The US housing market is truly bizarro world! San Francisco and Seattle are down near 10% year-over-year (YoY) while Chicago and Cleveland lead in price gains.
Notice that The Fed’s balance sheet is slowly unwinding (green line) and real weeky “usual” earnings are finally positive after two long years of decline (red line). No growth or loss in home prices at the national level.
How about at the metro level? Chicago, Cleveland, and New York again led the way reporting the highest year-over-year gains among the 20 cities in June. Chicago remained in the top spot with a 4.2% year-over-year price increase, with Cleveland in at number two with a 4.1% increase, and New York held down the third spot with a 3.4% increase. There again was an even split of 10 cities reporting lower prices and those reporting higher prices in the year ending June 2023 versus the year ending May 2023; 13 cities showed price acceleration relative to the previous month.
But The West is where home prices fell and fell hard. The biggest losers were San Francisco (-9.7% YoY) and Seattle (-8.8% YoY). Bubble cities of Phoenix (-7..5% YoY) and Las Vegas (-8.2% YoY) round out the four biggest losers in the nation.
The really interesting chart show the surge in home prices following The Great Recession of 2008 and ensuing financial crisis and post Covid. Of course, the commonality in the surge is the massive expansion of money supply thanks to a hyperactive Federal Reserve.
The puppetmaster of bizarro world? The Federal Reserve!
The 30-year conforming mortgage rate is currently 7.23%, up 161% under Biden and Bidenomics (code for massive Federal spending on green initiatives that go to large Democrat donors and Ukrainian oligarchs). Meanwhile, M2 Money supply is up 9.4% under Biden.
At the same time. home prices are UP 26% under Biden while Real Median Weekly Earnings are DOWN -5%.
On a sad note, it looks like The Federal government is starting to rattle its Covid saber just in time for the 2024 Presidential election. Odds are the US will ramp up online voting, early voting, etc. Think of John Fetterman (aka, Walter White’s twin brother) and the Pennsylvania voting experience.
If we look at the Case-Shiller National home price index against real weekly wage growth, you can see the problem clearly. Since Covid and The Fed’s overreaction by providing staggering monetary stimulus, home prices shot up while real median weekly earnings collapsed.
Buying a house requires a much bigger slice of people’s income now — making this the most unaffordable housing market since 1984, by one measure.
And that crushing lack of affordability isn’t expected to improve much in the near future.
At today’s rates, buying a median-priced home would require a monthly principal and interest payment of $2,440 for those making a 20% down payment, according to Black Knight, a mortgage technology and data provider.
That’s $1,172 a month more in mortgage payments from just two years ago, before the Federal Reserve raised its benchmark lending rate 11 times in 18 months, Black Knight found. It’s a 92% increase — and is taking a growing chunk out of household budgets already facing inflation on many fronts.
Currently, 38.6% of the median household income is required to make the monthly payment on the average home purchase, making housing the least affordable it’s been since 1984, according to Black Knight.
“To put today’s affordability levels in perspective, it would take some combination of up to a 28% decline in home prices, a more than 4% reduction in 30-year mortgage rates, or up to a 60% growth in median household incomes to bring home affordability back to its 25-year average,” said Andy Walden, vice president of enterprise research and strategy at Black Knight.
Must as well face it, we’re addicted to gov. Or at least Fed monetary stimulus.
Just look at Personal Interest payments under Bidenomics.
Joe Biden is an incredibly weak President. I am not talking about his age or his deteriorating mental faculties. I am talking about ordering his attorney general to indict his chief political opponent, Donald Trump. How does the world interpret this weakness? BADLY.
The US has gone off the rails in terms of printing money, particularly since COVID struck and money printing went wild.
Under Biden’s Reign of Error and the US reckless money printing, more countries are abandoning King Dollar (based of fiat currency) and joining BRICS. Brazil, Russia, India, China, South Africa and a host of countries joining like Argentina, Saudi Arabia, Iran, Egypt, UAE, etc.
Now, the rest of the world is still stuck on the US Dollar as reserve currency … for now. But as Biden gets weaker and weaker, watch more countries join BRICs.
According to Reuters, there are over 40 countries that have expressed interest in joining BRICS. A smaller group of 16 countries have actually applied for membership, though, and this list includes Algeria, Cuba, Indonesia, Palestine, and Vietnam. Pretty soon, under Biden’s crazy leadership, we may be the last man standing in using the US Dollar as reserve currency.
Then we have the other shoe dropping with Bidenomics.
