Since Fringe Finance has started, I’ve scoured the Earth far and wide to try and bring a perspective on real estate to the blog that is going to be both no bullshit and an unfiltered on-the-ground opinion that I know and trust (and could add value to my readers). After all, it’s an asset class that I am not nearly as in-tune with as I am with equities and, well…beer.
And to be honest, I didn’t have to scour much, as a good friend of mine is a brilliant up and comer in the world of real estate in Philadelphia. I’ve worked with her several times and have known her for years - she’s insightful, pragmatic, conscientious and has a serious pulse on the industry. I know for a fact that she works her ass off, eating, sleeping and breathing real estate on the daily.
As such, my kind friend, award-winning realtor Kira Mason, has agreed to drop in once in a while to offer up her take on the pulse of the industry for benefit of my readers. Kira runs the Substack Gritty City Real Estate, which you can read & follow free here and she is @kmasonrealtor on Twitter.
Let’s start with something we can all agree on: housing is in the midst of a major slowdown. Existing home sales are falling faster than they did during the great financial crisis of the mid to late aughts, and mortgage interest rates have just about doubled since the start of the year and are now flirting with 7%. As a result, housing affordability is deteriorating at full tilt. The market is hemorrhaging buyers, and sellers are holding tight to the record low rates they locked these past couple of years and are hunkering down for the ensuing… for the ensuing what? Correction? Crash? Meltdown? It depends on who you ask.
Every expert and industry leader seems to have a wildly different take on what comes next; our patch of common ground is approximately the size of an empty lot in north Philly. The conditions we’re seeing don’t map neatly onto any other time in history. As a result, we find ourselves on uncharted territory in which everyone is busy trying to get a grip and the perspective refresh rate is hourly.
Perhaps unsurprisingly, the most conservative projections I’ve seen have come from industry insiders. The National Association of Realtors chief economist Lawrence Yun predicts that we’ll see 1% appreciation in 2023: essentially a flattening of prices. Our local Bright MLS economist Lisa Sturtevant expects the same. Those in this camp tend to reason that low inventory will prevent prices from dropping, even while demand plummets.
Morgan Stanley, on the other hand, originally predicted price growth in 2023 but recently revised their forecast. They are now predicting that prices will fall 7% YoY by the end of next year. Incredibly, that would only return prices to where they were in January 2022. Goldman Sachs also revised their initial 2023 forecast from a stall to a 5-10% price decline. Moody’s Analytics’ revised prediction matches that of Goldman Sachs.
Bill McBride in his extraordinary CalculatedRisk Newsletter takes a long look and predicts that over the next 5-7 years, nominal prices will decline 10% or more and real prices will decline 25%. This is an important distinction; most other forecasters aren’t adjusting for inflation, which is likely to be an especially meaningful consideration in the coming years. McBride acknowledges that record low inventory will help to anchor prices, but he’s less optimistic about the degree to which they will be able to do so.
Another favorite real estate analyst of mine, Mike Simonsen of Altos Research, thinks there is a chance that prices will stay flat in 2023, but he is not confident that conditions will allow for it. He’s keeping a close eye on inventory in the coming weeks: It is typical for inventory to drop leading up to the holidays; if instead it continues growing into November, Simonsen sees that as an unusual bearish signal that would not bode well for housing prices in 2023.
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Inventory nationwide is significantly lower than what we might consider normal, and despite a severe lack of buyer demand, we are still technically in a sellers market. Homeowners today have low housing costs, high equity, and record employment levels. As most sellers are also buyers facing the same affordability issues, they are not easily parting with their homes. Unlike the crash of 2008, unless conditions shift, any inventory buildup is likely to be the result not of seller desperation but of glacial buyer demand.
Subprime lending practices were the driving force behind the great financial crisis, and the market was flooded with inventory when interest rates went up. Since then, mortgage credit availability has rested at below average levels. It is now at its lowest point since March 2013. Underwriting standards have been massively shored up and getting a loan is no longer quite so easy, which will certainly change the flavor of whatever correction we’re poised to see in 2023 and beyond.
What prices end up doing in 2023 seems to hinge on two major factors:
Seller motivation. If anything causes inventory to surge, prices could plummet. If buyer demand stays suppressed there will be some inventory buildup, but for more significant price drops to occur, sellers need more reason to sell. Recession hitting big and causing significant job losses may create the conditions for a sell-off in 2024, and if rates are still high at that time, it would be fair to expect prices to drop precipitously.
