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good afternoon so I was looking at Twitter or X I don't know what we're doing with that but anyway I guess X now for good uh I was looking at at Twitter and x and uh I uh I saw this tweet I wanted to share it with you it says it's from Jeff Wier and it says they don't just hike to 5.5% and then the system collapses in the next trading session it takes a while for the deflationary smack to occur insolvencies late payments people falling behind it's a process it will meet punishment here's an example Commodities so he has this uh tweet and he says that you know like look the FED is raising rates but things haven't happened yet to cause you know it cause issues and so if you look here you see these little uh these little knockdowns basically when the fund f fund rates goes up the uh the knockdown occurs okay so that's his Central thesis so the idea that some are are are putting forth is that um when you have these rate cuts and they were so so so fast and so rather severe um that it's going to take a time for this to work itself through the economy and so uh this follows with the FED kind of um recently saying you know we're going to we're going to pause for right now but we're going to continue uh to to monitor the situation we're not going to we're not going to raise rates but we we're not taking that off the table and so you know we're stuck in this situation where at least in the real estate world where I live um you know we've got high mortgage rates okay we've got very very expensive properties which is the result of in infation in my opinion and it's it's it's sticky it's not going down raising the rates is not lowering the uh lowering the uh asking price on homes or the sale price on homes um and yet at the same time there's very few buyers that can can buy as we continue to move towards 8% um with mortgages so my thing today is is let's just say that he's correct okay let's look at some advice or let's look at some um articles that might uh show uh Credence to what he's saying or maybe there's things that disprove so the first thing that I looked at was this CNN article now you can rail on CNN that's totally fine I totally get it but for the most part their business stuff is still pretty decent and so in this article this was from um July 26 of 2023 if you this was on one of the uh raising of the rates uh the FED did this is it says like you can see the headline inflation is still the number one Focus the labor market remains robust in the importance of RA wage growth but right in here is where I thought it was key it says it could take at least a year for the effective rate hikes to filter through the broader real economy According to some research and it's already been more than the than a year that since the FED began lifting rates so yeah so in theory like things should be happening in the economy okay and these things that should be happened should be related to um things that use credit right like a lot of credit and so if you look at this is from the New York fed this is from um the second quarter of 2023 uh this is the household debt in credit report and it says simply that the household uh total household debt Rose by 16 billion to reach 17.06 trillion in the second quarter of 2023 according to the latest quarterly report on household debt debt and credit credit card balances saw G brisk growth Rising 45 billion to a series high of 1.03 trillion other balances which included retail credit cards and other Consumer loans and auto loans increased by 15 billion and 20 billion respectively so one one branch of thinking is hey credit card debt going up more people putting credit on their credit cards and that's not a great thing considering that the rates on credit cards are adjustable and they're moving up in tandem with the Fed rate increases and that at some point in time when the American Consumer is tapped out there'll be more and more delinquencies in this space so that's that's what people are kind of looking for it sadly they're looking for The Misfortune of others they're looking for these numbers to change um the other thing that I thought was interesting about this is um you have uh student loan balances Falling by 35 billion which is strange because those are due in October it's start to be paid this month so that's a little odd and then here we have an an odd article here from Reuters saying that us Mortgage delinquencies fall to an all-time low so you have uh just in the quotes it's us mortgage delinquencies fell to a record low in the second quarter due to a strong job market and low interest rates prevailing on most Home Loans despite a big jump in mortgage rates over the past two years report on Thursday said so let's just break that down a moment they fell to a record low due to a strong job market which the FED has continually tried to soften and the low interest rates prevailing on most Home Loans which is the absolute reason why the housing market is stuck right now in my opinion it's stuck who is again who's going to sell their 3 when they have a 3% mortgage to move to a 7 or 8% mortgage and and a more expensive home it's it's not likely so delinquency rates fell to 3.37% at the end of the second quarter according to the Mortgage Bankers association's National delinquency service their lowest since the MBA began collecting data in 1979 and down from 3.64% year