Thread by @modestproposal1

I think it's very likely the macro data looks poor over the next few months, especially on a year over year basis. I also think by midyear it will start to look much better. Why? Base effects and consumers acclimating to mortgage rates. 3 charts.

30 year fixed mortgages have now been flattish for 9 months, and by beginning of Feb will be flat to up modestly Y/Y.

Looking at single family starts, it's clear that the next few months are going to look bad Y/Y. By June next year at the latest though, it is quite likely that numbers will be up Y/Y.

Same story for new home sales. The comps are going to look horrendous, especially against a huge November #. But by next June, I think we start to see flat to slightly up again.

So, in the midst of all this concern about recessions and housing, we are going to have cross currents. It's almost guaranteed the macro housing data sucks and looks awful for the next few months. But that's partly because late 17/early 18 was incredibly strong.

There will be a lot of doom and gloom, but it seems to me that by middle of the year, we are going to anniversary the early 18 strength and get back to an improving but muddling housing market.

The other strange crosscurrent is that just like the economy has gone through these rolling mini cycles, housing is to. The entire first half of this expansion was about move up and high end buyers, as first time buyers were completely shut out.

Now, as prices have moved steadily higher, the biggest slowdown has been in move up product where higher rates and higher prices have locked people in. First time product is flying. If you can build it, you can sell it.

The problem is, builders bought land for move up, lumber and labor prices soared, and so many weren't set up for first time demand. It takes time, but new communities will be opened. Product will be more tailored. But there's a pause as the handoff from move to first time occurs.

And finally, if you talk to builders, up until the last few months, almost none had been willing to discount product to move it, in stark contrast to usual behavior. Why? They didn't have more communities to open, so they didn't have the same urge to get rid of inventory.

Now that can only last so long, and incentives / price cuts have definitely picked up. But for most of the fall, builders held the line, which partly explains the significant slow down in sales. Buyers pulled back but also builders weren't feeling the urge to blow out inventory.

If rates spike again, or job market slows, or any of that than who knows, but these two charts tell you there hasn't been much craziness in the single family market, if anything, prices are up because of lack of supply, not any excesses.

one additional chart, re: mortgages, you can see that the rate on the average mortgage crossed through the rate on the outstanding stock of mortgages early this year. There's a notion that "locked in" some move up buyers. Also meant refi opportunities mostly disappeared.

some early anecdotes in here, of course ~4 people doesn't move the needle on 600,000 sales wsj.com/articles/falli…

and on refis, not sure we're gonna get another 20bps down, but shows how sensitive that market is to changes in rate, that 7.5% of GSE backed mortgages would be attractive to refi at that point.