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Comparing this housing market recession to 2008

The housing market recession we’ve seen this year is significantly different than 2008. Here’s what you should pay attention to.



As we close out 2022, it’s time to reflect on a historic year for the housing market, which was even crazier than the COVID-19 year of 2020. There are similarities and significant differences between the housing recession we’ve seen this year versus 2008, and looking at specific factors in both timeframes gives us an idea of what to expect in 2023.

First, we must define what we mean by recession. Our general economy is not yet in a recession, but housing has been in one since the summer. For me, it’s straightforward: it’s when we see these four things happen in any sector of our economy:

1. Sales fall. Housing demand has fallen noticeably this year.
2. Production falls. Housing permits and starts are falling now, even with the backlog of homes in the system.
3. Jobs are being lost. The housing sector — especially real estate and mortgage — has seen significant layoffs, while the general economy will create more than 4 million jobs in 2022.
4. Incomes go down. With less transaction volume, general incomes in the housing sector are falling.

A few months ago, I was asked to go on CNBC and talk about why I call this a housing recession and why this year reminds me a lot of 2018, but much worse on the four items above.

It is crazy to think we are seeing these four things happen in the housing market considering that even in March of this year we were seeing bidding wars accelerate before mortgage rates rose. That is how fast things changed — a by-product of a sector where the prices of homes were getting out of control after 2020.

Then we had the biggest mortgage rate shock in recent history and yet even with that, we will have over 5 million total home sales this year. Sometimes this discussion gets off the rails because people tell me home prices are up in 2022 so housing can’t be in a recession.

That is precisely the wrong way to look at housing economics: higher home prices have nothing to do with housing being in a recession, as I showed above. Housing went into recession in 2006 and prices weren’t collapsing that year either.

Let’s look at the recessionary factors we see now versus 2008.

Home sales

The housing market of 2002-2005 had four years of sales growth facilitated by credit. As we can see below, the purchase application data had four years of growth, peaking in 2005 and then collapsing. In our current market, purchase application data recently fell below the 2008 level.

However, what isn’t identical is that we have not had a massive sales boom like we saw from 2002-2005. We only had one year of growth in the purchase application data from 2020-2021. The COVID-19 pause and rebound meant that the end of the year in 2020 was artificially high, so I can make the case that we had decent two years of growth, but that’s all. This is significantly different than the period from 2002-2005 when credit expansion was booming.

Existing home sales has seen a waterfall dive in demand, but this has happened in less than a year. During the housing bubble years, home sales peaked in 2005 and it took two years to get back to the sales levels we are trending at today. As we can see below, we had times in the previous expansion when rates rose and sales trends headed to under 5 million. Now, with one more report left in the year, we might break under 4 million.

Outside of COVID-19, we have yet to see pending home sales hit levels that low level this century. Part of the issue is that mortgage rates moved up so fast that many sellers quit this year as well.

Key thing to remember: A traditional seller is also usually a buyer . This common-sense reality has been lost in the discussion of housing market economics for a long time because people kept pushing the false narrative of supply spikes — which means people would sell their homes to be homeless. In fact, when traditional primary resident homeowners list their homes, they typically buy another home.

When mortgage rates spiked up as much as they did this year, it wasn’t financially appealing to some sellers to purchase their homes at rates of 6.25%-7.37%. This has led to many people not listing their homes to sell and facilitated a more considerable decline in home sales than we would traditionally see. This now goes into a subject matter that is a striking difference between 2022 versus 2008: Inventory and Credit.

Housing inventory

This aspect of the housing market is where we see the biggest divergence between 2008 and today. Total housing inventory today — using the NAR data — stands at 1.14 million. We have a good probability over the next two existing home sales reports to break under 1 million total active listings, which would mean that we will start 2023 with the secon-lowest level listings ever in history.

As I have explained, this started in the year 2000, when total active listings grew from 2 million to 2.5 million in 2005. Except we had many years of a credit sales boom on debt structures that weren’t sustainable. So, when housing peaked in 2005, we had a flood of inventory from home sellers who couldn’t buy a home, and that flood allowed the list to spike to over 4 million in 2007.

As you can see below, today — a few days away from 2023 —with existing home sales trending at 2007 sales levels, it is strikingly different.

The housing economy is built on housing construction, and the recession that started in June meant housing permits were going to fall, which they have. The issue is that when housingw as in a recession in 2007, we had a massive spike in supply. That isn’t the case now and housing permits have legs to keep going lower as long as mortgage rates stay high.

