Alarm! US home prices are decelerating as inflation rages and The Fed tightens.
Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.
A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.
The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated.
While 13% growth sounds good, it is not good for renters looking to buy a home.
According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.
On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.
The Federal Reserve’s DOTS PLOT shows where each Fed official’s projection for the central bank’s key short-term interest rate is headed. As of the September 21, 2022 Fed Open Market Committee (FOMC) meeting, the prediction of future Fed target rates is decidedly DOWNWARD SLOPING.
The Fed hawks, those that want to tighten monetary policy, are Bowman, Waller, Kashkari, Mester and George. The Fed doves (or those who are neutral) are Biden recent appointees Barr, Cook, Jefferson, Logan, Collins. Note that Brainard and Bostic are the only technical doves.
I call the hawks at The Fed “The Blackhawks” since their mission of fighting inflation may lead to a recession. And Bowman, Mester and George are Lady Blackhawks.
Sweet home DC! At least for the ruling elites. For the rest of us mortals, Bidenflation is crushing our finances.
To combat Bidenflation, The Fed has signaled that they will continue to raise interest rates. But at what cost?
(Bloomberg) — The world’s leading central banks are finally pushing their interest rates into restrictive territory, causing fears of overkill in financial markets and stoking chatter that policymakers may need to pivot at some point.
And with the withdrawal of monetary stimulus comes the slowdown of US M2 Money growth (green line). And with that slowdown, we see a declining stock market and an inverted US Treasury yield curve.
Of course, Biden could reverse his green energy agenda and allow for oil and natural gas exploration … again. Or begin building nuclear power plants again. But nooooo.
Another peril is rising mortgage rates.
Here is the S&P 500 against global liquidity.
Speaking of Freddie King, here is Joe Biden’s favorite song: hideaway.
As I frequently told my investment and fixed-income securities students at Chicago, Ohio State and George Mason University, any 10 basis point change in the US Treasury 10-year yield is significant.
But how about today’s 20 basis point decline in the US Treasury 10-year yield?
The UK’s 10-year yield is down even more at -24.1 basis points. Germany is down -18 bps and France is down -10.3 bps.
Speaking of credit default swaps, Credit Suisse is back to financial crisis levels while UBS and Deutsche Bank are not … yet.
With all the turbulence in markets thanks to the war in Ukraine and Biden’s green energy mandates and spending (not to mention Statists like Klaus Schwab screaming about a Great Reset), I was reminiscing about more simple times.
The National Association of Home Builders market index fell more than expected in September to 46, the lowest reading since 2012 (if I exclude the Covid economic shutdown).
Note that the NAHB market index is declining along with at the increase in the 30yr mortgage rate.
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