Housing affordability. We can tell by looking at metrics from online real estate engines like Zillow and Trulia that buyers are looking at even more listings online today than they were a year ago, despite far less in-person showing activity. Millennials are the largest sector of home buyers in America, making up 43% of the market. Many of them still want to buy homes but have had their plans foiled by rate hikes these past few months. We saw that when rates rose above 5.5%, buyer activity plummeted. If rates fall below this level in the near future, we could see a quick release of pent up demand.
In my little corner of the Philadelphia market, buyers are becoming discouraged as they watch their purchasing power decline as if by the hour. Many of my clients, and those of my colleagues, have decided to shelve their plans until conditions change. In response to this precipitous drop in demand, more and more sellers are reducing the prices of their homes and/or offering to pay down buyer rates in an effort to keep them in the game. At the same time, I’ve got opportunistic buyers in the sidelines rubbing their hands together and waiting for prices to fall, at which point they’ll swoop in with either cash or confidence that rates will drop and allow them to refinance in the near future.
Prices in Philadelphia are 36% higher than they were three years ago. Even if the most extreme predictions I’ve seen come true, prices would not fall below pre-pandemic levels. Inventory is starting to expand slightly in our area, and I will be anxiously tracking what it does in the coming weeks. As of now, prices in the Philadelphia metro appear to be holding pretty firm, but with what I’m seeing on the ground it is awfully hard to believe that we won’t see some price declines once today’s pending transactions close in November and December. Philadelphia’s market these past few years has been more moderate than in places like Austin and Boise; I expect that whatever correction we endure over the course of the next few years will be proportionate to the dimensions of our local boom.
(Sources: CoreLogic, Altos Research, Bill McBride, Mortgage Banker’s Association, National Association of Realtors, Bright MLS, Morgan Stanley, Goldman Sachs, Moody’s Analytics)
How much stress is too much? A psychiatrist explains the links between toxic stress and poor health − and how to get help
No one can escape stress, but sometimes it takes a physical and emotional toll that translates to disease and other health effects. The good news is that…
COVID-19 taught most people that the line between tolerable and toxic stress – defined as persistent demands that lead to disease – varies widely. But some people will age faster and die younger from toxic stressors than others.
So how much stress is too much, and what can you do about it?
I’m a psychiatrist specializing in psychosomatic medicine, which is the study and treatment of people who have physical and mental illnesses. My research is focused on people who have psychological conditions and medical illnesses as well as those whose stress exacerbates their health issues.
I’ve spent my career studying mind-body questions and training physicians to treat mental illness in primary care settings. My forthcoming book is titled “Toxic Stress: How Stress is Killing Us and What We Can Do About It.”
A 2023 study of stress and aging over the life span – one of the first studies to confirm this piece of common wisdom – found that four measures of stress all speed up the pace of biological aging in midlife. It also found that persistent high stress ages people in a comparable way to the effects of smoking and low socioeconomic status, two well-established risk factors for accelerated aging.
Children with alcoholic or drug-addicted parents have a greater risk of developing toxic stress.
The difference between good stress and the toxic kind
Good stress – a demand or challenge you readily cope with – is good for your health. In fact, the rhythm of these daily challenges, including feeding yourself, cleaning up messes, communicating with one another and carrying out your job, helps to regulate your stress response system and keep you fit.
Toxic stress, on the other hand, wears down your stress response system in ways that have lasting effects, as psychiatrist and trauma expert Bessel van der Kolk explains in his bestselling book “The Body Keeps the Score.”
The earliest effects of toxic stress are often persistent symptoms such as headache, fatigue or abdominal pain that interfere with overall functioning. After months of initial symptoms, a full-blown illness with a life of its own – such as migraine headaches, asthma, diabetes or ulcerative colitis – may surface.
When we are healthy, our stress response systems are like an orchestra of organs that miraculously tune themselves and play in unison without our conscious effort – a process called self-regulation. But when we are sick, some parts of this orchestra struggle to regulate themselves, which causes a cascade of stress-related dysregulation that contributes to other conditions.
For instance, in the case of diabetes, the hormonal system struggles to regulate sugar. With obesity, the metabolic system has a difficult time regulating energy intake and consumption. With depression, the central nervous system develops an imbalance in its circuits and neurotransmitters that makes it difficult to regulate mood, thoughts and behaviors.