One saving grace is right now is that the builders still have a massive backlog of homes to build, especially two-unit rental units that amount to nearly 1 million added supply coming online next year. This is a big plus in fighting inflation.

Key thing to remember: The best way to fight inflation is more supply.  If you’re trying to fight inflation by destroying demand, it’s not the most effective measure and can ruin future production. Depending on how the next two years go, this will be a topic of conversation if housing permits fall over the next two years.

The good news for 2023 is that we still have supply coming, and we all should be rooting for housing completion data to improve next year. As you can see from the chart below of housing completion data, sales are falling, but completions have gone nowhere for some time now. This is because we didn’t have the credit sales boom from 2020-2022 that we saw from 2002-2005.

Housing credit

The most significant difference between the recession today and 2008 is housing credit. In 2008, the rise of foreclosures and bankruptcy were waving red flags before the job-loss recession even happened. Today, it’s the complete opposite story: the 2005 bankruptcy reform laws and the 2010 Qualified Mortgage laws laid the foundation for the best housing credit profiles recorded in U.S. history.

From 2005 to 2008, we saw a rise in foreclosures, all before the job-loss recession happened. That isn’t what residential housing credit risk is supposed to look like.

We now have real credit risk, as prices are falling from the peak in some areas; late-cycle lending risk is always traditional. People who buy homes late in an expansion and lose their jobs with no selling equity will likely lead to a foreclosure, most likely those with FHA loans. This means that the scale of defaults when the next job -oss recession happens will be small compared to 2008.

A foreclosure takes a lot of time, traditionally nine to 12 months. As we can see, once the recession started in 2008, the 90 days late + foreclosure data line took off. However, this all actually began in 2005 with the rise of new foreclosure and bankruptcy data heading toward the recession of 2008.

From Fannie Mae: The conventional single-family serious delinquency rate decreased by three basis points to 0.64% in November.

The housing reforms made housing credit boring again, and boring is sexy! Housing is the cost of the shelter to your capacity to own the debt. So, someone buys a home, their debt payment is fixed, and their wages rise every year, making their cost of shelter go down while their income grows. This has created one of the most impressive data lines for homeowners.

Mortgage debt service payments as a percent of disposable personal income have collapsed as people stayed in their homes longer and longer. With three refinancing waves since 2010, their housing debt cost versus their total wages fell. As you can see below, there is a massive difference at the end of 2022 versus 2008.

FICO score trends have been steady for 12 years. Now, we have seen people speculate that the recent rise in FICO scores for owners is credit score inflation, but the trends have stayed the same for a long time. It’s just the fact that, as a country, we originated a lot more loans during COVID-19 due to the massive wave of refinancing. People assume that was credit score inflation but in reality, the trend stayed the same.

As you can see in the chart below, the credit quality is much better now and we have no more exotic loan debt structures in the system post-2010.

On top of homeowners’ credit looking excellent, we have a lot of nested equity, and over 40% of homes in America don’t have a mortgage. So, on the credit and debt side of the equation, the housing market looks a lot different in this recession.

Housing debt adjusting to inflation isn’t even above the housing bubble peak. This is a by-product of having the weakest housing recovery in the previous expansion. I wrote about this before we got into the critical timeframe of 2020-2024, and we weren’t in a housing bubble in 2019 as so many people claimed. 

So is housing in a recession? Yes, it is. Is it like 2008? Not even close.

What I’ve showed here can explain why some data look the same, and some look very different. This time around we have taken a much more aggressive hit in existing home sales in a faster amount of time. We didn’t see similar inventory spikes as we did from 2005 to 2008, nor has the housing credit market crashed.

However, we are in the early stages of housing permits getting hit, and many housing jobs were lost in 2022 due to the decline in demand for homes. The question now is, what about 2023? 

Next week I will be providing my 2023 forecast, which will be written in a way I have never done before because the chaos in today’s housing market data is truly savagely unhealthy, while some of the core foundations of housing are very well intact. Happy New Year’s!

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Market Report – 2nd October 2023

The US Non-Farm Payroll jobs report due on Friday is the key data point of the coming week.  Analysts predict payrolls will fall…
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  • The US Non-Farm Payroll jobs report due on Friday is the key data point of the coming week. 
  • Analysts predict payrolls will fall to 150,000 from 187,000 last month and the unemployment rate to hold at 3.8%.
  • Average hourly earnings are expected to increase 0.3% month-on-month.
  • Any deviation from those forecasts can be expected to trigger price moves in all the major currency markets.

