she even beats her insurance price. good for you kate, good for you. goodrx, stop paying too much for your prescriptions. download the free app today. >> from bloomberg's world headquarters in new york, i am caroline hyde. i am romaine. steve mnuchin's down plane the chances of a pre-election stimulus deal. >> the question is what'd you what isroline: happening on this week's earnings. five of the biggest u.s. next reported a profit, the good, the bad, the ugly. you might have missed the window

into consumer credit. jp morgan encouraged creditors to pay down their credit card bills. that fargo pointed out they missed the lowest level in five years. the optimism about the consumer can also be seen in the housing market as home sales are the highest in 14 years. record low mortgage rates. enticing buyers into the market but not all buyers. high-end home sales have made the largest jump since 2013 but sales on midprice homes declined modestly. affordable purchases are actually declining. is totally unequal. we are seeing some sort of progress in credit. joe: this downturn or whatever --are calling it, that step statistic you decided about the

number of credit, all of these companies, all of these banks saying that the credit provisions are not as bad, we see deleveraging right there. credit card balances, that white line coming in sharp. even as available credit continues to rise. this is not what you typically expect to see. >> it is interesting. we got quite a few of the bank earnings out. that was not actually the case. we heard from bank of america and a couple of other banks, saying that this was less than what some investors expected including jp morgan. there was this general sense that we heard from the commentary of the executives, the economy actually was not doing as bad.

caroline: all of this with >> we are seeing consumer spending picking up. people are refinancing in the lower coupons. a lot of home purchase activity is happening as people are moving from cities to suburbs in part because of what has happened with the virus. autos, a lot of activity in autos has been going on during this time. things are better. joe: we just wrapped up bank earnings, jenny. the theme seems to be that lending, balance sheets, credit, not as bad on loan losses. investors don't seem excited

about faang stocks. explain how the banks are doing better on the credit side but not getting much credit for them so to speak from the stock market. it is an interesting phenomenon. the big takeaway we are getting is wear skin set aside less provision. also, the fear that losses are still coming. the knowledge that the end of 2021 is where it might be when they see these losses start to peek and people fall behind on their loans. seem --ly if we don't see stimulus deals. there is this weight quick -- big question. the horizon just looks a little bit worrisome.

>> it has obvious i've been a pretty volatile year. there is no sense that that affecting has been the next quarter. >> goldman sachs spent a lot of their time trying to prove that these trading games might be here to stay. they are pointing to the elections, general pandemic craziness. seereasons that we might this even into next year. we have also gained a lot of market share. they were really trying to make the case that this is not a short-term game, that these could be things that are sustained going into the future.

caroline: talk about standing by your clients. i am sure they have stayed by their clients who want to trade in assets but what about standing by your client to want to take loans to salvage their small enterprise? to be able to ensure that they made it to the next month and the next month? how is lending at the moment? it has not been that efficient. how able have banks been to make loans if they needed? that is a great point. it is such a bizarre time. on the consumer side, these banks have been pointing to the fact that loans are down. when we ask the banks about that, they pointed out that consumers are borrowing less, they are paying down their debts. even as they spend more, there being really conscious about their own personal balance sheet. not looking to bulk up on credit right now. it is this different take than what we saw during the last

crisis where things got bad. i think a lot of it is this consumer demand, this desire to fortify their own personal balance sheets. and other regulators have to step up a little bit more and ensure they are standing in when they need to be. >> when we talk about this dual phenomenon where the temporary shot from the crisis -- shock from the crisis is fading. permanent unemployment is slower moving and the stress on the economy continues to build. is the bottom line that the banks are jesting that corollary? -- just seeing that corollary? this generaleeing sustained lack of activity?

exuberance? just continues to drag down the business? is that was reflected in the stock price? i think it has been a little bit of that. historically, the un-appointment rate and credit have moved in lockstep. we have seen that disintegrate during this crisis. you're seeing that the banks have not been lending to a large swath of america. starting toy are see a second round of unemployment in terms of white-collar layoffs, it is more , those kinds of things really weigh on the outlook for these stocks and how banks recover. still seem to be embracing these names. you're getting a little bit of a selloff today but for the most part, they have managed to stay

in the camp of some of these financials. economicthat once rebound comes, this would be the place to bay. jenny: you're seeing them wanting to pick their spots. there has been a lot of ups and downs this year for these stocks. of the talk because of these credit losses and unemployment reaching the u.s. high. >> we are going to continue this conversation and take a little bit more of the vocus out of this window consumer credit and focus on housing. >> this was a lot of really fantastic the medic researched. she will join us a little bit after the break. this is bloomberg. ♪

>> welcome back. we are talking about what is going on in the credit space, the consumer credit space and what is going on with housing. one interesting thing about this recession we are in is that when you look at home prices, prior to the recession, home prices were actually on the downswing. recession, they were on the upswing. joe: nobody thinks that in a major crisis, for several months, people were not even leaving their houses. tons of people were losing their jobs in rapid time. then there is rick celebration at the highest level since early 2019. in terms of the pace of growth. very impressive, very

surprising, no real evidence that is slowing down. expensive. we have seen the other assets driven up on the back of this. this is because of the shortage and the desire to be building houses. joining us for more, iv. let's start big picture. we had this for the extraordinary housing data so far this year over the last six months or so. are the conditions that have allowed this to happen -- do they have further to run? >> it is possible they have further to run. it depends on what we are talking about from retail versus new construction. we are seeing a slight tapering with respect to our proprietary survey.

