guess what? It has gotten worse. Here is a headline from yesterday (Monday)–The Deal Is Off: Home Sales Are Getting Canceled at the Highest Rate Since the Start of the Pandemic:
Nationwide, roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month. That’s the highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic. It compares with 12.7% a month earlier and 11.2% a year earlier.
You do not need an advanced degree in math to understand where we are headed. If interest rates continue to rise (and they will based on current Federal Reserve policies), the number of home sales will continue to fall. That has a ripple effect throughout the economy, starting with realtors making less money, which means home inspectors and companies pushing new loans and refinances will make less money and need fewer people. Then there are the secondary effects. Folks moving into a new home generally will make improvements ranging from cosmetic touch ups (paint, new flooring, curtains and furniture) to a full blown renovation. That work will start drying up as well.
Companies devoted to selling loans are now laying off workers–Loan Depot is a “prime” example (sorry for the mortgage rate humor):
Nonbank lender loanDepot is making what appears to be the largest series of cuts in the mortgage industry this year, eliminating 4,800 jobs over the course of 2022.
Overall, the California-based lender is implementing a program dubbed “Vision 2025” to save between $375 million and $400 million annualized, including headcount reduction, process optimizations, real estate consolidation and reduction in marketing and third-party spending.
The company will go from 11,300 employees at the end of 2021 to 6,500 by the end of 2022, loanDepot said in a filing with the Securities and Exchange Commission on Monday. The workforce reduction will result in the lender paying $3.5 million to $4.5 million in severance and benefits in the second quarter and $25 million to $28 million in the year’s second half.
The growing number of unemployed courtesy of cutbacks among mortgage lenders is long and growing and not confined to just one geographic region (thanks to the Truth About Mortgage site). Here is a partial list:
Wells Fargo to cut 107 jobs in Des Moines area (7/6/22)
Redwood Trust acquires Riverbend Lending (7/5/22)
AnnieMac Home Mortgage acquires OVM Financial (6/30/22)
First Guaranty Mortgage Corp. files Chapter 11 bankruptcy (6/30/22)
Mid America Mortgage, Inc. to rebrand as Click n’ Close (6/25/22)
First Guaranty Mortgage Corp. cut 428 jobs in Plano, TX (6/24/22)
Barclays to acquire Kensington Mortgages (6/24/22)
Chase to cut 1,000 home lending jobs (6/22/22)
HomeLight acquires Accept.inc (6/16/22)
Notarize let go of 25% of staff (6/15/22)
Compass to cut 10% of its workforce (6/14/22)
Redfin to slash nearly 500 jobs (6/14/22)
Flagstar Bank cut 20% of mortgage staff (420 jobs)
Rocket Mortgage offering buyouts to 8% of staff
Knock to reduce its workforce by approximately 46%
Better Mortgage to cut additional 3,000 jobs in United States and India
Zillow Offers shut down, 25% of staff to be let go
If you believe this is a sign of a strong, growing economy, you are certifiably nuts.
The other flashing red light is the surge in re-possession of automobiles. There are several articles describing this unfolding catastrophe. My fav is Barrons–Car Repos Are Exploding. That’s a Bad Omen. (we called this No Shit Analysis at the CIA):
Lucky Lopez is a car dealer who has been in the business for about 20 years. In recent meetings with bankers, where he bids on repossessed vehicles before they go to auction, he has noticed some common characteristics of the defaulted loans. Most of the loans on recently repossessed cars originated during 2020 and 2021, whereas origination dates are normally scattered because people fall on hard times at different times; loan-to-value ratios, or the amount financed relative to the value of the vehicle, are around 140%, versus a more normal 80%; and many of the loans were extended to buyers who had temporary pops in income during the pandemic. Those monthly incomes fell—sometimes by half—as pandemic stimulus programs stopped, and now they look even worse on an inflation-adjusted basis and as the prices of basics in particular are climbing.
Housing and cars are not inconsequential, bit players in a nation’s economy. It those sectors are in trouble it is reasonable to project that other sectors will follow. We should act like a sane coal miner who spots the canary perched in the mine gasping for breath. That is God telling you to run for your life.
My wife and I retired 5 years ago and decided to downsize our home and build a new house. Our plan was to make enough off our current home to pay for the new house. Then COVID hit. Everything slowed down.
Then that idiot Biden, Moron in Chief was fraudulently put in office. Costs for everything rose. More slow-downs. More delays. Now, we are almost finished and ready to market our home… just in time for the idiot Biden economic collapse.
Any chance idiot Biden will “forgive” construction loans? I seriously doubt it.
Trump ran up nearly as much debt in 4 post-recovery years as Obama did in 8 while dealing with the Bush recession.
How many times were you warned that the King of Debt’s insane economic policies would make run-away inflation inevitable? He stimulated the hell out of a recovered economy, and exhausted the tools used to deal with inflation and recession.
He initiated a totally screwed up withdrawal from Afghanistan with no provisions for the evacuation of anybody, and put that into effect during his final months in office.
Then he tried overturn our constitutional election process to remain in office.
This is the idiot you want back?
You are as clueless as Biden. At least he gets prewritten cue cards. You were told Bob Mueller and his group of anti-Trump lawyers had nothing, but you wouldn’t listen.
Nah. Trump leveraged debt. Obama and now Biden ran it up.
The leftist hoax of Trump running up debt as long dead.
It’s always Trump’s fault with you. We were told by HRC and the NYT Krugman, Trump would be an economic disaster. He wasn’t. They were wrong. So are you. The Biden administration isn’t pushing the lie you are. They’ve got their own.
We did fine under Trump no matter what we saw or heard from the gutter level M.S. Media the Eco-Freak idiots and the Democ-Rats and the Useless Nations