Employment Just Cracked. Housing Is Next

Layoffs are skyrocketing and it's absolutely going to impact the housing market. It's going to explode over the next year with businesses that are starting to fall behind for various reasons and it absolutely will impact the housing market. If you don't have a job, you won't be able to purchase a home. Let's dig into this data and how this is happening and how it may impact you and your either real estate business if you're a buyer or seller looking to sell in the next year or if you're a real estate investor, this is so important for what comes next in our economy in 4 2026.

So look, the reality is that credit is getting tighter, banks are getting smarter, they're understanding what's going on underneath the surface with the consumer being completely maxed out. People are stopping paying their credit cards. We're seeing record credit card delinquencies even at 22% interest rate, it's just continuing to accumulate. But look at this New York Fed credit analysis survey.

It shows that the rejection rate among applicants is near record highs at 25, you know, 25%. This means that these people are applying for credit and they're not able to get it, right? So the thing you need to understand about the housing market is it's generally one of the last things to crack. First, people stop paying their credit cards, then they stop paying their auto loans, and then lastly, they stop paying their mortgage payments or their rent.

We're even seeing late payments pop up with rent by about 2%. So this on top of the student loans that have to start being paid again and making it really hard for loan loss mitigation to occur anymore because it's more hoops to jump through. It's clear now in a lot of states here in the Sunbelt area that we're going to see a foreclosure spike in Q2 Q3 of 2026. Now, when I talk to my contacts on the ground such as my foreclosure attorneys and short sale attorneys, they're seeing a spike across the board.

One of them even said it's 9x higher than it was last year and this is just the beginning as consumers who bought in the vintage years 2021 through 2025 are moving, they have to sell, they have job loss, things like this. It's going to make the entire situation completely worse. And if the stock market cracks at the same time as the job market, we could really see a massive correction here across the board here in real estate especially in the areas that are completely overbuilt. Now, here's the job layoff announcements.

You can see the government's laying off employers, UPS, Amazon, Intel, Nestle, Verizon. Across the board, we're just seeing massive number of layoffs and the layoffs are just as high as they were during the 2008 financial crisis and we're not in any sort of crisis at this point in time. So this is an incredible piece of information that you need to understand that if the employment market falls, people cannot buy houses and the confidence to purchase a house if you lose, you know, if you're thinking you're going to lose your job, you're not going to be out there making your largest financial investment. So this will absolutely impact the demand that you have from buyers on your real estate.

This is ultimately the largest elephant in the room. And by the way, 60% of Americans right now from surveys are saying that we are already in a recession. 80% I believe already feel that way for sure. So look at this chart.

It says 1.2 million US layoffs announced exceeded 1 million jobs for the first time since 2020 and this is just an incredible statistic that's out there cuz again, we're already in a pretty middle of the road interest rate level environment. We're likely to get the Fed cut tomorrow. By the time this video comes out, you'll actually probably see a Fed cut and potentially quantitative easing where the Fed goes in and buys treasuries and it increases their balance sheet to start providing liquidity to the system and drive down interest rates to make it more attractive for loans to occur to hire people, everything. The government is going to try to prop up everything, but if the job loss really starts to accelerate, there's only so much that they can do other than the QE and the the rate cut.

So we're going to have to see how this is going to play out, but my prediction is that this is about to get a lot worse and probably won't get any better for any time in the future even with the rate cuts that are likely to come. Layoffs are plaguing the housing industry. So this is layoff announcements this year top 1.1 million, right? So this is from Challenger, the most in 2020 when the pandemic hit And by the way, when employment falls, this is a great chart to just visualize when employment falls, existing home sales fall.

When existing home sales fall, employment they they they go in lockstep. It's kind of a leading indicator and a lagging indicator at the same time, right? So if you have job loss, obviously people can't purchase a house, they go and sell their house, there's not as many existing home sales cuz the confidence is is gone down. Consumer confidence is the number one thing that drives home sales, by the way.