sequentially, august-september sales where they historically declined 7%, that is after five months of better than seasonal trends and the orders were still up. versus 79 in august. at atapering is happening slow, tapering pace. builders cannot build houses fast enough to meet the current demand across all price points, not just entry-level. in your research, when you look at what the builders are doing or more importantly, what they are planning to do, are they planning to increase output to a level to meet current demand given? there seems to be some pretty long runway from when you can develop that land and sell it. >> they are aggressively buying

more land. they are recognizing that the current pipeline can be absorbed faster than they have been forecasting. their plan is to bring a product to market through by more land. land prices are rising. they are passing it the consumer. some builders are being forced to slow down sales. even after aggressively pushing price to cover crazy lumber prices and other input costs are rising. it is going to be interesting to see how far affordability has rooms ago with rates as low as they are. they have wind at their back but those price increases are 14% throught now at our proprietary survey. .hat covers 100 builders that is something we are

watching closely. keep in mind, everyone focuses on rates but that is really the equivalent for an entry-level buyer about a 3% increase in their monthly payment. this rapid home price blow the 3% is not they're currently running at. it is just trying to frame it for you. theline: we will delve into affordability question much more in a moment but first, a geographical question. where are people building in the right areas? where are we seeing it redistribute itself? talking of people are about the great american shuffle. we are seeing a lot of migration. that affordable southeast, southwest overall market. it is pretty interesting is that great shuffle has been underway since the last decade,

2010-2020. more consumers are taking advantage if they can sell their homes and move to those more favorable areas. today, the markets that are the phoenixes offhave the charts, extremely strong. you have -- phoenix is off the charts, florida. it is the red states that are pro-business, low cost, more affordable and frankly, more space. the problem with our high density cities is there is not a lot of area to build. there just aren't areas that builders are pursuing as aggressively. there just isn't enough space. joe: i want to ask you about the broader macro conditions. one of the things that we have been talking about, we have seen this fairly sharp economic rebound since the worst days in march and april. we have seen an ongoing rise in

permanent layoffs. that does not seem to be slowing down yet. at what point does that start to sap some of the demand for housing if people are anxious were lending to people whose jobs might be at risk? >> i think interest rates are something the surge in unemployment. 161 milliont the people that are in our labor force not including retirees. if you want to send at 15-20% of the population they before his is out of work or furloughed, you have all these people that are currently working. i think the big change is remote work. six or 7% pretend -- pre-pandemic. what you have right now is the flux ability being afforded to employees where they could maybe come to work once or twice a week in cities where they

typically commuted, allowing them to move further out. we have seen tremendous second-home buying, the most in a decade, even since the boom. we are seeing families that might not want to leave cities permanently but they might want to get away. there is tremendous tailwind from the overall remote work. but employment back into thousand one never got to the current levels we are at today. if you recall back in 2000, the market was starting to price and that the fed was going to have to cut rates. pretty much 2000 into 2001 when the fed did start cutting. housing was irrelevant. rates trumped rising unemployment. that was not necessarily comparable but think of all the people taking advantage of the mortgage rate -- mortgage rates down 3%.

that trumps unemployment. i don't know how long as long as rates stay low and don't push rates too far too fast. the market is see multiple bids. >> fascinating stuff. she will stick with us more as we talk more about the unequal nest in the housing recovery. all of that and more is next. this is bloomberg. ♪

i want to bring back in ivy. we are talking about some of the unequal aspects of the housing recovery. you were talking about the boone

-- boom in second homes. some people doing fantastically well. we don't even really think about downturns -- second homes during downturns. the second-home market has a lot of room to run but it is so contingent on base. i think a lot of people that have the wherewithal is recognizing that you're basically getting free money. taking about the wellness and the safety of their families where they really wanted to have that getaway home. i think while we are in a pandemic, second homes will keep searching. as long as we have covid and we are fearful of being on lock down or worried about ourselves, we will see that more people are taking advantage of those second homes, if prices were to go up another 10 or 15%, it might slow down the momentum. i thing more and more people are really fearful during the pandemic. i think the housing market will start to see relative slowing if

we have something that returns to normalcy. housing is center stage right now but will housing still be center stage? it will still be fundamentally strong but you start to figure back consumers, they are spending everything on their homes. they are staying home, not thinking about getting on the road and going at staying at various hotels. it is most likely will come back. that will take the focus off our homes and second homes will be included in there. focus has been having the luxury to move. the lower homes, the affordable will not ever get progressively worse. >> i think that month number is other misleading.

that is a function of lack of inventory. when you look at those people who can buy a new home, that is the third ring of a market, sales are running at 80 on the index. the ones that are the most affordable are even stronger in some markets than they were in the great boone. the resale market is just too tight. today plusmarket whatever new construction is out there, the velocity is as strong as it has ever been on record. in other words, what you sold at thel is on record.

>> this tradition in the most recent years has been that lack of affordability. shift through the outer rings with regards to affordability? >> that has already been underway. i remember saying that if you build it, they will come as the realtors were begging. they had this affordable $200,000 box they were able to provide. all of the builders like they have always done followed the leader. they're tripping over each other. that has already been way underway. i think they are selling as strong as they possibly could. pushing pricetart

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