As Biden/Harris approve of Ukraine launching missiles against Russia risking nuclear war, we are witnessing a slow down in the US economy. This time, housing starts and permits.
US Housing Starts and Building Permits disappointed in October with the former dropping 3.1% MoM (-1.5% exp) and -0.6% MoM (+0.7% exp) respectively. This is the second straight month of declines for both measures of housing activity.
Source: Bloomberg
That pulled the SAAR totals down to four month lows – hovering just above COVID lockdown levels…
Source: Bloomberg
Under the hood, it was very mixed with Single-family permits rising and multifamily permits dropped. Single-family Starts plunged while multi-family Starts jumped…
Source: Bloomberg
As rate-cut expectations have fallen, so have homebuilders actions it seems…
Source: Bloomberg
But homebuilder ‘hope’ remains high…
Source: Bloomberg
With Trump back in charge, how much will Powell and his pals really want to cut rates now?
The Market Composite Index, a measure of mortgage loan application volume, decreased 10.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 2 percent higher than the same week one year ago.
The Refinance Index decreased 19 percent from the previous week and was 48 percent higher than the same week one year ago.
“Ten-year Treasury rates remain volatile and continue to put upward pressure on mortgage rates. The 30-year fixed rate last week increased to 6.81 percent, the highest level since July,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Applications decreased for the sixth consecutive week, with purchase activity falling to its lowest level since mid-August and refinance activity declining to the lowest level since May. The average loan size on a refinance application dropped below $300,000, as borrowers with larger loans tend to be more sensitive to any given changes in mortgage rates.”
The refinance share of mortgage activity decreased to 39.9 percent of total applications from 43.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.0 percent of total applications.
The FHA share of total applications decreased to 15.5 percent from 16.4 percent the week prior. The VA share of total applications decreased to 12.5 percent from 14.6 percent the week prior. The USDA share of total applications increased to 0.5 percent from 0.4 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.81 percent from 6.73 percent, with points decreasing to 0.68 from 0.69 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $766,550) increased to 6.98 percent from 6.77 percent, with points increasing to 0.65 from 0.49 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.75 percent from 6.55 percent, with points decreasing to 0.87 from 0.94 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.21 percent from 6.27 percent, with points decreasing to 0.55 from 0.77 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 6.05 percent from 6.20 percent, with points increasing to 0.84 from 0.59 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The bond market is reacting to the election of Trump with a clear Bear Steepening.
Bear steepening happens when yields move up across tenors, but long-end yields move up even faster than short-end yields.
This isn’t going to help mortgage applications due to lowering rates.
S&P/Case-Shiller released the monthly Home Price Indices for August (“August” is a 3-month average of June, July and August closing prices). August closing prices include some contracts signed in April, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).
The US government now pays out on average $3bn in interest expenses per day…If the Fed cuts interest rates by 1%-point and the entire yield curve declines by 1%-point, then daily interest expenses will decline from $3bn per day to $2.5bn per day.
Even worse, unfunded Federal liabilities total $219 trillion while total US assets total only $213 trillion. In other words, if China (for example) forced us to pay off our unfunded liabilities like Social Security, Medicare, etc., we couldn’t.
Notice how NO politician ever discusses The Federal goverment spending LESS money. Particularly not Joe “The fool on the hill” Biden or Kamala “Word salad Kammie” Harris.
I read “The Arms of Krupp” by William Manchester. A great book about the rise of ThyssenKrupp during World War II. It is one of the world’s largest steel producers, but it now has NEGATIVE ENTERPRISE VALUE.
The cause? Germany is up the creek without an economic paddle after years of gross mismanagement by Angela Merkel and her party. Mass immigration in Germany and a slowdown in the global economy aren’t helping.
Big bubbles! US home pricest hit an all-time high as The Fed keeps its foot on the monetary gas pedal following the Covid economic shutdown in 2020.
Home prices in America’s 20 largest cities rose for the 16th straight month in June (according to the latest data from S&P CoreLogic – Case Shiller – data today), up 0.42% MoM (hotter than expected and accelerating from May). On a YoY basis, prices rose 6.47%, but notably that is the third straight monthly slowdown in the pace of price appreciation…
Source: Bloomberg
Overall, US home prices reached a new record high in June (as median new home prices continued to tread water)…
Source: Bloomberg
Home prices continue to track Fed Reserves closely, but a turning point may come soon…
Source: Bloomberg
Given the smoothing and heavy lag in the Case-Shiller data, it’s hard to find a causal relationship between prices and mortgage rates…
Source: Bloomberg
But, with prices reaccelerating and mortgage rates already back below 7.00% – in anticipation of The Fed – WTF does Powell think is going to happen when he actually starts cutting with prices at these record highs.
The Freddie Mac HP index shows the variation in home price growth. New Jersey coastal towns of Atlantic City and Ocean City grew at 10% YoY while Lake Charles LA declined by -2% YoY.
Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 5, 2024. Last week’s results included an adjustment for the July 4th holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 0.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 20 percent compared with the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 19 percent compared with the previous week and was 13 percent lower than the same week one year ago.
The Refinance Index decreased 2 percent from the previous week and was 28 percent higher than the same week one year ago.
Mprtgage prepays fell less than daycoiunt.
But on;y high-coupn GNMAs prepayments sped up.
Finally, most out-of-the-money loans are now fully seasoned.
Yes. everyone can see the mental decline in President Biden and he should be in a nursing home. While he vows to run for President against Donald Trump, can you imagine what he will be like in 2 years? Let alone another 4 years??
This estimate is down from 4.2% seen in mid-May and from 2.2% seen on June 28th. If this estimate turns out to be correct it will be the 2nd consecutive quarter of GDP growth below 2.0% after Q1 2024 GDP of 1.4%.
Housing hasn’t slowed across the board … yet. But with mortgage payments as % of income near the highest since the early 1980’s, it will eventually slow down.
There is only one way out. CEASE Bidenomics and the crazy spending and debt and deficits!
Confounded Interest - Anthony B. Sanders 
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