I'm sure it's nothing. Either that or a leading indicator of a total bed shitting of the housing market. 👇
Discussion
Why would new C&I loans be a leading indicator of the housing market?
I agree. I’ve worked in residential real estate for a long time. Commercial real estate and residential real estate are two different animals. So much so that they have non-corollary market cycles. Don’t get me wrong, residential has slowed significantly and could take a serious dive in the near future, but Jack missed the mark with this one.
C&I is non real estate altogether. Maybe a piece of owner occupied real estate gets thrown into the structure, but this A/R, inventory, and equipment lending for businesses, and those cycles are definitely non-corollary. I wasn’t sure if there was a deeper insight here I was missing.
Wow, I assumed this was real estate since OP mentioned the housing market. Thanks for educating me.
Now I can see how one might jump to the conclusion that if lending on C&I goes down that means business is slowing, then people loose their jobs and eventually their homes? It’s a reasonable assumption.
I have found that while that seems intuitive, that’s not reality. We’ve also never had interest rates this high for such a long time, and it’s hard to tell what factors even correlate to each other anyways. I was genuinely curious as to what Jack’s thought process here was.
Not good for credit-based system
I could just be too tired, but if black is the median, blue is 2022, red is 2023, and the gray area means it’s the extremes (the total range seen in the data) from 2010 to 2023. Doesn’t that mean that the present period (red 2023) is a not as bad as it has been in the last decade, which for housing loan growth was decent before interest rates increased?. This metric has been worse than it is right now. And this data isn’t from the 2008/2009 housing subprime disaster. So there was a time between 2010 and the present where the loan growth was worse than it is now. That doesn’t seem that foreboding to me. I have to imagine the absolute extreme was 2020? Would be interesting to have that context. But with interest rates at recent highs it would make all the sense in the world for the housing market to be slowing down. Again I could be too tired to read a graph at the moment.