US dollar strength continues to be the underlying theme of the currency markets, with EURUSD currently testing the key 1.04823 support level and the GBPUSD downward price channel showing few signs of reversing. The US Non-Farm Payrolls jobs report, due to be released on Friday, is always an important milestone in the trading month, and September’s numbers could offer clues as to how far the current trend has left to run.

US Dollar

The Non-Farm Payrolls employment report, released on the first Friday of every month, often sets the tone for the following week’s trading. After this September, which saw EURUSD and GBPUSD give up 2.48% and 3.70% in value, respectively, Friday’s report is the most important item on the coming week’s economic calendar. The jobs report will be a crucial indicator of whether the rush to the dollar is likely to continue or if a reversal could be about to form.

ISM Purchasing and Services data will also offer an insight into the health of the US economy, and big corporations will kick off earnings season next week. There is also the backdrop of the US Federal budget and a possible government shutdown to consider, but for now, the NFP is the most likely catalyst of the next price moves.

Daily Price Chart – US Dollar Basket Index – Daily Price Chart – 20 SMA

us dollar basket daily price chart 20 sma

Source: IG


The coming week is quiet in terms of euro-specific data releases, but updates from other regions look set to influence the value of euro-based currency pairs. Due on Friday, the NFP number out of the states will very likely impact prices in the largest currency market in the world – the Eurodollar. Before that, on Tuesday, the interest rate decision due to be announced by the Reserve Bank of Australia will influence EURAUD price levels. However, comments from that central bank can also be taken as a guide regarding the mood of the rest of the central bank peer group.

Daily Price Chart – EURUSD – Daily Price Chart – 1.04823

eurusd daily price chart oct 2 2023

Source: IG

EURUSD has started the week trading midrange between two significant support and resistance price levels. To the downside is the 1.04823 support level, which marks the price low of 6th January. That still represents the current year-to-date low for EURUSD, but the tests of that level on Wednesday (1.04880) and Thursday (1.04910) suggest that bearish momentum is still strong.

Whilst the bounce off that level was strong enough for traders to think a trend reversal could be imminent, there is also resistance to further upward moves in the region of 1.06351. That price level relates to the swing-low price pattern formed on 31st May and previously acted as support between 14th and 25th September.


As with the euro, traders of sterling-based currency pairs will see prices influenced by announcements from other regions rather than UK authorities this week. The run-up to the release of the NFP jobs report could see GBPUSD continue to trade within a range formed by key support/resistance price levels.

Price level 1.23081 marks the upper end of the current price channel and is the low price recorded during the swing-low price move of 25th May. This level didn’t offer as much support as expected when it was breached on 21st September, and with the RSI on the Daily Price Chart at 29.09, there are signs the market is oversold and is due a bounce.

Daily Price Chart – GBPUSD – Daily Price Chart

gbpusd daily price chart oct 2 2023

Source: IG

The downward trend, which started on 13th July, has formed a price channel which has trendlines which have been barely tested over a period of weeks. That leaves plenty of room for the price of GBPUSD to continue to weaken and move towards the major support level of 1.18030, which marks the year-to-date price low of 8th March.


The recent decision by the Bank of Japan to continue with its dovish approach to interest rates has left room for USDJPY to track upwards, guided by the 20 SMA on the Daily Price Chart. That metric remains the key indicator, and until price breaks through that level (currently 148.21), there is room for a test of the multi-year price high 151.946 printed on 21st October 2022.

Daily Price Chart – USDJPY – Daily Price Chart

usdjpy daily price chart oct 2 2023

Source: IG

Monday sees the Japan Tankan Index number for Q3 be released. Analysts forecast that the index will rise to 7, but as with the other major currency pairs, the major news event of the week is the NFP employment report due on Friday.

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    Bonds, Bullion, & Black Gold Battered As Hawkish FedSpeak & Inflation Fears Lift The Dollar

    Bonds, Bullion, & Black Gold Battered As Hawkish FedSpeak & Inflation Fears Lift The Dollar

    Rate-change expectations shifted hawkishly…



    Bonds, Bullion, & Black Gold Battered As Hawkish FedSpeak & Inflation Fears Lift The Dollar

    Rate-change expectations shifted hawkishly today, after drifting dovishly for the last week, on the heels of the Manufacturing PMI's report which showed the rate of inflation quickened to the sharpest pace in five months and FedSpeak which confirmed Powell's "higher for longer" messaging.