As soon as Biden took office, he set out to destroy industries that produce reasonably priced energy. He focused tremendous effort on deficit spending and borrowing to hand out “government goodies” to buy votes; recipients of this government largesse, in large part, included debt-saddled students, the green mafia, and leftist activists.
When Biden took office, inflation was under 2%, despite COVID and supply chain disruptions; shortly after, it skyrocketed to over 9%. Now inflation increases are “down” but prices remain exceptionally high compared to pre-Biden.
For example, crude oil prices, which affect almost everything and are used in over 6,000 products, are roughly double what they were when Biden took over.
President Trump focused on reduced regulations and energy independence, and implemented lower tax rates, all moves that greatly helped the American people. In contrast, Biden focuses on ensuring bureaucrats rapidly increase regulations which raises costs for everyday Americans; he’s waging economic war against us. Very few of Biden’s regulations go through Congress. From the White House archives:
Between FY 2017 and FY 2019, the Trump Administration has cut nearly eight regulations for every new, significant regulation….
The Council of Economic Advisers (CEA) estimates that this pro-growth approach to Federal regulation will raise real incomes by upwards of $3,100 per household per year.
Here are some recent reports of how well Biden policies are working:
Leading economic indicators have fallen for sixteen straight months. Maybe that is why people think the economy is moving in the wrong direction?
The current cost-of-living crisis is a manufactured one. As inflation rose, the Federal Reserve was forced to raise interest rates, which saw fewer people move. The cycle is very understandable, as simply explained in this one headline, “Housing Crunch: Home Sales Fall To Six Month Low…But Prices Rise Anyway”.
Parcel volumes are dropping by so much, freight pilots are “worried” about job security.
People are running up credit card debt and defaulting on car loans because of high inflation, and because their real wages haven’t been able to sustain them. Now, even more are falling behind on their payments. From CNN:
More Americans are failing to make payments on their credit cards and auto loans, another sign of rising financial pressure on consumers.
New credit card and auto loan delinquencies have now surpassed pre-Covid levels, according to a Wednesday report issued by Moody’s Investors Service.
After years of promoting and subsidizing electric cars, they represent around 6% of total sales, and demand is clearly slowing. It wasn’t that long ago that well-to-do people were buying these electric toys so quickly that they were placed on waiting lists; now, inventories are building because they are too impractical and expensive:
Auto News understands that there is currently a 103-day supply of unsold EVs in the United States. While it did not specify how many units are sitting on dealership lots, it says there is a higher supply of unsold EVs than any other automotive segment, except those in the ultra-luxury and high-end luxury segments with supplies also reaching over 100 days.
So what is Biden’s solution? Force people to buy them.
Here are some simple economics questions for the media and other Democrats:
Does flooding the U.S with illegals help or hurt housing availability and affordability?
Will the intentional destruction of oil and coal companies help or hurt the middle class and the poor?
Yet, the media and other Democrats brag that Biden’s economic policies are great, and when the public gives Biden poor marks, they say that we just don’t understand, and we’re not willing to get behind a candidate if they fail to make us feel “warm and fuzzy.”
Are journalists really that unaware?
Of course, they always sought to destroy Trump as his policies, even as poverty sank to record lows amongst minorities, because they don’t really care about anything but big government. According to Census data:
In 2019, the poverty rate for the United States was 10.5%, the lowest since estimates were first released for 1959.
Poverty rates declined between 2018 and 2019 for all major race and Hispanic origin groups.
Two of these groups, Blacks and Hispanics, reached historic lows in their poverty rates in 2019.
Results and facts haven’t mattered to the complicit leftist media for a long time.
And perhaps the worst mistake Biden made (amongst his laundry list of horrible mistakes, [Afghanistan retreat, not showing up to E Palestine Ohio, Bidenomics that is a payoff to green donors and BIG corporate interests, an embarrasing visit to Maui two weeks after the fire, indicting his leading political opponent, ….) is the appointment of the WORST Federal Reserve Chair (Janet Yellen) as Treasury Secretary.
Joe Biden will always be remembered for lying about never raising taxes on households making under $400,000. Inflation is a permanent tax, mostly on those making under $400,000 per year. And household essentials are up substantially under Biden: gasoline prices are up 72%, rent CPI of Primary Residence is up 16%, and food at home CPI is up 20%! That is a HUGE tax on the middle class.
When CPI falls this does not mean that prices on goods and services are going down, it only indicates that prices are rising slower than they were the month or the year before.
Another misconception about CPI is that it measures the inflation rate accurately for regular consumers on common purchases. In reality, the CPI represents mean average price rate increase for a vast basket of goods; over 94,000 items and services with over 200 separate categories. Most of these items and services you will never use or rarely purchase in the span of a year. In other words, inflation declines in uncommon goods can dilute the numbers, making it seem like inflation is dropping while prices on daily necessities continue to spike.