‘Treating’ stress
Though stress neuroscience in recent years has given researchers like me new ways to measure and understand stress, you may have noticed that in your doctor’s office, the management of stress isn’t typically part of your treatment plan.
Most doctors don’t assess the contribution of stress to a patient’s common chronic diseases such as diabetes, heart disease and obesity, partly because stress is complicated to measure and partly because it is difficult to treat. In general, doctors don’t treat what they can’t measure.
Stress neuroscience and epidemiology have also taught researchers recently that the chances of developing serious mental and physical illnesses in midlife rise dramatically when people are exposed to trauma or adverse events, especially during vulnerable periods such as childhood.
Over the past 40 years in the U.S., the alarming rise in rates of diabetes, obesity, depression, PTSD, suicide and addictions points to one contributing factor that these different illnesses share: toxic stress.
Toxic stress increases the risk for the onset, progression, complications or early death from these illnesses.
Suffering from toxic stress
Because the definition of toxic stress varies from one person to another, it’s hard to know how many people struggle with it. One starting point is the fact that about 16% of adults report having been exposed to four or more adverse events in childhood. This is the threshold for higher risk for illnesses in adulthood.
Research dating back to before the COVID-19 pandemic also shows that about 19% of adults in the U.S. have four or more chronic illnesses. If you have even one chronic illness, you can imagine how stressful four must be.
And about 12% of the U.S. population lives in poverty, the epitome of a life in which demands exceed resources every day. For instance, if a person doesn’t know how they will get to work each day, or doesn’t have a way to fix a leaking water pipe or resolve a conflict with their partner, their stress response system can never rest. One or any combination of threats may keep them on high alert or shut them down in a way that prevents them from trying to cope at all.
Add to these overlapping groups all those who struggle with harassing relationships, homelessness, captivity, severe loneliness, living in high-crime neighborhoods or working in or around noise or air pollution. It seems conservative to estimate that about 20% of people in the U.S. live with the effects of toxic stress.
Exercise, meditation and a healthy diet help fight toxic stress.
Recognizing and managing stress and its associated conditions
The first step to managing stress is to recognize it and talk to your primary care clinician about it. The clinician may do an assessment involving a self-reported measure of stress.
The next step is treatment. Research shows that it is possible to retrain a dysregulated stress response system. This approach, called “lifestyle medicine,” focuses on improving health outcomes through changing high-risk health behaviors and adopting daily habits that help the stress response system self-regulate.
Adopting these lifestyle changes is not quick or easy, but it works.
There is now strong evidence that it is possible to treat toxic stress in ways that improve health outcomes for people with stress-related conditions. The next steps include finding ways to expand the recognition of toxic stress and, for those affected, to expand access to these new and effective approaches to treatment.
Lawson R. Wulsin received funding in 2010 from the Veterans Administration support a secondary analysis of data from the Framingham Heart Study, which was published and contributed in part to the substance of this article.
The manufacturing and consumer confidence weaknesses of the United States are deeply concerning, particularly considering that all those allegedly infallible Keynesian policies are being applied intensely.
Considering the insanity of deficit spending driven by entitlement programs, the decline in the headline University of Michigan consumer sentiment index in March—from 76.9 to 76.5—is even worse than expected. Let us remember that this index was at 101 in 2019 and has not recovered the brief bounce shown by the reopening effect in March 2021. Consumer confidence is still incredibly low, and a decline in the expectations index fully explains the most recent decline. Persistent inflation, high gas prices, and declining real wages may explain the poor expectations of the average citizen. Furthermore, this poor consumer confidence reading comes after poor control group retail sales last month.
No, this is not a strong economy. The consumer confidence index, labor participation, and unemployment-to-population ratios, as well as real wage growth, remain significantly below the pre-pandemic level, and this after $6.3 trillion in new public debt that will likely reach $8 trillion by the end of 2024.
The manufacturing weakness of the United States is also a problem because this should be a period of high growth, considering the opportunities generated all over the world. Industrial output bounced 0.8 percent in February, but the January figure was revised to a larger 1.1 percent slump. If we factor in the decline in the Empire State survey, to -20.9 in March, it looks like the manufacturing decline will persist.