    Source: Bloomberg

    In the US, S&P Global noted

    “Less encouraging was the news on the inflation outlook, as producers’ costs rose at the fastest rate for five months, largely on the back of higher oil prices. These increased costs are already feeding through to higher prices to customers, which will inevitably result in some renewed upward pressure on inflation.”

    Globally, JPMorgan warned that there were further signs of price pressures building in September.

    Input costs and output charges both rose for the second consecutive months, with rates of inflation accelerating for both measures.

    Fed Gov Michelle Bowman again said that multiple interest-rate hikes may be required to get inflation down:

    “I continue to expect that further rate increases will likely be needed to return inflation to 2% in a timely way,” Bowman said in remarks prepared for delivery to bankers in Banff, Canada.

    “I see a continued risk that high energy prices could reverse some of the progress we have seen on inflation in recent months.”

    Fed Vice Chair Michael Barr said the US central bank is “likely at or very near” a level of interest rates that is sufficiently restrictive:

     “I think it is likely that we’ll need to keep rates up for some time in order to get inflation down to 2%. I’m confident that we’ll get there.”

    Traders were buying protection against a less-hawkish Fed. Bloomberg notes significant SOFR flows on the day have been skewed toward dovish protection into year-end, standing to benefit from no more additional rate hikes from the Fed.

    The hawkish shift sent the dollar higher, rallying back up to perfectly tag the stops from Wednesday highs...

    Source: Bloomberg

    The stronger dollar weighed on crude oil prices, with WTI sliding back below $89, as Citi's Ed Morse muttered something about Oil "going back to the $70s" as “demand looks constrained as the pandemic recovery factors continue to ease off and peak transport fuel demand looms, while supply is growing in non-OPEC+ suppliers”

    And gold was dumped to fresh cycle lows, selling off for the 6th day in a row (9th drop in the last 10 days)...

    Source: Bloomberg

    Spot Platinum prices plunged to their lowest since Oct 2022...

    Source: Bloomberg

    Treasuries were sold across the board with the belly  (5s-10s) suffering the most...

    Source: Bloomberg

    Which steepened the yield curve (2s10s) to its least-inverted since the peak of the SVB crisis...

    Source: Bloomberg

    Bitcoin continued to drift higher, spiking above $28,500 intraday

    Source: Bloomberg

    Stocks were very mixed on the day with Small Caps clubbed like a baby seal while Mega-Cap tech outperformed leave The Dow and S&P trying to get back above water...

    Value stocks puked relative to Growth, erasing their recent gains...

    Source: Bloomberg

    'Most shorted' stocks were hammered for the second day in a row with no squeeze attempts...

    Source: Bloomberg

    Utes were the biggest losers today (NEE's plunge did not help) and Tech stocks were the only sector to end green...

    Source: Bloomberg

    That's quite a puke in Utes...

    Source: Bloomberg

    Goldman's data could hint at capitulative flows: CTAs as short $17.8bn of global equities (31st %tile), while In the US, CTAs are short $17.5bn of equities after selling -$59bn over the last two weeks, representing the largest two week selling since Covid!

    And finally, financial conditions continue to tighten, suggesting stocks may have more room to run to the downside...

    Source: Bloomberg

    Is that the 'deflation' that Powell is looking for?

    Tyler Durden Mon, 10/02/2023 - 16:00

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    UC Riverside startup company wins prestigious NIH grant

    Soon after he joined UC Riverside in 2015, Maurizio Pellecchia, a professor of biomedical sciences in the UCR School of Medicine, began working with…



    Soon after he joined UC Riverside in 2015, Maurizio Pellecchia, a professor of biomedical sciences in the UCR School of Medicine, began working with the UCR Research and Economic Development office to create on campus an incubator space. He envisioned that space as a home for UCR scientists to create startup companies to prove the commercial potential of their technologies. That multi-year effort helped create in the Multidisciplinary Research Building the EPIC Life Sciences Incubator that currently houses young companies in agricultural technology, biomedical technologies, bioengineering, and medicinal chemistry.

    Credit: Stan Lim, UC Riverside.