The CPI is weighted according to consumer spending patterns, which is where the calculations can be “adjusted” to a certain extent in an arbitrary manner. Then there is outright government manipulation through various means. As we witnessed recently with the Biden Administration’s claims that “Bidenomics” has defeated the inflation threat, what these reports don’t mention is that Biden has been dumping US strategic oil reserves on the market for the past year. And since energy prices effect the inflation of so many other categories, Biden has artificially manipulated the CPI down using one key resource.
Now that his ability to dump oil reserves has ended, CPI will rise once again along with energy prices.
The point is, it’s impossible to get a sense of the real damage from inflation without looking at the cumulative inflation in necessities (the goods and services that people are required to purchase on a regular basis to live day to day). If we throw out the CPI distraction and look at common necessities since 2020, the economic picture is far more bleak.
Overall food prices have soared by 25%-30% in only three years (again, this means that you are now paying 30% more this year for food than you were paying at the beginning of 2020). Chicken is up from $3 per pound to $4 per pound. Beef is up from $3.50 to $6 per pound. Corn is up from $3.50 per pound to $4.70 per pound. Wheat is up from $5 per pound to $7 per pound. In 2019 the average American household was spending $8100 on food annually; with a 30% increase, in 2023 Americans will be spending at least $10,500 per household.
By the end of 2019, the average rental price of a single family home was around $1450 per month. This year the price is around $2000 per month. At the beginning of 2020, the median cost of a home was $320,000; by 2023 the price skyrocketed to an average of $416,000.
For gasoline, the price in early 2020 was around $2.50 per gallon. The price has fluctuated dramatically due to Biden’s manipulation of the market using strategic reserves, but still remains high today at $3.80 per gallon.
The cost of electricity has risen swiftly, holding steady around .13 cents per kilowatt hour for a decade, then spiking to at least .17 cents per kilowatt hour by 2023.
Remember, most of these costs are static and are difficult to reduce through household spending cuts. These are not items that are easily removed from a monthly budget and the expenditures add up to considerable pressure on consumer accounts. This is probably why around 74% of the public in polls say that the economy is getting worse, not better. It’s because government statistics are not highlighting the true inflationary crisis.
When we look at the cumulative climb of prices in necessities since before the inflation crisis officially began, the truth is that Americans now have to increase their wages by at least 25%-30% on average to maintain the same standard of living they had three years ago. This is a disaster not seen since the stagflationary event of the 1970s and early 1980s. If you have a strange feeling like your bank account is being rapidly drained in recent months, that’s because it is.
And the 30-year mortgage rate is up 163% under Middle Class Joe.
Let’s see. We have inflation that is eroding wage growth so that REAL wage growth is negative. Meanwhile, the Biden Administration and Congress are spending like they can print infinite amounts of cash with no consequences. The result? The Federal government is paying nearly $1 trillion in interest on an annualized basis.
On the corporate side, we are seeing a surge in bankruptcies.
So far in 2023, over 400 corporations have gone under. Corporate bankruptcies are rising at the fastest pace since 2010 (barring the pandemic), and are double the level seen this time last year.
Below, we show trends in corporate casualties with data as of July 31, 2023:
Represents public or private companies with public debt where either assets or liabilities are greater than or equal to $2 million, or private companies where assets or liabilities are greater than or equal to $10 million at time of bankruptcy.
Firms in the consumer discretionary and industrial sectors have seen the most bankruptcies, based on available data. Historically, both sectors carry significant debt on their balance sheets compared to other sectors, putting them at higher risk in a rising rate environment.
Overall, U.S. corporate interest costs have increased 22% annually compared to the first quarter of 2021. These additional costs, combined with higher wages, energy, and materials, among others, mean that companies may be under greater pressure to cut costs, restructure their debt, or in the worst case, fold.
Billion-Dollar Bankruptcies
This year, 16 companies with over $1 billion in liabilities have filed for bankruptcy. Among the most notable are retail chain Bed Bath & Beyond and the parent company of Silicon Valley Bank.
Mattress giant Serta Simmons filed for bankruptcy early this year. It once made up nearly 20% of bedding sales in America. With a vast share of debt coming due this year, the company was unable to make payments due to higher borrowing costs.
What Comes Next?
In many ways, U.S. corporations have been resilient despite the sharp rise in borrowing costs and economic uncertainty.
