US Home Price Growth “Slows” To 9.24% YoY As Fed Tightens Noose (But Fed’s Balance Sheet Remains Elevated)

The US housing market continued to sag in October as the impact of higher mortgage rates and concerns over the economy rattled buyers and sellers.

Prices fell 0.5% from September, the fourth consecutive monthly decline for a seasonally adjusted measure of home prices in 20 large cities, according to the S&P CoreLogic Case-Shiller index.

The market began downshifting earlier this year as the Federal Reserve started hiking its benchmark interest rate, with the goal of easing high inflation that’s been driven in part by skyrocketing housing costs.

Rates for 30-year, fixed mortgages reached 7.08% in October — and again in November — though they have since retreated, Freddie Mac data show. With borrowing costs roughly double where they were at the start of the year, and inflation leaving less savings to put toward a down payment, homebuyers have pulled back. Sellers are also reluctant to list their properties, yet houses that are on the market are lingering and getting discounted as demand slumps.

The Case-Shiller National Home Price Index “cooled” to 9.24% YoY growth as The Federal Reserve tightens its monetary noose.

Of the top twenty metro areas, both Miami and Tampa Florida were up over 20% YoY. Hot ‘Lanta, Charlotte and Dallas were over 10% YoY. Mordor on the Potomac was up “only” 6% and all other metro areas were under 10%.

But if we look at October/September changes, all metro areas are down (MoM) with San Francisco the worst.

Finally, The Federal Reserve’s massive balance sheet is still out in force.

Look at this chart of the Case-Shiller National home price index again The Fed’s balance sheet. Uh-oh.

Let’s look at San Francisco (my hometown) since The Federal Reserve began interest rate tightening.

US Gasoline And Diesel Prices Falling As Fed Tightens Monetary Noose (But Gasoline Prices Still Up 30% Under Biden, Diesel Prices Up 78%)

As the global economy slows and global central banks continue to tighten, we are seeing gasoline and diesel prices falling.

But bear in mind that US gasoline prices remain 30% higher since Biden was sworn-in as President. Diesel prices are up a staggering 78% since that fatal day.

Speaking of tightening monetary policy, the US Treasury yield curves have flattened/inverted since The Fed started tightening with rate increases to fight inflation.

Let’s see how inflation does with Congress’ $1.7 trillion, unread Omnibus bill. Aka, Grand Theft Congress. Pelosi is holding an iPhone and Schumer is holding the scope rifle. McConnell is wearing the gas mask since the wasteful spending truly stinks.

Inflation Bomb? US Core PCE Deflator Calms Down To 4.7% YoY, Still Over 2x Fed Inflation Target (Taylor Rule At 10.10%, Still Unachievable)

There’s inflation in the air. The US Core PCE deflator slowed to 4.7% YoY in November. But it is still over 2x The Fed’s inflation target.

The lower core PCE growth of 4.7% YoY results in a Taylor Rule estimate for The Fed Funds Target rate of 10.10%. Which The Fed will never reach, particularly since the House Of Overlords (the US Senate) just passed a grossly irresponisble omnibus bill of $1.7 trillion laden with insidious pork barrel spending and, on a depressing note, billions for border security in Egypt, Oman and other countries, just not our wide-open border with Mexico.

Here are the Lords of Darkness (Schumer and Pelosi) who concocted this witch’s brew of crony payoffs that will be ulitmately signed by El Stupido (Biden).

US Leading Economic Indicator Falls To -1% QoQ In November, -4.5% YoY As Fed Sugar Dissolves (Do I Detect A Trend?)

Do I detect a trend in the US Leading Economic Indicator data?

The Conference Board’s US Leading Economic Indicator was released this morning and it wasn’t pleasant. The US Leading Index was down -1% MoM in November.

On a year-over-year basis, it is down -4.5% YoY as The Fed withdraws its massive monetary stimulus.

The good news … for military contractors … is that Biden and Congress have given Ukraine’s Zelenskyy ANOTHER $47 BILLION.

US Existing Home Sales Plunge -35.4% In November, 16 Straight Months Of Negative YoY Growth (Median Price YoY Falls To 3.21% As Fed Stimulus Wears Out)

One of the big problems with Federal goverment and Federal Reserve monetary stimulus is … it wears out. Just look at M2 Money growth.

US existing homes sales fell -7.70% in November to 4.09 million units SAAR. And since the same month last year, existing home sales are down -35.4% YoY.

Existing home sales were the lowest in November since 2010.

The good news? The median price of existing homes fell to 3.21% YoY. The bad news? The ark is really bad pointing to a bad December. Inventory for sale (orange line) remains below pre-Covid shutdown levels.

Of course, will the Federal government and Federal Reserve come riding to the rescue of the housing market … again? It looks like The Fed is thinking about it.

My Kuroda! BOJ’s Kuroda Shocks Markets By Loosening Rate Band (Final End To Uber-loose Japanese Monetary Policy)

My Kuroda!

(Bloomberg) — Bank of Japan Governor Haruhiko Kuroda just gave investors a glimpse of what to expect when the world’s boldest experiment with ultra-loose monetary policy comes to an end.

In the face of sustained market pressure, Kuroda shocked markets Tuesday by saying he’ll now allow Japan’s 10-year bond yields to rise to around 0.5%, double the previous upper limit of 0.25%.

Whether this is a strategic tweak to buy time for his yield-curve control settings until his decade-long term ends in Aprilor the start of the end for his unprecedented monetary easing remains to be seen.

Here are the BOJ’s rate. bands being widened.

The yen?

