Weekly Market Update by Retirement Lifestyle Advocates

Housing Inventories Up: Housing Sales Down

         Inventories of all single-family homes on the market rose in January by 8.3% from one year earlier (Source: https://wolfstreet.com/2025/02/26/inventory-of-new-houses-for-sale-highest-since-2007-builders-push-mortgage-rate-buydowns-price-cuts-and-incentives/)

.  From January 2019, inventories are up a whopping 42%!  There are now 496,000 unsold single-family homes on the market.  That’s a 9-month supply.

         This chart from the Commerce Department and “Wolf Street” tells the story.

         Notice from the chart that the number of single-family homes for sale presently is at the same level as in 2008 at the time of the Great Financial Crisis.

         “Spec house” inventory, houses that were built with no buyer lined up, is building quickly.

         “Spec house” inventory is up 39% from one year ago (January 2024) and 44% from January 2019.  That data comes from the Census Bureau.

         In short, the real estate landscape is changing. Homebuilders are adding to housing inventories faster than they are selling the homes that they are building.  That explains the rapidly rising inventories of single-family homes for sale.  And it likely means lower real estate prices ahead.

Is a Recession Now Imminent?

        The Federal Reserve Bank of Atlanta’s “GDPNow” model just revised first-quarter economic growth estimates from +2.3% to -1.5%.  Negative economic growth, or economic contraction, is the textbook definition of a recession.

         If government spending continues to be cut in a meaningful way, it will almost guarantee a recession since government spending is one of the components in calculating economic growth, or gross domestic product.

       Gross domestic product is calculated by adding these components:  Consumption (or consumer spending), government spending, business domestic investment, and net exports (if net exports are negative, this reduces GDP).

         While government spending cuts are economically healthy in the long term, they are not without some short-term economic pain.

Debt Continues to Loom as a Major Economic Headwind

         Since consumer spending is the largest component in the economic output of the United States, comprising about 70% of the gross domestic product, high levels of consumer debt are a drag on economic growth.  Consumers are using their discretionary income to make debt servicing payments rather than using that income to make new purchases.

         When examining consumer debt levels presently, we conclude that American consumers are collectively up to their proverbial necks in debt, with many struggling to service the debt.

         Credit card debt rose in the third quarter of 2024 to $1.17 trillion, the highest level recorded in the more than 20 years that the Fed has been tracking this statistic.  In the fourth quarter of 2024, credit card debt rose again to another all-time high of $1.21 trillion.  Fourth quarter credit card delinquency rates hit 7.18%.  That means about one in fourteen credit card accounts are delinquent.

         It’s not just accumulated credit card debt dragging down the spending ability of many Americans; automobile-related debt is also higher, and interest rates on new auto loans are much higher than they had been previously.  Since 2018, the average monthly auto loan payment has increased by more than 50%.

         When looking at the delinquency rate on automobile-related debt, one finds that delinquencies have been rising since 2021 in every income bracket.

        Since 2021, auto loan delinquency rates have increased by almost double for the lowest income quartile of Americans and by more than double for the second income quartile and third income of Americans.

         Interestingly, even the highest-earning quartile of Americans have had delinquency rates surge by nearly 50%!

         Total automobile-related debt is now $1.655 trillion.

       Then, there is mortgage debt, which is now $12.605 trillion.  Mortgage debt amounts to about 70% of all consumer debt.

         All-in-all, consumer debt in the United States is now more than $18 trillion.

Dow to Gold Ratio Update

         The Dow to Gold ratio, which essentially prices the Dow Jones Industrial Average in gold, remains extended.  The chart here, published by past RLA Radio guest Egon von Greyerz, illustrates the ratio going back 220 years.

       Notice that prior to the establishment of the Federal Reserve in 1913, the Dow to Gold ratio remained in a much tighter range.

         However, since the Fed became the central bank of the United States, the ratio has had some wild swings.

         I have long forecast that this ratio will eventually get back to at least one, with gold and the Dow reaching parity.  I am still of that mindset.  Mr. von Greyerz is suggesting even lower than that, with gold doubling the Dow.

         This week’s RLA radio program features a ‘best of’ interview that I did with Mr. Karl Deninger of Market-Ticker.org.  Karl and I talk about the US economy and also some politics.

The interview is posted and available now by clicking on the "Podcast" tab at the top of this page.

“There’s only two things you can start without a plan, a riot and a family.  For everything else, you need a plan.”

                                                      -Groucho Marx