So if the consumer's not feeling good again, they're not going to go out and make these major purchases, but you can see here, you know, we see a spike in employment growth, we see the housing do a little bit better on existing home sales. You see the decline in employment growth and you see housing situation gets a little bit worse year over year. So you can see it's it's very correlated together and housing is a multiplier type of business. So if you buy a house, you're going out there, you're buying a car after you buy the house, obviously.

You're buying furniture, you're getting upgrades on the house, you're getting a new AC unit, you're getting dishwasher appliances. All of these aspects create a multiplier effect in the economy and you make that house your own. Well, when the transactions slow down, that's a huge problem for all of these industries that are related to the housing industry, which are a tremendous number of them. And look, this just keeps getting worse every single month.

Employment situation gets worse. You can see from 2024, this is from ADP and BLS and it's ultimately showing Look, we're not even getting the BLS data anymore. So it's kind of scary that the government isn't releasing this data at this point. I know we had the shutdown, but they should be able to pull pull together their surveys and their information and continue to to get that moving forward.

So it is sad that we don't have this data at this time. I don't think it's going to be be released in the future as well. So we're going to have to see how this is going, but we're starting to see this really start to decline in terms of the number of jobs that are being created out there and the job postings, right? So this is Indeed job openings.

They've been declining ever since the Fed started raising interest rates. They brought rates from zero, you know, nearly up to you know, up to 5% the range and ever since then, you just see these employment job openings just start to fall. A lot of these are being reported as fake job openings as well, but it's not looking good and we're even seeing reports out there that the share of people graduating from high school who are unemployed are the same percentage as people who are graduating college. So this is a really interesting indicator.

Of people are questioning is is even college worth it. I'd love to hear from you what your thoughts are on that right now. Is college worth it? Are a lot of these degrees worth it?

And was your degree worth it? So let us know, but ultimately, the job openings are starting to decline, businesses are pulling back and they're firing people at a really rapid rate. Now, obviously, this is going to have a massive impact on real estate, but real estate is already in some areas that had this wild speculative bubble already has a ton of listings. This is in Cary, North Carolina.

I was there last week and the inventory, I mean, you drive around, there's new construction still going because they have to finish their projects. There's a ton of listings that are already on the market and they're just sitting there. There's not a lot of buyers for them. There's a lot of people who are rage quitting, taking the listing off the market.

They'll put it back on the market. But ultimately, this is just an indicator of of what's already happening from just the Fed increasing interest rate tied job loss on top of that, this is really going to be a terrible situation. Here's Jacksonville, Florida. This is where I am.

I mean, obviously, you can't even see the word Jacksonville here anymore. It is out of control the number of listings that are coming on and a lot of people again are taking their listing off the market hoping that next year will be better during the springtime, but ultimately, we expect to have a lot more listings on the market next year. Specifically, the condo market and townhouse market is just dead. It's really really tough for those markets.

And so when we're seeing how this is going to impact the employment situation is going to impact the housing market, this is what we're already seeing. Roughly 15% of the homes were delisted in September were at risk of selling for a loss, which is less than what they bought it for. That's already the situation now. Now, multiply that over 3 to 4 years of our current trend line and you can see that a ton of listings, again, from those vintage years 21 to 25 you purchased during those years during those peak prices, you're likely going to be selling at a loss.

Mention the round trip costs of buying and selling can be up to 10%. Buying costs you 3%, 4%, selling costs you 6 to 7% and it's going to get worse when we see this job this job loss continue to trend. And again, the Fed will do everything to that they can to try to prevent this and prop up asset prices. That's what they're committed to.

However, it might not be enough to save the housing market in specific areas especially in the Sunbelt areas where we're completely overbuilt and the prices make no sense. This is the value the home value to rent ratio. You can see that we're currently in a bubble. This is where the bubble was previously and obviously, it got completely out of control the last go around, but we're still at this point where we are way far from the median, right?

So the best time to buy would have been 2012. Now, I mean, obviously, we'll see where this goes. I can see us at least getting back to the median with a 20 to 30% decrease in the price especially if we see the job loss on top of what's happening. Now, wages are lagging across the board on top of the job loss.