And with the ECB, Fed and now Bank of Japan all tightening, we are seeing sovereign yields rising across the board.

The Japanese sovereign yield curve is upward sloping unlike the humped US Treasury yield curve.

Will the US Treasury Secretary Janet “Statist” Yellen comment?

US Real GDP Growth Forecast To Be Dismal 0.50% In 2023, Personal Savings Rate -67.9% YoY In October, US Mortgage Rates Headed Down (Economic Lights On But Nobody’s Home)

Albert Collins said it best about the US economy under Joe Biden: “Lights Are On But Nobody’s Home”.

The Federal Reserve forecast for the US economy is a dismal 0.50% YoY. Do I detect a trend?

The FOMC forecast for 2023 and 2024. Core PCE YoY (inflation) is forecast to drop to 3.50%, still considerably higher than The Fed’s target rate of inflation of 2%. And unemployment is forecast to be 4.60%.

To cope with Bidenflation, US personal savings rate as of October is -67.9% YoY. The “good” news is that rents YoY are crashing. But food prices under Inflation Joe remain very high. But most everything is slowing down, not due to Biden’s policies, but a global and US economic slowdown.

With a big slowdown coming our way, you can understand why The Fed’s December Dot Plot is showing declining Fed Funds Target rate starts declining in 2024.

Even US mortgage rates are headed down.

Speaking of going down, cryptos are down across the board with Cardano leading the decline at -6.91%.

All aboard the SS Biden!

The Amazing, Disappearing Jumbo/Conforming Mortgage Spread Since Covid And Fed Intervention (Jumbo Spread At 1.67 Basis Points After Covid Fed Reaction)

Years ago, Brent Ambrose, Michael Lacour-Little and I wrote a paper on the US 30-year jumbo mortgage spread over conforming 30-year mortgage rates entitled “The effect of conforming loan status on mortgage yield spreads: a loan level analysis.” But that paper was written before Covid and the dramatic distortion caused in mortgage markets by The Federal Reserve’s massive increase in money.

Here is the spread between Bankrate’s 30-year mortgage rate and their 30-year JUMBO mortgage. Notice that between 2007 and early 2020, the median “jumbo spread” was 49 basis points. But after Covid and The Fed’s counterattack (by printing M2 Money), the median Jumbo spread from 4/1/2020 to today is only 1 basis point.

In the following chart, you can see the jumbo mortgage rate (yellow) against the conforming mortgage rate (white) and there is almost always a spread between the two UNTIL 2020 where we saw M2 Money growth (green line) spike and The Fed increased their purchases of Agency MBS (purple line). Since Covid and The Fed’s massive reaction, the jumbo rate and conforming rate are virtually the same. In fact, the latest jumbo spread is 1 basis point over the conforming rate.

Why is this happening? One explanation is that demand from the investors who ultimately buy jumbo mortgages. The strong demand by investors appears to have driven down the yields on jumbos relative to conventional loans, especially as the use and accessibility to jumbos has grown.

A second explanation is that Loan Level Price Adjustments that were added to conforming loans post-financial crisis never went away (until just recently on selected loans). This makes jumbos and conforming loans very close in yield.

So, when will the mortgage market return to normal and jumbo mortgages go back to the normal 50 basis point spread? We may see normalization if The Fed speeds up its withdrawal from markets. Also, getting rid of Loan Level Price Adjustments would help normalized the mortgage market.

But things are getting stressed in jumboland (California) where home prices are crashing in 5 of the top 8 metro areas.

Harry Houdini couldn’t have created a more tantalizing mystery … and one I wish would go away.

Not Always Sunny! Philadelphia Fed Admits US Jobs “Overstated” By At Least 1.1 Million From March To June 2022 (Will Biden Retract “Greatest Economy In History Statement?)

Its NOT always sunny in Philadelphia. Here is a video of the Philly Fed economists explaining massively overstated job numbers to Fed Chair Jerome Powell.

The Federal Reserve Bank of Philadelphia estimates that the employment data was vastly overstated in 2022. 10k jobs added instead of 1.1 million reported from March to June of 2022.

Here is a chart (courtesy of Zero Hedge) showing reported payrolls and REVISED payrolls. Somehow, I don’t think Jean Pierre (Biden’s spokesperson, not the French chef) will be touting “Unlike Trump, our administration barely added any jobs in March, April, May and June 2022.

How will this revelation influence the Fed’s open market committee (FOMC) going forward knowing that the Biden Administrations job creation claims are wildly overstated?

Perhaps it doesn’t matter since Bernanke, Yellen and Powell don’t follow any rules (like the Taylor Rule), but generally with job creation almost nonexistant in March through June of 2022, The Fed should be cutting rates like mad. But wait! Can they with significant inflation?

The good news is that inflation is coming off its peak, but will take a while to get to The Fed’s 2% target. Hence The Fed may raise their target rate since they cannot achieve it will energy price up substantially since Biden became President.

California Screamin’! 2022 Home Prices Crashed Mostly In California As Fed Withdraws Monetary Stimulus (Austin TX And Seattle WA Also Crashed Hard)

California Screamin’!

6 of the top 8 metro areas with the largest home price crash in 2022 were in California, according to Redfin.

Sadly, I lived in three of these metro areas (Austin TX, San Jose CA and Phoenix AZ), although I wouldn’t confuse correlation with causation.

The trend for home price growth (blue line) is definitely on the downturn as The Fed removes its ample stimulus (green line).

Here is California governor Gavin (Nancy Pelosi’s nephew) Newsome screaming about crashing California home prices.