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The other coming economic calamity going completely under the radar [1]

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Date: 2025-04-23

Everybody these days is paying attention to the unfolding Trump economic disaster. After all, how can anyone avoid the news - it’s truly overwhelming! Trump’s tariffs causing untold chaos in the stock market, in supply chains, soon-to-be shortages of things on store shelves, etc. Truckers and small business owners will lose their jobs and go belly-up ... you name it ... unless he backs down from his tariffs pronto.

Back in November I talked about still another impending issue (falling US oil production, which has just begun … now ...), but this isn’t even about that.

What I’m talking about is actually similar to the US oil production issue, in that it’s not Trump’s fault, but there is nothing he can do to stop it.

I’m referring to the under-reported phenomenon that, in more than half the country, the US housing market is showing clear signs of an imminent crash. Namely, in the South and West. The Midwest and Northeast are doing relatively OK.

I’m going to leave several links describing this, all from the same financial website which has been covering this pretty thoroughly lately (Wolf Street). If you read just one of these links, read the first. But I also highly recommend at least also reading the second. All these links are from just the last couple months:

Inventory of New Houses for Sale Stuck at Highest Level since 2007, Driven by Gluts in the South & West. Prices Fall, Incentives Soar, Sales Rise

Despite huge inventories of new houses for sale, including completed houses, homebuilders have continued to build homes at an aggressive pace. Some of the big homebuilders, such as Lennar, have cut prices and thrown large incentives on the market, and their sales increased; while other homebuilders, such as PulteGroup, have been less aggressive on pricing and incentives, and their sales fell.

^ In that link it is imperative to look at the charts, starting about halfway down the page, comparing inventory of houses for sale in the four US Census regions: Things are at 2007 Housing Bust levels in the South and West. But in the Midwest and Northeast they are more sedate.

In the South, Pending Home Sales Plunge to Record Low, just as Inventories in Florida & Texas Balloon. Push US Pending Sales to Record Low

Here we go again, with another record low in demand: Pending home sales – a forward-looking indicator of “closed sales” of existing homes to be reported over the next couple of months – dropped by another 4.6% in January from December, seasonally adjusted, and carved out a new all-time low in the data going back to 2010, according to the National Association of Realtors today. Compared to the January in prior years:

Shadow Inventory of Vacant Homes Suddenly Piles on the Market in Texas. New Listings, Active Listings Spike to Highest for March in Many Years

The inventory of vacant homes is coming out of the woodwork in Texas, even as sales have plunged and buyers have lost interest. New listings in the state jumped by 22% in March from February, to 45,004 homes, the biggest number of new listings for any March in the data by realtor.com going back to 2016. Compared to 2019, new listings rose by 14%, and compared to 2018 by 17%. But back then, buyers weren’t on strike and sales hadn’t plunged.

In 15 Bigger Cities, Condo Prices Already -10% to -22%, 5 Are in Florida with Accelerating Drops. Absurdity Comes Unglued

Condos are often the first and biggest movers in local housing markets. Prices exploded in many of them over the three years between mid-2019 and the peak in mid-2022, by 60% such as in Austin, TX; by 70% such as in Tampa, FL, and Chula Vista, San Diego County, CA; or by 80% such as in Mesa, AZ, and Lakeland, FL. But this absurdity is now coming unglued, and prices have begun spiraling down. In Austin, which is on the forefront of this movement, prices have already given up nearly two-thirds of the 60% three-year gain. People who bought at the top in mid-2022 are 22% underwater. People who bought in mid-2019 are still sitting on a 20% gain that is shrinking.

Now, it’s one thing if a ton of new houses are being built as long as people are buying them. But, alas, sales are just sort of meh:

FRED: New One Family Houses Sold: United States

So what will happen, barring something miraculous, is that all this excess inventory will eventually catch up to home builders, who will then reign in their building efforts, lay off construction workers in the process, which will have ripple effects in trucking, window and door factories, etc. Who knows, maybe those deported Mexican construction workers might have been laid off anyway and headed back to Mexico on their own volition.

Again, this all began before Trump started creating all manners of chaos, so this is one thing we can’t blame on him. In particular, if you look at the charts in my second link it all began in 2022, which would indicate that the Fed’s raising of interest rates is the ultimate cause.

But it will be Trump who will feel the effects of the washout. Aw shucks.

At about the same time store shelves start getting empty and truckers and dock workers lose their jobs, construction workers will be laid off (no doubt there will be shortages of building supplies anyway), leading to still more truckers being laid off while door and window factories will lay off people, and so on. At some point either late this year or sometime next year, the oil markets will start to panic about falling US oil production. Oh yeah, and oil patch workers are already starting to get laid off due to falling oil prices (though that won’t last).

It’s bad enough the housing issue and oil production were headed our way regardless of last year’s election results. Trump, in a brilliant stroke of self-destruction, decided to pile on yet another series of economic disasters onto everything else.

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