We're not keeping up with the price of housing. So you can see the median sales price of a home right now is 433 and the price to income ratio has gone from 3.5 times the the ratio now to 5.8 times. So it it's almost twice as hard to purchase a house today than it was back in the 1980s when you're looking at it relative to the median household income. And this is terrifying, right?

Because in Jacksonville, our median house is about 400,000, the median household income is 68,000. You need $108,000 to be able to afford the median price home. So, the locals are completely priced out. So, the only people purchasing are either going to be dual income families or people relocating who have already built their wealth and are coming to Jacksonville.

And this is what we're seeing across the board across the Sunbelt is that prices just got way too high because of the Fed's zero interest rate policy. And now we're starting to see metros with the greatest share of homes that lost value in the last year. You can see that 83% of homes in the Jacksonville market lost value in the last year. I'm surprised it doesn't say 100%.

I'm curious to see how this Zillow puts this together. Uh maybe through their Zestimate. However, just four homes have lost value since their last sale. And I expect this percentage to continue to drift up as time goes on and prices come down.

But you can see the areas that are getting hit the hardest were the ones that had the most speculation in those markets from the hedge funds, from people relocating. And relocations to Florida are down 82% from the peak in 2022. And the builders just continued to build at that pace uh and they expected those relocations to continue and they just didn't. And that's why you're starting to see Jacksonville, Orlando, Tampa.

Austin is the same thing. Austin is obviously the epicenter and Dallas. They're having issues, San Antonio, Phoenix, Las Vegas, Denver, Sacramento, San Francisco, Portland. Uh but the areas that had the most speculation during the boom years are going to be the spots that the prices are going to fall the most.

And we expect prices to come down in 2026. So, look, the Fed will do whatever they can to cut interest rates and do their quantitative easing. They cannot let asset prices fall because they need this baby boomer generation and the demographics are not looking so great. They need to prop those prices up because that's the majority of the wealth for that generation.

So, the government's going to come in and do whatever they can. The Fed is going to do come in and do whatever they can. That's why you're seeing these wild proposals of a 50-year mortgage, assumable mortgage, portable mortgage, all these ideas out there that are basically financial engineering. It doesn't make properties more affordable.

It makes them more accessible. It just changes the payment. Uh but as you know for amortization tables, you're paying the majority of your interest up front as the as the loan progresses and then more principal as the loan gets more like older and aged. And this is a huge problem because people could be paying the entire price of the home just in interest in the first 15 years.

And if you do a 50-year mortgage, that just makes it even worse. So, we're seeing these proposals come out. We're seeing the Fed come out and say we're going to pump asset prices as much as possible and this is going to be something that's going to make the problem even worse. So, you think affordability is bad now?

Just wait until this money supply issue continues to spike. Your dollar is going to become worth less and less as the government becomes more involved with the market. And how housing is going to play out will completely depend on the employment situation. So, look what happened.

I mean, we're starting to see a correction that we had from the raging inflation, right? We had the inflation, we need to get it under control because the dollar's not worth as much. Let's raise interest rates and slow things down. We're now back down to the April 2020 levels from a Fed balance sheet perspective and we did quantitative tightening for the last few years.

And we're just back to the April 2020 level and we still and if if they just let these assets run off their balance sheet, we would be crushed. And instead, they're just saying, "Okay, we're going to reinvest and we're going to kind of stabilize here." And they're probably going to increase the money supply massively. And this is just from a few years of just letting the assets run off their balance sheet without any intervention. And so, this is a this is a crazy chart to me and it just explain it just shows you why our the dollar value the value of a dollar is not worth what it used to be.

It's because the Fed is getting involved. And it's also because of our debt crisis that we have with our government where we just continue to spend trillions and trillions of dollars without any accountability in Congress for getting results or finding a path to be able to unwind what we're doing what we're doing there with the programs and social security, Medicare, Medicaid. All of those issues that we have are just not being addressed and including the budget for the military. And I wish that Dozh was still there and looking for to find ways to save money.

