Observing an Economy in Decline

Current Economic Struggles

The general dissatisfaction among Americans can be largely attributed to the continuously worsening state of the economy. This situation may work in favor of the Trump campaign, as the majority of Americans are eager for change. However, the rapid deterioration of the economy makes it a daunting task for anyone to reverse the trend. The momentum of decline is strong, and the future months do not seem promising.

Decline in Home Sales

A clear indication of the economic downturn is the drop in home sales. In the previous month, sales of pre-existing homes reached their lowest point since October 2010, a time when the aftermath of a global financial crisis was being dealt with. The year is on track to be the worst for sales of pre-existing homes since 1995, marking the second consecutive year of this trend. High home prices and elevated mortgage rates are deterring potential home buyers. Sales of pre-existing homes in the first nine months of the year were lower than the same period last year, as reported by the National Association of Realtors. The rate of existing-home sales in September fell by 1% from the previous month to a seasonally adjusted annual rate of 3.84 million, the lowest monthly rate since October 2010.

Plummeting Mortgage Applications

Adding to the concern is the sharp fall in the number of mortgage applications. Data from the Mortgage Bankers Association’s weekly application survey for the week ending October 11, 2024, showed a 17% decrease in mortgage applications from one week earlier, as mortgage rates surged. The Market Composite Index, a measure of mortgage loan application volume, decreased by 17% on both a seasonally adjusted and an unadjusted basis from one week earlier.

Commercial Real Estate Crisis

The commercial real estate crisis is another area of concern. For instance, an office building in Manhattan that was sold for 332 million dollars in 2006 was recently sold for just 8.5 million dollars. Commercial real estate prices are crashing all over America, and this crisis is not receiving the attention it deserves from the media.

Banking Industry Troubles

The banking industry is also facing significant challenges. Recently, The First National Bank of Lindsay was shut down by the Office of the Comptroller of the Currency (OCC), with the Federal Deposit Insurance Corporation (FDIC) appointed as receiver. The OCC took action after identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank’s capital. The OCC also found that the bank was in an unsafe or unsound condition to transact business and that the bank’s assets were less than its obligations to its creditors and others. Some experts predict that hundreds of more banks could soon fail, which would be a nightmare scenario.

Restaurant Apocalypse

The so-called "restaurant apocalypse" also continues to unfold. Denny's, a 71-year-old diner chain, has announced plans to shut down 150 locations over the next year. Other chains are also downsizing, with thousands of restaurants being permanently closed from coast to coast.

Store Closures

In another blow to the retail industry, Buybuy Baby announced that it will be transitioning to an online-only model and closing all of its physical stores by the end of the year. Most struggling retailers try to hold on until at least the end of December, but a huge wave of new store closures is expected in 2025.

Consumer Struggles

U.S. consumers are also feeling the pinch. A staggering percentage of U.S. cardholders have already maxed out at least one credit card. The Bankrate’s Credit Utilization Survey found that nearly 2 in 5 cardholders (37%) have maxed out a credit card or come close since the Fed started raising interest rates. This includes 20% who have maxed out a credit card and 17% who have come close to maxing one out.

Bottom Line

This is the picture of an economy in decline. Bubbles are bursting all around us, and the outlook for 2025 and beyond is grim. Despite the injection of trillions of dollars into the system and unprecedented amounts of debt, the economy is unraveling. It's clear that a hard landing is imminent. What are your thoughts on this situation? Do you think there's a way to reverse this economic decline? Share this article with your friends and discuss. You can also sign up for the Daily Briefing, which is delivered every day at 6pm.