onye so you know that if we're if we're seeing an incre inre in credit card debt why are we not seeing an increase in uh mortgage delinquencies it's kind of a mystery seriously delinquent loans which are 90 days or more past due or in the process of foreclosure fell to the lowest non-seasonally adjusted rate in 23 years at 1.61% and think of that only 1.61% of all homes in the United States were under were were in facing seriously delinquency uh in the second quarter economists are watching mortgage delinquency rates closely for signs of weakness amidst the fed's reserve aggressive 525 basis point interest rate increase since March of 2022 which increased the cost of borrowing across the board and so yes people are looking again we should see more delinquencies and let's just let's just talk for a moment about what the FED is is trying to do okay the FED does not like inflation but they don't like it as as much as I despise it I was on the fed early on and said you need to start raising rates you don't have to raise them a ton but just let's start raising this a little bit you know let's just get it up a little bit you know quarter point here wait wait because we don't know the results and it could take a year or more I mean this is not new stuff if you're familiar with General economics so they didn't do that though because again inflation was transitory they said all of them all the experts and um that I thought was very very dangerous but what the fed's trying to do is to try is trying to put the brakes on an over heated economy that they created by artificially low rates and so what they want to see is something they would call softening of the employment sector right softening softening means you get fired or laid off okay that's what they want they don't like to see they consider full employment between 4% unemployment to like what well I'd say 3 to Four 3 to 5% and so uh we've been running in that range now for for a long time it's and it's um they want that number down they just don't like that high that high employment number a good a strong Employment Number would indicate like would would cause Rising wage growth we would get we in theory would get wage growth and that would be great um for the people because then they could afford these houses that are are very very expensive pretty much not affordable you know on the on the median so we're not seeing the the soften employment well what would we what are we seeing right what are we seeing well they say Commodities have collapsed but um I know I know oddly enough that orange juice is on a record run and live cattle also on a record run on Commodities um gasoline has been low but I feel like it's going to come back I feel like it's coming back so that that's not really doing anything so credit card debt credit card debt being um higher okay not good which would lend to this idea that people are stretched and can't afford basic things so they're putting it on their credit card which is very dangerous to do when the rates um on your credit card are adjustable and they're moving to the higher end uh due to the FED increase in in their borrowing rate so um but we're not seeing that what what else would we see we should see auto loan defaults now anecdotally we're seeing lenders move out of that space big National lenders move out of that space um is that is that like we're looking for these things to happen and have enough of them happen so that we can have some sort of narrative that says yes the economy is cooling off uh delinquencies in the uh in in mortgages you would think would follow delinquencies with Autos credit card debt that you're not seeing many you're not seeing as the delinquencies in the credit card debt either all this is to say that this situation that we find ourselves in as real estate agents uh is not great because we still we're going to see high mortgages which affects the affordability even if Supply did come to the market you're still so high on your prices and the mortgages people are still U reticent to want to go forward with purchasing a home and it's so strange I've never I've never encountered this before so I don't want you to think that um that this is normal I've been doing this for quite some time um but but we're kind of stuck I just wanted to bring it to your attention that if you if you yourself are at home and you're like you know what should I be keying off of well you should start looking at things like delinquencies for mortgages now look as the prices go up you get more equity in your home okay so so this I mean the amount of my gosh our home prices are up 40% in four years I mean that's going to cover up a lot of bad situations because basically you're living there and the home goes up in value you haven't done anything to it so um there's that but you should be looking if that Employment Number goes south or if the credit card delinquencies go higher then you can see the effects of the FED not necessarily fixing inflation that's just the start and to the original tweet it does take a significant amount of time as the FED Titans before you start to see it in the numbers and we're just not at that point yet so this is August of 2023 let's let's revisit this in December and see what the situation is uh going into the new year with that I'm going to head on out thank you for watching thank you for listening and I will catch you on the next one