And it's sad that those programs just completely got put to the side and it's all about pumping assets again, which I think is really unfortunate. And the next generation will be paying the price for the decisions that are being made right now because of the compounding nature of our debt, the compounding nature of our money supply being expanded. The next generation is going You think these ratios are bad now, 7:1 for purchasing a house from your income ratio? It's going It could be way worse in the future if we start to see the Fed come in and start to to bail out the owners of these assets already.

So, look, this is what's happening in certain areas around the country. We're seeing rents decline. This is great for renters and we're really excited about that and the vacancy's moving up. It's terrible for investors, right?

Investors who bought from 2021 to 2022, 2023, they're getting absolutely crushed right now. They've lost a lot of equity, their rents their underwriting is really bad, and their rents are going down, right? A lot of people underwrote for oh, 4% rent growth every single year. Well, that's no longer happening anymore.

So, now we're seeing this in Dallas, Texas. This is a huge correction in the rents. And so, with these boom markets, we're seeing them come back down. Now, eventually this will this will be across the United States in most areas that had new construction and a lot of speculation.

The Northeast is somewhat insulated because they did not have that. They actually had people relocating out and they did not have the building going on and we're actually seeing people relocate back into those areas that are keeping the inventory really tight. Look at this for Austin, Texas. It's even worse than Dallas.

You can see the rents have dropped from a peak of 1636 all the way down to 1288 in An investor seeing this, you are terrified of this type of situation on top of the vacancy, you can lose a ton of money. Now, renters, you're in control. You can negotiate your rents, you can negotiate free months rent, you can negotiate the rate down lower, especially if you're super highly qualified. This is fantastic.

We need this relief in these areas. So, I'm glad to see these markets start to correct. But the pain is just showing up and just wait until those investors start unloading their properties because they no longer see that 4% appreciation that they thought they would have and they start to have expenses on the repairs and everything. So, again, it depends on your vintage years and what your payment is on those investments.

But if you bought in '21 to '25 through that time period, you're likely in a boom market, you're likely going to be in trouble. Here's across the board what we're seeing on the rental market corrections. And this is important because if job loss happens, you start to see people move in with each other and the rent demand starts to decline because, you know, people are consolidating. So, that's why the employment situation is important in this.

But you can see Austin, Texas, you can see areas of Florida, North Carolina. The areas again that had the big boom, Atlanta, Georgia, Denver, are now the ones that are seeing the largest decline in these markets. And we will continue to see this moving forward. Now, from an existing home sales situation, when you're looking at realtor.com, they have a sales forecast.

But it keeps getting revised down less and less every single year. They expect there to be more sales next year, but only slightly. And the majority of this reason is because you know, the the employment situation continues to get worse. The interest rates haven't fallen as much as many people expected this year so people could get a a lower mortgage payment and a lower a lower payment period.

And each forecast that we see is starting to decline more and more as people becomes more aware of what is happening here on the ground. Shoot. As we start to see a declining job market. Now, affordability at this point, this comes from realtor.com, too, is near an all-time high of an issue.

This is percentage of income spent on mortgage payments. There's different charts out there that show rents and mortgages up to 45% of your income is going to your rent or mortgage. And if this is the case, you definitely probably want to downside at this downsize at this point. You're You're outliving your means.

Usually, a healthy threshold is near 25%. So, it's very likely that we will see in the future because of declining prices and potentially declining mortgage rates, if we have that, that we will start to see housing affordability come back. I know locally we're up about 6 to 7 points in affordability, which is great for the next generation to be able to afford and and buy into the market. However, for the majority of people, it still makes more sense right now to hold the line and wait and just rent and ride this out, which is what I'm recommending to a lot of my friends here locally because it's the price of what you you're paying for things right now is like the number one thing that's going to impact the return that you have on your investment.

You got to negotiate an insane deal. Not saying there's not deals out there, go and get them. There's unique homes that are always going to be worth more than other homes in the area. Go get them.

