Fed Garbage? MBA Applications Rise As Households Panic About The Fed Raising Rates (Refi Applications Still 83% Lower YoY, Purchase Applications 30% Lower YoY)

As people are painfully aware, The Federal Reserve is on a mission … to hike interest rates to tame inflation back to 2%.

So, we saw a small surge in mortgage applications last week as the expectations of Fed rate hikes sinks in and households try to lock in mortgage rates.

Mortgage applications increased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 16, 2022. Last week’s results include an adjustment for the Labor Day holiday.

The Refinance Index increased 10 percent from the previous week and was 83 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 11 percent compared with the previous week and was 30 percent lower than the same week one year ago.

At least the percentage of ARMs remained the same, 9.1%.

The Federal Reserve has a line on you! Or noose.

By the way, the theme song for the US version of the TV show “The Office” was written by Jay Ferguson, the primary singer for the ’60s band Spirit (that performed “I’ve Got A Line On You!”).

Here is Jay Ferguson singing the Spirit song “Fresh Garbage.” A fitting song for The Federal Reserve. Fed Garbage??

Today will be another Fed rate hike, expected to be a whopping 75 basis points. The S&P 500 tends to rally (green line) after the FOMC announcement. What will happen today?

US Housing Starts Decline -0.1% YoY In August (But Apartment Starts UP 28.57% MoM!) As Fed Removes Monetary Stimulus

The US is short on housing stock and remains short in August. While housing starts in August seems fantastic (12.8% MoM), the YoY growth in housing supply is down -0.1% as mortgage rates soar and The Fed removes monetary stimulus.

On a month-over-month (MoM) basis, 1-unit (single family detached) were up only 3.43% in August. 5+ unit (multifamly) starts were up 28.57% in August.

Since the Biden Administration has allowed over 2 million illegal to flow across the southern border, apartment space is in high demand.

According to RentCafe, the hottest rental markets in the USA are Miami, Orlando, SW Florida and … Harrisburg PA (the temporary home of uber-leftist PA Lt Governor John Fetterman). Perhaps Fetterman is letting illegal immigrants stay in his Harrisburg mansion, unlike President Obama on Martha’s Vineyard.

Why isn’t Biden letting illegal immigrants stay in his massive summer mansion in Reboboth Beach, DL?

C’mon man!

The Core! US 30y Mortgage Rate Rises (US Futures Fall as Traders Eye Supersized Fed Hike)

Even Obama’s economic advisor, Larry Summers, is wondering why Biden won’t allow pipelines to be build to reduce energy prices and reduce inflation.

Having said that, US mortgage rates are now the highest since 2008 and continue to rise with the expectation of more Fed rate hikes this year. Even core inflation is on the rise motivating The Fed to do more tightening since they aren’t receiving any help from Biden on energy or Congress in terms of massive spending of our money.

Mortgage payments for a median existing home in the US is back to the mid-1980s.

Data from Fed Funds futures implies that The Fed will raise their target rate to 4.50% by March 2023, then slowly lower rates.

Futures are down with the prospect of a 75 basis point bump in rates tomorrow. The Dow Jone Mini is down -167 points.

Powell’s Famous Chili! National Association of Home Builders Market Index Falls More Than Expected To 46 As Fed Tightens Monetary Noose (Lowest Since 2012, Excluding Covid Crash)

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.

Fed Tilts Toward Third 75 Basis-Point Hike on Stubborn Inflation (Fed’s Target Rate Expected To Hit 4.395% By March ’23 Then Fall, Mortgage Rates Rising)

Inflation is stubborn because “goin’ green!” by 1) restricting US fossil fuel production and exploration and 2) Biden/Congress endless spending splurge since Covid. So, The Federal Reserve has a tough problem: cooling inflation while US energy prices are up 54% under Biden. And those higher energy prices have percolated through the entire economy in terms of food prices and heating prices.

Where do we sit? The US Treasury 10yr-2yr yield curve remains inverted (a sign of impending recession). Mortgage rates are the highest in 14 years as The Fed tightens.

If we look at Fed Funds Futures data, we can see that traders expect The Fed’s target rate to rise to 4.395% by March 2023’s FOMC meeting. Then traders expect The Fed to take their enormous foot off the tightening pedal.

Yes, inflation is crushing the middle class and low-wage workers. Average hourly earnings YoY after we subtract inflation are negative.

