How much do people spend when they move into a new house? Fresh data is hard to come by, but we do have some guidance from the National Association of Homebuilders. In 2020, the NAHB found that people who moved into a “typical” existing home spent $13,179 on alterations, appliances and furniture. For those who chose not to move, the amount was only $7,942.

The housing market is frozen. In the most populous state, California, existing home transactions have fallen 47% from their December 2020 high. Most of the other states aren’t doing too much better. For the U.S. as a whole, the sales decline from the COVID-19 peak is 38%.

Mortgage rates are the culprit. Consider this: anyone who borrowed $800,000 at 2.5% when they refinanced during COVID-19 has the same monthly principal and interest payment as someone who has to pay 6.5% on a $500,000 loan. Talk about “less house.” It would be one thing if the prevailing national average mortgage rate, 7.18% according to Freddie Mac, was coming with a cheap headline price tag. Unfortunately, that is far from the case. Using average hourly earnings in manufacturing, the $406,700 median existing home is equal to the wages that are earned from 15,353 hours of toil. For context, the housing bubble peak in 2005 was 13,862 hours.

Across ages and education levels, the responses in the New York Fed’s Consumer Expectations Survey were clear: Americans resoundingly state that they have very little intention of moving in the next 12 months.

High interest rates and high prices: this is the stuff of a consumer discretionary pinch. As people who would move opt not to, the phone doesn’t ring quite as much for locksmiths, pest control teams, radon specialists and hundreds of other professions. It is happening right now. In line item after line item, we observed stark deflation in housing-related components of the CPI in the most recent report. Year-over-year red ink was splashed on window and floor coverings, linens, furniture, bedding, major appliances, laundry equipment, dishes and tableware. Granted, part of this can be attributed to the clear-up in the supply chain. The other part is a lack of need to purchase more items to “keep up with the Joneses,” because the home décor was newly bought when they moved house last time.

There is a plot twist in all of this: the millions of households who refinanced at low rates and are staying put are in a situation where they are accumulating boatloads of home equity with each passing payment. That may be why J.D. Power and GlobalData found that new vehicle sales popped 15.4% in the year to August. Flush with home equity and a zooming stock market, some buyers are plunking out as much as six figures for a Ford F-150.

Needless to say, what is holding this economy together is job availability. One concern we have is that many market observers may think the unemployment rate may gently back up to something like a “5-handle” at the worst stage of the cycle. But there are some omens that could disrupt that benign scenario.

Namely, California again.

The state’s unemployment rate has bolted to 4.6% from last year’s 3.8% trough, owing to tech layoffs. Because of California’s sheer size—its GDP is nearly the size of Germany’s—when it catches a proverbial cold, the other 49 states almost necessarily feel the “sneeze.” If 5% unemployment is considered outlandish for something like a 2024 portent, we posit that the state of California may see it before Santa comes in three months.