This can be explained in part by stronger than anticipated profits seen in 2022. While some companies have cut costs, others have hiked prices in an inflationary environment, creating buffers for rising interest payments. Still, S&P 500 earnings have begun to slow this year, falling over 5% in the second quarter compared to last year.
Secondly, the structure of corporate debt is much different than before the global financial crash. Many companies locked in fixed-rate debt over longer periods after the crisis. Today, roughly 72% of rated U.S. corporate debt has fixed rates.
At the same time, banks are getting more creative with their lending structures when companies get into trouble. There has been a record “extend and amend” activity for certain types of corporate bonds. This debt restructuring is enabling companies to keep operating.
The bad news is that corporate debt swelled during the pandemic, and eventually this debt will come due likely at much higher costs and with more severe consequences.
The face of Bidenomics: the top 1% are gleefull (like Billions Biden), the bottom 99% are mournful.
Preliminary benchmark revision smaller than some had projected
Biggest payrolls adjustment in transportation and warehousing
Are you surprised that the Biden Administration has been lying about job creation?? Not really since Biden compulsively lies about everything. Including his corruption.
US job growth was probably less robust in the year through March than previously reported, according to government data released Wednesday.
The number of workers on payrolls will likely be revised down by 306,000 for March of this year, according to the Bureau of Labor Statistics’ preliminary benchmark revision.
Even without the revision, job growth has slowed to 2.2% YoY in July as M2 Money growth slowed to -3.7% YoY.
Let see what our Overlords say at the Jackson Hole Fed symposium.
Mortgage demand (applications) decreased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 18, 2023.
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 35 percent lower than the same week one year ago. 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 30 percent lower than the same week one year ago.
The spread betweenn Bankrate’s 30 year rate at 7.62% and the effective rate on mortgage debt outstanding at 3.595% has exploded as mortgage rates jump.
Today’s mortgage rates are up to 7.49%. OMG!
Bidenomics (code for making large donors wealthier and the middle class getting the boot) and catch-up for Yellenomics (rates too low for too long), and Powell are helping to burn down the housing market.
What is the difference between a porcupine and the KC Fed Jackson Hole conference? At the annual Jackson Hole Federal Reserve retreat, the pricks are on the inside! (Source: Clive Owen from “Shoot ‘Em Up” about drivers of BMW cars).
Yes, the elites of The Federal Reserve System will gather at Grand Teton National Park in Wyoming to discuss “Structural Shifts in the Global Economy,” and will be held on Aug. 24-26.
Here is where we sit on Sunday. The 30-year conforming mortgage rate (blue-green line) is over 7% and up 154% under Biden. The Fed’s target rate is now 5.50% (dark blue line) and The Fed still has over $8 TRILLION on its balance sheet. So they haven’t really done all they can do to fight inflation.
Do you remember what happened in 2008? Many people believe that another historic financial disaster is coming and that it will absolutely devastate the U.S. economy. Earlier this week, I wrote about an investor named Michael Burry that has actually bet 1.6 billion dollars that the stock market is going to crash. He made all the right moves in 2008, and he fully intends to be proven right once again in 2023. Of course current conditions definitely resemble 2008 in so many ways. The residential housing market is so dead right now, and commercial real estate prices are plummeting at a very frightening pace. Unfortunately, officials at the Federal Reserve are making it quite clear that they are not done strangling the economy.
This week, mortgage rates jumped above the 7 percent mark to the highest level that we have seen in more than 20 years…
Mortgage rates surpassed 7% this week, hitting the highest level in more than two decades.
The average rate on the popular 30-year fixed mortgage increased to 7.09% this week, up from 6.96% the week prior, according to Freddie Mac’s release on Thursday. That’s the highest point since the first week of April 2002 and marks just the third time rates have exceeded 7% since then. The last times were in October and November of last year, when the rate reached 7.08%.
Needless to say, high mortgage rates have been crippling the housing market in recent months.
At the midpoint of this year, existing home sales were down a whopping 18.9 percent from the same time in 2022…
Total existing-home sales1 – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 3.3% from May to a seasonally adjusted annual rate of 4.16 million in June. Year-over-year, sales fell 18.9% (down from 5.13 million in June 2022).
There are certainly lots of people out there that would like to buy homes, but thanks to how high mortgage rates have become they simply cannot afford to do so.
Housing has become extremely unaffordable in this country. According to Redfin, the percentage of teachers that can afford to buy a home close to the school where they work has fallen to just 12 percent…
The number of teachers who can afford a reasonably priced home in their school district nationwide has collapsed to just 12%, down from 17% last summer and 30% in 2019, amid the worst housing affordability crisis in a generation, according to data from Redfin.