The shape of the U.S. economy also reflects the impossibility of the soft-landing narrative. Inflation remains well above target, and bond yields are reflecting the reality of persistent inflation. Furthermore, money supply growth stopped declining months ago.
If the money supply rises and government spending continues to rise, the Federal Reserve will be unable to cut interest rates, and the impoverishment of citizens by a loss of purchasing power will continue.
This is the result of an insane fiscal policy that increases spending and taxes. Weak growth, manufacturing decline, and worsening consumer confidence.
Demand-side policies and Keynesian experiments are leaving a once-strong economy on the same path as the eurozone: stagflation. A warning sign should be the fact that the increase in public debt completely justifies the gross domestic product recovery.
This is the problem of extraordinary monetary and fiscal experiments. Governments embrace massive spending and debt monetization under the premise that they will implement control policies if the warning signs appear, but when they do, they never stop spending. Economists close to the government said that the administration would reconsider and adjust its budget if inflation rose, and alarm bells rang. Now we have heard all the alarm bells, and the administration continues as if nothing happened. The Inflation Reduction Act became the Inflation Perpetuation Act; the rise in government borrowing is now evident in the 10- and 30-year curve; and the private sector is in an obvious contraction.
Trusting governments to moderate spending after an expenditure binge is simply an extremely dangerous bet that always ends with worse conditions for citizens. Once they start, they cannot stop, and the inevitable end is higher taxes, weaker growth, lower real wages, and a decline in the purchasing power of the dollar. All the figures in the U.S. economy scream “buy gold” because the government will always prefer to destroy the currency than to moderate the budget deficit and government size in the economy.
In a new book, experts in a variety of fields explore nocebo effects – how negative expectations concerning health can make a person sick. It is the first time a book has been written on this subject.
“I think it’s the idea that words really matter. It’s fascinating that how we communicate can affect the outcome. Communication in health care is perhaps more important than the patient recognises,” says Charlotte Blease, who is a researcher at the Department of Women’s and Children’s Health at Uppsala University.
Along with colleagues at Brown University in the United States and the University of Zurich in Switzerland she has written the book “The Nocebo Effect: When Words Make You Sick”. Nocebo is sometimes called the placebo’s evil twin. A placebo effect occurs when a patient thinks they feel better because of receiving medicine and part of that perception is due not to the drug but to positive expectations. The concept of the nocebo effect means that harmful things can happen because a person expects it – unconsciously or consciously. This is the first time the phenomenon has been addressed in a scholarly book. Researchers in medicine, history, culture, psychology and philosophy have examined it, each in their own particular area.
Credit: Catherine Blease
In a new book, experts in a variety of fields explore nocebo effects – how negative expectations concerning health can make a person sick. It is the first time a book has been written on this subject.
“I think it’s the idea that words really matter. It’s fascinating that how we communicate can affect the outcome. Communication in health care is perhaps more important than the patient recognises,” says Charlotte Blease, who is a researcher at the Department of Women’s and Children’s Health at Uppsala University.
Along with colleagues at Brown University in the United States and the University of Zurich in Switzerland she has written the book “The Nocebo Effect: When Words Make You Sick”. Nocebo is sometimes called the placebo’s evil twin. A placebo effect occurs when a patient thinks they feel better because of receiving medicine and part of that perception is due not to the drug but to positive expectations. The concept of the nocebo effect means that harmful things can happen because a person expects it – unconsciously or consciously. This is the first time the phenomenon has been addressed in a scholarly book. Researchers in medicine, history, culture, psychology and philosophy have examined it, each in their own particular area.
“It’s a very new field, an emerging discipline. Even if the nocebo effect is documented far back in history, it perhaps became especially obvious during the coronavirus pandemic,” Blease says.
A previous study of patients during the pandemic (see below) shows that as many as three quarters of the reported side-effects of the coronavirus vaccine may be due to the nocebo effect. The study involved more than 45,000 participants, approximately half of whom were injected with a saline solution instead of the vaccine but despite this still experienced many side-effects such as nausea and headache. In the book, the authors highlight that one issue that disappeared in the discussion of side-effects during the coronavirus pandemic was that many of these were actually due to the nocebo effect.
“Whether this is due to expectations – the nocebo effect – remains to be understood. However, it is curious that so many participants reported side-effects after receiving no vaccine. Regardless, some people may have been put off by what they heard about side-effects,” Blease comments.
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