Taylor Rule? Currently, the Taylor Rule based on Core inflation of 4.56% YoY suggests a Fed target rate of 9.14%. Since traders anticipate the target rate to peak at 4.395%, The Fed will almost be halfway towards cooling inflation.

The problem is … Fed Chair Powell and Treasury Secretary Yellen don’t like rules limiting their “power.” Powell and Yellen think the Taylor Rule is a New Jersey ham product.

Consumer Sentiment For Housing Remains In The Doldrums As Fed Tightens To Combat Bidenflation (Atlanta Fed GDPNow Tanks To Only 0.5%)

As inflation rages thanks to Biden’s energy policies and insane Federal spending, The Federal Reserve is trying to cool inflation (or Bidenflation).

As The Fed tightens, the 30-year mortgage rate has risen to 14 year highs. And home prices are still hot, hot, hot (though slowing). But consumer sentiment for housing remains in the doldrums (UMich Buying Conditions For Houses).

The good news? Atlanta Fed’s GDPNow real-time GDP tracker shows the US economy at positive growth of 0.521%. Ok, that is kind of lousy given the massive Fed stimulus and Federal spending since Covid.

M2 money velocity demonstrates the lousy return of Fed/Federal government “investment”.Near the lowest level in US history.

So, The Fed will have to destroy the US economy to save us from Bidenflation (bad energy policies and out-of-control Federal spending).

And more good news! The NASDAQ composite index is down only -1% today!

Pain! US Mortgage Rate Rises To 6.28%, Highest Since November 2008 As Raging Inflation Results In Fed Tightening

Raging US inflation is resulting in Federal Reserve monetary tightening, causing the 30-year US mortgage rate to hit it highest level since November 2008 (the beginning of Fed Quantitative Easing). Bankrate’s 30-year mortgage rate just hit 6.28%, the highest rate in 14 years.

The Biden Administration will be remembered for crippling inflation, the highest in 40 years AND the highest mortgage rate in 14 years.

And with Fed chatter about hiking rates, Dr T (me) predicts pain for the mortgage market.

US Mortgage Applications Fall To Lowest Level Since 1997 As Fed Tightens The Monetary Noose (Purchase Apps DOWN -29% YoY, Refi Apps DOWN -83% YoY)

US mortgage applications dropped to the lowest level since 1997. I wonder if President Biden will invite boring crooner James Taylor back to the White House to sing about the collapsing mortgage market? Perhaps he can sing “Shower The People” and change the lyrics to “Shower ON The People.”

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 9, 2022. This week’s results include an adjustment for the observance of Labor Day.

The Refinance Index decreased 4 percent from the previous week and was 83 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 12 percent compared with the previous week and was 29 percent lower than the same week one year ago.

The Bankrate 30-year mortgage rate is now at the highest level since 2008 at the advent of Fed’s QE.

Yes, The Fed has been slow as a sloth in shrinking its balance sheet.

NASAQ Index Plunges 4% On Fed’s Inability To Cool Inflation (Gimme Some Quantitative Tightening!)

That’s the way The Fed likes it!

On today’s inflation report for August, it is clear that The Fed has failed to cool off US inflation, meaning that MOAR QT is on the way.

The NASDAQ composite index plunged -3.85% after The Fed’s failure was released.

The Dow was down “just” -2.70% today. But things are red all over in Europe where they too are failing to tame inflation.

The Fed is probably singing “Give me some quantitative tightening!”

The likelihood of further rate increases just rose to over 4% for the December FOMC meeting.

Jay and The Statists At The Fed!

Pain is coming!

Sundown? Freddie Mac 30Y Mortgage Rate Highest Since Financial Crisis And Advent Of Fed Quantitative Easing (CORE US Inflation For August Expected To Rise To 6.1% YoY)

Is it sundown for housing and mortgage markets with Fed quantitative tightening (QT)?

Freddie Mac’s 30-year mortgage commitment rate just rose to its highest level since … The Fed initiated Quantitative Easing (aka, fanatical money printing) during the financial crisis.

The good news? The US inflation report is likely to show a slowing of the inflation rate to around 8% YoY and -0.1% MoM. Why? Gasoline prices are cooling thanks to the global economic slowdown.

While gasoline and food prices are falling, CORE US inflation, the inflation rate excluding food and energy, is expected to rise to around 6.1% YoY and +0.30% for August.

But watch out as winter approaches!