Redfin’s analysis of median teacher salaries for 2022 across 50 major cities for over 70,000 PreK-12 public and private schools revealed no teacher in San Jose and San Diego could afford homes within “commuting distances” to their respective school, which means home and work are 20 minutes during typical rush hour conditions.
So much damage has already been done.
But apparently officials at the Federal Reserve believe that even more carnage is necessary, because they are indicating that more rate hikes are on the table…
Most Federal Reserve officials signaled during their July policy-setting meeting that high inflation still poses an ongoing threat that could necessitate additional interest rate hikes this year.
Minutes from the U.S. central bank’s July 25-26 meeting released Wednesday showed that central bank officials observed that inflation remains well above the Fed’s 2% target — and that policymakers need to see “further signs that aggregate demand and aggregate supply were moving into better balance to be confident that inflation pressures were abating.”
No.
Don’t do it.
Even if rates stay at current levels, we are headed for extreme pain.
Raising rates even higher would just be suicidal.
But it looks like they are going to do it anyway, and that could push mortgage rates up to the 8 percent level…
Economists have predicted mortgage rates could go above 8 percent if the economy continues to show signs of strength and the US Federal Reserve decides to raise interest rates again.
Mortgage Rates have not hit such levels since 2000, according to data compiled by Freddie Mac.
Do officials at the Fed actually believe that our system can handle such high rates?
Unless the Fed changes course, the housing market is going to absolutely implode.
And of course the commercial real estate market is already imploding.
The chaos that is already transpiring is putting an enormous amount of strain on our financial institutions, and Fitch is warning that we could soon see sweeping rating downgrades in the banking industry…
A Fitch Ratings analyst warned that the U.S. banking industry has inched closer to another source of turbulence — the risk of sweeping rating downgrades on dozens of U.S. banks that could even include the likes of JPMorgan Chase . The ratings agency cut its assessment of the industry’s health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks.
In many ways, I feel like I am watching a repeat of 2008.
Officials at the Fed can clearly see everything that is happening, but they just keep insisting on making things even worse.
So I hope that you have been preparing for turbulent times, because things are going to get crazy.
Sadly, the truth is that most Americans are not prepared for tougher times. In fact, one recent survey discovered that 72 percent of Americans are not financially secure…
For many Americans, payday can’t come soon enough. As of June, 61% of adults are living paycheck to paycheck, according to a LendingClub report. In other words, they rely on those regular paychecks to meet essential living expenses, with little to no money left over.
Almost three-quarters, 72%, of Americans say they aren’t financially secure given their current financial standing, and more than a quarter said they will likely never be financially secure, according to a survey by Bankrate.
Many of those people will lose their jobs during this new economic crisis, and because they don’t have any sort of a financial cushion to fall back on many of them will also end up losing their homes.
Delinquency rates are already starting to move higher, and that should deeply alarm all of us.
US personal savings are being exhausted as The Fed raises rates to fight inflation. I call this phenomenon “low riding” where consumers are being punished by The Federal Reserve and Biden Administration.
On a seasonally-adjusted basis, The Fed says that total deposits dropped $11BN last week (the first decline in 4 weeks). We also note that the prior week’s inflow was revised higher…
Source: Bloomberg
After last week’s enormous $121BN NSA deposits inflow, last week saw an $11BN outflow (on a non-seasonally-adjusted basis)…
Source: Bloomberg
The gap between SA deposits and NSA deposits remains more manageable (until the next time The Fed decides to fiddle)…
The divergence between money-market fund assets and bank deposits remains extreme…
Source: Bloomberg
On a seasonally-adjusted basis, Small Banks saw $5.6BN deposit inflows last week while Large Banks suffered $28.7BN outflows (with foreign bank inflows of $12BN making up the difference)…
Source: Bloomberg
And so, for a nice change, everything is tidy with domestic US banks seeing deposit outflows on an SA and NSA basis…
Source: Bloomberg
On the other side of the ledger, small banks continued to pump out loans (+$3.56BN, sixth straight week of increases), while large banks saw a $7.4BN contraction in loan volumes…
Source: Bloomberg
So, if The Fed’s data is to be believed, Small banks are ‘winning’ – deposit inflows and making loans; while large banks are leaking – deposit outflows and shrinking loans. All while Treasury prices tumble, stressing small bank balance sheets.
Just remember, the sitting US President Joe Biden goes under several psuedonyms like Robert Peters, Robin Ware, and JRB Ware in his email conversations about Ukraine with his son Hunter. But don’t forget another pseudonym: The Reverend Kane from Poltergeist 2!
Confounded Interest - Anthony B. Sanders 
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