But if you're just buying a cookie-cutter house, I think right now is a better time to just wait. And the demographics are starting to show up, right? Sadly, we're going to have about 15.3 million baby boomers leave us in the next decade or so according to a Harvard study. And Florida is one of the second highest share of older adults in the United States.

So, not only do we have the weather issues, but the demographic issues look really really tough. So, we're likely to see these demographic issues show up along the line, right? So, we have cracking employment, we have affordability, we have weather issues, and then we have the demographic issues that are starting to impact our market. That's why I think we're going to go through this boom bust period here in Florida.

And the Fed's going to do everything that they can to prevent the decline across the board. However, keep in mind, their policy will impact the entire United States and every market is unique and is doing very very different. And the reality is that we should be seeing a ton of home sales right now because the largest population grow group is 32 to 36 years old and this is in 2024, but this is the largest group of population and they're in their prime years for being able to purchase at this age. They have income, they're getting married, they're starting to have kids.

You know, we see that chart you know, people who are age 30 who are married and own a house and it's only 12%. And that is a like terrifying statistic as it used to be above 50% and this is basically showing that people are putting off their home purchases. When you overlap this with the number of sales that are happening, you have peak earning people they should be purchasing and then they're just not at this point in time. It's because of this affordability crisis.

This comes from John Burns, great research and consulting company. Puts out a ton of real estate data. Highly recommend you check out their charts. And so when you put this all together, the media is starting to understand this narrative that they're completely changing, right?

Because they keep saying, "Hey, we're in a housing shortage, housing shortage." Well, you saw the pictures of all those green dots. How could you be in a housing shortage and continue to push that? Well, there's certain companies out there that actually do which is really sad and it frankly depends on the area. If you're in the northeast, sure there's going to be areas that don't have the housing that have a housing shortage, but if you're in the if you're in the Sunbelt, there's no there's no way you can say that, but the US housing market is poised to crash worse than 2008 experts warn and 50% plunge could start as soon as 2026.

Now, I've done the math locally here in Florida and I can say, you know, from my investment banking background, we are probably going to see a 31 to 42% decline from the peak of October 2022. That's where it would start making sense for buyers to actually start come back in in versus renting and investors to come back in versus investing in other type of asset classes, but the good news is that the media is finally coming catching on. They can no longer ignore the data that we're starting to see here on the ground and it's really hard to convince people that we're in a housing shortage when they drive down the street and see something like this where they see every single house up for sale or for rent. So, fun fact, this is just where I want to leave you with this thought.

There is no Mamdani effect. This was this expectation that we're going to have a surge of people moving from New York to Florida. We have not seen it here in Jacksonville. Maybe they're not wanting to move to Jacksonville for some reason.

We're not seeing it from any of the people I talked to in Florida. I think what'll have to happen is if policies get implemented that really people don't want to stand, they will move at that time and probably Florida will be one of the locations, but again, there's not going to be enough relocations to buy up this insane glut of inventory we have already accumulated. We went from 2,000 active listings in 2022 all the way up to 12,000 active listings today. And so it's getting worse every single month because of this affordability crisis, but it would be nice to have a lot of people from New York continue to relocate here.

We're just not seeing it as much. It's still happening, but not as much as we saw previously. So look, I'd love to hear from you. What do you think?

Will employment crack the housing market in 2026? Do you think it's going to continue get better or worse moving forward? And how far will the Fed go to bail out the housing market? We've already heard from them that they're very resistant to going back and buying mortgage-backed securities to drive down mortgage rates.

They are committed to buying potentially treasury rates at the beginning of next year is what the word on the street is. How far do you think they are going to go to save the housing market, especially since it's not the entire US, it's only specific areas in the Sunbelt at least for now. Would love to hear from you. As always, you can subscribe to my Substack.

You can also follow me on X. I have a I have a big account there over a million views in the last, you know, just 2 weeks. I'm putting all the charts that I put here out there with commentary and I look forward to talking with you next week. See you later.