Banks are people, people with loans

We've all got some unrealized losses, after all. Plus small banks, we're gonna miss 'em when they're gone, and other reasons to stop getting in our own way

Random Walk goes Free to be . . . You and Me because who couldn’t use a little Harry Belafonte in their day? We’ve got a real estate check-in and a banking crisis check-in, which have more in common than we’d like. Plus a fond farewell to small banks that are Too Small to Not Fail, and a desperate plea to get our heads on right, lest we become Strangers in a Strange Land.

Scatterplots

This one is a bit more thematic than the usual Scatterplots, but I promise it will reveal the 10 key habits that all successful people swear by, if you read all the way to the end.

Banks and people, not so different after all

Homes and loans, both not selling

Homes started to sell a bit again, yay!

Does that mean we’ve reached a bottom? No! It’s just seller concessions:

Professional builders figured that out weeks ago when they had no choice but to offer concessions to move inventory (and bring buyer cancellations to heel):

Nationally, inventory is still really low because nothing is moving—that’s not to be confused with when inventory was even lower during the pandemic because everything was moving.¹

Houses-are-to-Loans is, again, an imperfect (but also perfect) analogy of the banking crisis: houses and loans can’t move without someone taking a loss.² If you bought a thing with very cheap money—whether a house or a loan—the game has changed. Everything is fine unless someone needs to sell, which generally hasn’t happened (yet), but certainly can happen when your costs go way up—as it has for everyone, but especially for the people in the business of money.

So for now, home prices stay relatively flat (to down).³ We don’t account for “unrealized losses” on homes, but if we did, the chart wouldn’t be pretty.

Everyone’s got unrealized losses

Scary charts from the WSJ help visualize the dynamic of “rates go up” (i.e. money gets more expensive) and “loans go down” (i.e. makes giving away money for free look silly in retrospect):