Higher interest rates are absolutely strangling the real estate industry, and there is no relief in sight. The sudden shift from a very low interest rate environment to a much higher interest rate environment has paralyzed sales. As I have discussed previously, very few homeowners that are currently locked into a mortgage at a low interest rate want to sell, because buying a home to replace the one that they are selling would mean taking on a mortgage at a much higher rate of interest. And millions of potential home buyers have been chased out of the market because of the exceedingly high mortgage payments that they would be facing if they pulled the trigger on a purchase right now. So sales of previously-owned homes have dropped by more than 32 percent over the past two years. In other words, about a third of the entire previously-owned home market has already been wiped out.
When home sales crash, everybody that works in the real estate industry suffers.
And it turns out that home purchases by investors are falling at an even faster rate. Wall Street Silver posted the following to Twitter earlier this week…
I was stunned when I first saw that, but I also knew that I had to confirm if this was true or not.
And I discovered that it is true…
45%
That’s how much investor purchases of homes have fallen since last year, as of the second quarter, according to data from Redfin, as homebuying looks less profitable than during the pandemic housing boom.
Investors, just like private buyers, think it’s a bad time to buy a home.
We have got a major crisis on our hands, and it is not going to go away any time soon.
Things are even worse on the commercial real estate side.
The Wall Street Journal just published an article entitled “Real-Estate Doom Loop Threatens America’s Banks”, and that headline does not exaggerate the current state of affairs at all.
Commercial real estate prices are plummeting all over the nation, and our banks have trillions of dollars of exposure…
The WSJ analysis put total bank exposure to commercial real estate at $3.6 trillion, which it estimates is 20 percent of their deposits. Holdings of CMBS and loans to nonbank lenders accounted for $623 billion of that total at the end of last year.
In the past decade, regional banks went to town on commercial loans, never expecting how quickly the tide would turn against them. Today, losses on loans are leading banks to cut back on lending, furthering the drop in property prices and more lender losses — in other words, a doom loop.
Banks are already pulling back. Debt origination fell by 52 percent for the second quarter year-over-year, according to Newmark; lending volume among banks fell by 48 percent. M&T Bank said it would reduce commercial lending as nearly 1 in 5 of its loans to office landlords was in trouble.
So many of our financial institutions are going to be in very serious trouble because of this.
If the Federal Reserve were to push interest rates all the way to the floor immediately, that would help.
But instead, Fed officials continue to insist that rates are going to go even higher, and that is going to escalate this crisis into a full-blown real estate apocalypse.
And higher rates will also do an incredible amount of damage throughout the rest of the economy as well. This is a point that the Shark Tank’s Kevin O’Leary made very well during a recent interview with Fox Business…
In a recent interview on Fox Business, Kevin O’Leary, the “Shark Tank” investor slammed so-called “Bidenomics” for leaving small businesses behind. He warned that chaos is about to kick off for the “little guy”, which are the 33.2 million small businesses in America, due to the Federal Reserve’s aggressive rate hikes.
“They’re struggling because the Fed has raised rates up to 5.5% in a matter of months,” O’Leary said. “You’re going to hear a lot of people crying about this in the next few months because they can’t borrow anything anymore and they can’t run their businesses.”
He is right.
Small and mid-size businesses all over America are really struggling right now.
Economic activity is slowing down all around us, and they are starting to lay off workers.
In fact, in just the past two months the U.S. has lost a whopping 670,000 full-time jobs…
Well, one look at this month’s adjustment and it’s literally a shocker: you will not hear anyone from the Biden admin or associated economist cheerleaders mention this, but the BLS reported that in August the number of full-time jobs dropped again, sliding by 85K to 134.2 million, and followed the whopping 585K plunge in July which brings the two-month total drop in full-time jobs to a whopping 670K, the biggest 2-month plunge since the covid lockdowns in early 2020 when 12.5 million full-time jobs were lost in one month!
When the official numbers that the government gives us start looking this bad, you know that the hour is late.
And the job cuts just keep on coming. On Wednesday, we learned that Roku will be conducting a third round of layoffs…
Video streaming company Roku shares spiked Wednesday after it announced plans to lay off more than 300 people, or about 10% of its workforce, and pull certain content from its streaming platform to ease operating expenses.
This is the third round of layoffs from Roku in recent months after the company let go of about 400 employees total between November and March. The company had roughly 3,600 full-time employees across 14 countries at the end of last year, according to its annual report.
I actually really like Roku, and so I hope they can turn things around.
But the reality of the matter is that everyone is going to have to deal with the very hard times that are now upon us.
Hordes of middle class Americans are being pushed into poverty, and hordes of impoverished Americans are being forced into the streets.
Coffee the Christian way: Promised Grounds
So far this year, we have actually seen “the biggest ever spike in homeless people living on the streets”…
The United States has seen the biggest ever spike in homeless people living on the streets – as preliminary figures showed a record 11 percent increase in one year.
There are nearly 600,000 rough sleepers across cities and towns in America, and the jump from 2022 to 2023 so far is the highest since the government started tracking the data in 2007, according to the WSJ.
Places like Oakland and San Francisco in California have become hotbeds for homelessness, as people living on the streets are like ‘drug tourists’ who arrive to have easy access to narcotics.
But this isn’t supposed to be happening.
The Biden administration told us over and over again that “Bidenomics” was working. Of course the truth is that we have now entered the very early chapters of a full-blown economic nightmare.
Things are going to get a whole lot worse for the real estate industry. And things are going to get a whole lot worse for the economy as a whole.
So I hope that you have been getting prepared for what is ahead, because most Americans are going to get completely blind-sided by what is coming.
Sound off about this story on our Economic Collapse Substack.
Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here. Article cross-posted from The Economic Collapse Blog.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
