WHO knows when a Market Downturn Impacts Land and Building Values?

Whether you purchased your property during the Pandemic or you purchased your property prior to the GFC (Great Financial Crisis) of 2008, it has been quite a long time since the United States has experienced a more traditional recession.?

As noted in the graphic below, the gray vertical bars are periods of economic contraction, also known as Recession.?

Removing Covid and the GFC from consideration, the most recent Recession experience is nearly 20 years ago.?

Then consider that in 2022, the average age of first-time homebuyers was 36, according to the National Association of Realtors (NAR).?

IF you owned a home during the last Recession, that means today you are AT LEAST 50 years old.??

YET, those 50 years or older account for ONLY 34% of the total US population according to the Harvard Demographics on Aging.?

AND if you really want to talk to someone who understands what happens during a Recession, you NEED to talk to someone approximately 70 years old.?

GUESS What??

Those individuals 70 or older account for LESS THAN 15% of the total US Population.?

In Summary, the majority of people alive today have NO CLUE what happens to real estate when the United States enters a Recession.?

AND those who are alive and age 70 or older vividly recall what the experience was like.?

SO, be a good neighbor and go talk to a wise elder.

You’ll be glad you did and they’ll appreciate your interest in their life’s experiences.

The graphic above highlights an infrequent phenomenon, called Recession, and this chart is also an indicator to forthcoming declines in property values.?

Credit to Tom Menacho of Kineo Capital, who consistently tracks significantly more technical data than we do at PahRoo.?

Tom noted that the graphic above, from the Federal Reserve Economic Data, compared the US 10-year treasury bond vs the 2-year treasury bond.??

In a typical curve, graphing short term (2-year) to longer term (10-year) US Treasury Bonds, the line should be up and to the right.?

In a typical graphical representation of the two Treasuries, when a longer dated Treasury bond (10-year) is subtracted from a shorter dated Treasury bond (2-year), the result should be a positive number.?

Hence, the 10-year Treasury should be higher than a 2-year Treasury.??

PRESENTLY, the U.S. Treasury Bond yield spread is inverted (meaning the shorter term Treasury bond is ACTUALLY higher than the longer term Treasury bond).??

AND, the spread is now at its widest point for this cycle, reaching 100bps, a level LAST SEEN in the early 1980s.?

As shown in the top graph below, each of the last 5 U.S. recessions have been preceded by some degree of Treasury curve inversion.??

For those who love more information on this, check out St Louis Federal Reserve:

https://fred.stlouisfed.org/

And, Kineo Capital:?

https://kineocapital.com/

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