    Soon after he joined UC Riverside in 2015, Maurizio Pellecchia, a professor of biomedical sciences in the UCR School of Medicine, began working with the UCR Research and Economic Development office to create on campus an incubator space. He envisioned that space as a home for UCR scientists to create startup companies to prove the commercial potential of their technologies. That multi-year effort helped create in the Multidisciplinary Research Building the EPIC Life Sciences Incubator that currently houses young companies in agricultural technology, biomedical technologies, bioengineering, and medicinal chemistry.

    One of the tenant companies in the incubator space is Armida Labs, Inc, a pharmaceutical company founded two years ago by Pellecchia with Carlo Baggio, formerly a senior scientist in Pellecchia’s research group, as its chief technology officer and director of chemical biology. Armida Labs, which is developing a breakthrough pancreatic cancer therapy called Targefrin™, has now been awarded a highly competitive $400,000 Phase I Small Business Innovation Research, or SBIR, grant from the National Cancer Institute of the National Institutes of Health. The grant, of which Baggio is principal investigator, will allow the company to complete important next steps toward the preparation of human clinical trials. 

    “Our goal is to develop the drug Targefrin, which UCR has patented,” said Pellecchia, who holds the Daniel Hays Chair in Cancer Research at UCR. “We want to translate Targefrin from a laboratory discovery to a product that can fight pancreatic cancer, and potentially other cancers, and improve public health.”

    Pellecchia, who is the main inventor of Targefrin, explained that the SBIR grant makes it possible for Armida Labs to gather industry-standard pharmacokinetics and efficacy data, which are expensive to obtain. 

    “Without the grant, our studies would remain at the pre-clinical level,” said Pellecchia, who directs the School of Medicine’s Center for Molecular and Translational Medicine. “The Phase I SBIR grant will allow us to scale up the manufacture of Targefrin and to test this drug in more sophisticated pharmacology studies in models of metastatic pancreatic cancer. These data will help us craft the necessary follow-up studies that will enable filing an investigational new drug application with the Food and Drug Administration, and if successful, begin human clinical studies.”

    The SBIR grant Armida Labs received is a Phase I grant, which means it is a pilot phase grant. Only recipients of a Phase I grant can apply to the NIH for a Phase II grant. 

    “Phase II grants, which can be up to around $2 million, can allow us to apply for an IND,” Pellecchia said. “We expect our pilot studies will take about six months to one year to do. If these studies are successful, we will submit a Phase II application, which will allow us to complete toxicity studies in two animal models.” 

    An investigational new drug, or IND, is a drug that the Food and Drug Administration has not yet approved for general use. Researchers use INDs in clinical trials to investigate their safety and efficacy. Before testing in human subjects, however, researchers need to apply for an IND with the Food and Drug Administration.

    According to Pellecchia, the EPIC Life Sciences Incubator greatly simplified the launch of Armida Labs, the first UCR faculty biopharmaceutical company in the City of Riverside. He said it is a lot easier to start a company in an incubator space than to have to rent an empty lab space somewhere to start doing research.

    “Developing and growing a biotech company requires huge amounts of capital,” he said. “In contrast, a minimal amount of capital is needed to launch a startup in an incubator space. As a result, we were able to get Armida Labs off the ground and thus apply to the National Cancer Institute for seed funding. To go from a pre-clinical laboratory discovery all the way to drug development in patients, similar projects to Targefrin often require as much as $2-5 million. With our new award, we aim to complete valuable steps to attract further investment.”

    The EPIC Life Sciences Incubator, which is managed by Maricela Argueta and directed by David Pearson, aims to be a home for startups like Armida Labs by providing vital technology and equipment, as well as access to UCR’s core technical facilities, faculty, and entrepreneurial development services from the Office of Technology Partnerships led by Associate Vice Chancellor Rosibel Ochoa. It offers advice, makes connections with venture capital firms, administers the incubator space, and provides personnel for coordinating the use of shared equipment. 

    Pellecchia is excited to have launched Armida Labs and acquired the SBIR grant. As the company grows, it will hire more personnel.

    “Nothing would make me happier than to see our UCR research translated into experimental therapeutics. I am also thrilled to create new biotech jobs in Riverside, a region lacking incubator spaces where biotech companies can start and grow,” Pellecchia said. “At UCR, we graduate thousands of students and train many postdocs. But we are really educating and training them only to see them go elsewhere. We want them to stay and thrive in Riverside.”

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