Massive Layoff Coming To Nashville

If the Fed is waiting for layoffs to happen before they want to cut rates, it's already too late. That was a pretty timely comment from an interview with Anna Wong, chief economist at Bloomberg, because next week there will be a major layoff at one of Nashville's largest employers. And these are good paying jobs. Now I'm going to share about this massive layoff, but I texted a friend the other day. He worked for a bank and I said, what's the latest rate on your HELOC? Now I was just trying to find coverage on an assumable loan for another buyer. His response? Dude, the bank let me go this week. I was shocked. But then I saw this comment on my channel. We were thinking about upgrading to a bigger house since the mortgage rate is coming down. But now I'm not sure if I'll still have a job next month. So I'm not going to consider this move for the foreseeable future until the job market gets better. This is starting to feel like a recession. People are not confident they will have a job or even have confidence that they won't be required to relocate. And they are pausing purchases because of it. If it really is this bad, then why are contracts heading up right now? Demand is actually up. So there's a conflict in the anecdotes that I'm seeing and the data that I'm pulling. In fact, the Atlanta Fed's real GDP estimate for 2024 of Q3 is 2.8%. However, all this data gets revised over time and it takes years for it to come in. And it's likely going to be much worse than what they're showing. If you think that the revisions is big for 2023, it will be even bigger for 2024. And those revisions will only be apparent in February of 2026. On the one hand, we have layoffs that are happening and will happen pretty massively. And at the same time, we have an increase in demand. Now it's easy to just say that rates are driving this. And I do think that that could be a driver. But I also believe that might be something else. When we look at the Tennessee Warrant Tracker, we've seen some major employers close down or have layoffs in the past month. Plastic molding manufacturers and car part manufacturers out of Knoxville shut down hundreds of jobs lost. But the truth is, is most employers don't file warrant notices and they don't have to. It's a misunderstanding about how warrant notices work. And that's why employees of Asurion are chattering online about layoffs, potentially in the thousands. Yes, it's likely to be well over 1,000 employees, though I don't know a specific number, nor will they reveal it, nor will they file a warrant notice. However, it's a massive impact to the morale in the market in Nashville. And it's not just Asurion. Dell just recently had a round of layoffs, not announcing how many impacted in Nashville, but we know about 1,800 are employed locally. Nissan, which has a headquarters in Cool Springs, they're doing a buyout trying to avoid layoffs. Amazon is requiring return to office five days a week. And I've had conversations with Amazon employees. Even some here are being called to hubs in Austin or Seattle. So yeah, it doesn't feel great right now. And yet, housing demand is up. Purchases are actually trending up. How is this possible? Even though price growth is flat, it's not down. And leading indicators point to a stable Q4. I believe the answer can be found if we look at what people are actually buying and what sellers are actually selling. Look at existing homes versus new builds. Active listings for existing resale homes continue to skyrocket while new builds are stable. And even though demand is up year over year, it's apparent to me that many of the sellers are choosing not to buy. In fact, I had a buyer making an offer on a house with an assumable mortgage this week where the seller had already moved out and was renting. Can you believe that? They moved out to rent. It's not just that. Look at who's buying in this unaffordable market. We know that luxury homes are selling well above what can be afforded by the local economy, yet they are moving at an ever increasing pace. Why is this? Well, there's really primarily one answer, and it's migration. Migration, not just people and families, but also businesses. You see, even as we are getting slammed locally, and it is apparent to me that the recession is in fact here, whatever that means, people are migrating to Tennessee and particularly Middle Tennessee and East Tennessee as fast as anywhere else in the country. You know, I've showed this before, but you know they're not even moving to Memphis. Okay, so if we take Memphis out, the truth is it's Nashville and it's East Tennessee, maybe Chattanooga, and people are in fact moving out of Memphis to Nashville and East Tennessee. In fact, the migration out of Nashville, as much as everyone complains about prices, is much lower than the migration in. This can be seen by pretty much any data point available. U-Haul, Redfin, LinkedIn, you name it. In fact, even Mike Simonson posted from Altos Research about migration, and it shows Tennessee staying very strong. So let's look at the chart of demand. I know I'm talking about it going up, but is it really going up all that much? The truth is it's still way down from several years ago, significantly. But what we are seeing is a trajectory change. Now this trajectory change is likely as much about interest rates as it is about migration, but it's hard to delineate. And when you look at existing homes and knowing that people in the local economy can't afford to rebuy, and then you look at the purchases being luxury and new builds, it's hard not to extrapolate that the people buying are people migrating in, and the people selling are people that simply are cashing out of a market that they feel is too high. At least that's what it feels like to me in the data. But I'm open to suggestions. You tell me what you think. I would love to hear it in the comments. But as far as price goes, in the short run, it's very uncertain. But seasonally speaking, this is the time to buy. You've got the maximum number of options. You've got contracts which have stabilized. But the truth is it's much lower than it was in May. And this isn't me trying to get anybody to buy. I only help buyers who have already decided to buy. I'm not trying to convince anybody to buy in this market. You guys know that. You watch this channel for any amount of time. But for the most part, people that need to sell are able to sell their house quickly. And we continue to march for another year of real prices being down while nominal prices churn, which is shocking because that's not how the year started. In fact, the year started way, way up, very strong. And now it's erased all those gains. But it doesn't look like it's going down anymore or any more in the foreseeable next couple of months, which I know is crazy. I know some of you guys think, wow, this market has to tank. And it's the truth. I feel like this market has to tank, but it isn't tanking. The recession is here. The layoffs are happening. And yet people are moving more and more and more into Tennessee. As long as that happens, it's really hard for me to see a massive crash in prices. But look, I don't know. I don't know where prices are going to go. I don't know if they're going to go up. People ask me all the time. Are they going to go up? I don't know. I can tell you in the next 60 to 90 days, prices will be more stable than they were in the past 60 to 90 days when I said that we were going to have a massive drop in prices, which we have had. A lot of the price cuts are being absorbed, but we're starting to see price cuts tick up again. As that changes, of course, I'll keep an eye on it. I'll keep you posted. And if I see something, I will let you know. But right now what I see is I see recession and layoffs in a stable housing market. Will these layoffs change the housing market? I don't know. I mean, I would think they would. By the way, that podcast is on David Lin's channel. I'll put a link in the comments below. Fantastic podcast. You really should listen to the entire interview with Anna Wong. It's phenomenal. With that, I hope you guys have a great rest of the day. I'll see you next weekend.