Biden Administration Announces Mortgage Relief as Foreclosure Moratorium Comes to an End (The Never-ending Mortgage Crisis)

The good news? Only 3.6% of all active mortgages remain in forbearance. The bad news? The mortgage foreclosure moratorium comes to an end on July 31st. The good news? The Biden Administration rode to the rescue with a new mortgage relief program. The bad news? The Biden Administration rode to the rescue with a new mortgage relief program. And today, FHFA announced an extension of the COVID-19 REO eviction moratorium through September 30, 2021.

Where do we stand in terms of the forbearance crisis? According to Black Knight As of July 13, 1.9M borrowers remain in COVID-19 forbearance plans, making up 3.6% of all active mortgages and 2.0% of GSE, 6.3% of FHA/VA and 4.4% of Portfolio/PLS loans.

Forbearances rose most significantly among loans held in bank portfolios or private label securities (+35K), with FHA/VA mortgages seeing an uptick as well (+1K) The 5K decline among GSE loans offset just a small share of the total weekly rise.

There are still some 179K plans are still scheduled to be reviewed for extension/removal in July, which provides some substantial opportunity for improvement next week.

While still low, new forbearance plan starts hit their highest weekly level since late March, with restart activity also remaining elevated. Roughly 2/3 of all starts over the past week were restarts.

Removal volumes were the lowest since late May given the low volume of review activity at this time of month.

But with Covid Delta Variant and the Biden Administration saying that they are considering the return of the economy-destroying lockdown that will result in MORE deficit spending, MORE Covid relief programs, all of which will require MORE Federal Reserve spiking of the monetary punch bowl.

This is the never-ending mortgage crisis that started in late 2007 (partly due to the Federal government pushing affordable housing and homeownership so hard the it broke). Then it was the foreclosure crisis, this is a Covid-related government-shutdown crisis.

Government housing policies (push for homeownership and the Covid economic shutdowns) require The Federal Reserve to spike the punch bowl perpetually.

The Federal Reserve is the punch bowl king.

Despite Mortgage Rate Declines, Mortgage Purchase Applications Fall With Smokin’ Home Price Growth (What Will The Fed Do?)

While the Fed’s Jackson Hole meeting is going on, the Mortgage Bankers Association released their weekly applications data. Mortgage purchase applications fell -1.6% from the previous week. But look at the following chart.

With smokin’ home price growth, we are seeing a decline in mortgage purchase applications.

But at least mortgage refinancing applications are up 9.27% from the previous week as the MBA contract rate fell from 3.11% to 3.01%.

Is The Fed paying attention? Or riding jackalopes in Jackson Hole?

Home Price Growth At Record High (Fed Wants To Take It Higher!) Phoenix Leads At +25.9% YoY

The Federal Reserve wants to take home prices higher. But not taking any action … until next year(?)

The Case-Shiller home price index rose a record high 16.6% YoY in May. The problem with Case-Shiller is that it is the end of July.

Here is my concern that I mentioned in Benzinga. When home prices are growing at record highs (+16.61% YoY) and hourly wage growth is a paltry +2.28% YoY), were have serious affordability problems. That will eventually lead to a slowdown in home price growth.

The spread between home price growth an hourly earnings for workers is also at an all-time high.

How hot is the US housing market? All 20 metro areas in Case-Shiller’s 20 index are in double digits. Chicago is the slowest at +11.1% YoY. Phoenix AZ is the hottest at +25.9% YoY.

Here is Fed Chair Powell trying to tame home price growth at the Jackson Hole meetings.

US June New Home Sales Disappoint, Down 6.6% Since May (Median Price For NHS Drops 5%)

The expectation was for a 796k print for June, but new home sales checked in at 676k instead. That represents a decline of 6.6% from May to June.

And the median price of new home sales fell 5% from May to June.

At least the US is adding to its woefully low housing inventory.

US House Price Growth = 4x Average Hourly Earnings (Price Growth Will Be Forced To Slow Down)

In an article by Phil Hall for Benzinga, I laid out the case for slowing home price growth.

In a nutshell, the Case-Shiller National home price index YoY is growing at times the rate of growth of average hourly earnings. The last time this gap was this large, we saw a crash in home prices.

And with The Fed claiming that they will tighten their uber-loose monetary policy (next year), look for house price growth to subside somewhat.

Particularly if housing inventory returns to the market place. And The Fed slows its money printing.

Fast house price growth has caused consumer sentiment for buying a house to plunge.

How will Biden’s $3.5 TRILLION infrastructure bill impact housing? It depends on how much of legislation actually transmits to US households.

Here is Parks and Recreation’s Leslie Knope with now-President Joe Biden. Perhaps she help draft the monstrous $3.5 trillion legislation.

Fed Helps Repress Stock And Bond Volatility While Commodity Volatility Soars (House Price Growth Jumped From 4.28% Pre-Covid To 14.59% Post Fed Intervention)

Since the Covid outbreak of March 2020, The Federal Reserve entered markets in force, spiking their assets purchases and continually expanding their balance sheet.

Consequently, stock and bond market volatility (as measured by VIX and MOVE) have been repressed.

But commodities are a different story.

Crude oil futures are tracking The Fed’s balance sheet pretty closely while coffee “Arabica” futures have soared since July 17th. On the other hand, lumber futures prices have declined considerably since spiking in early May. Steel rebar prices have risen dramatically since mid-December 2020, a month before Biden’s inauguration as President.

Now, that’s volatility.

Home price growth jumped from 4.28% YoY pre-Covid to 14.59% after Fed intervention.

Fed Reserve Chairman Jerome Powell using his stock and bond market volatility repression beam.

US Existing Home Sales Rise 1.4% MoM In March, But Median Prices Soar 23.4% YoY With Small Increases In Inventory (Where Have All The Affordable Houses Gone?)

I was reading the usual pundits talking about massive increases in housing coming onto the market, then I saw today’s existing home sales numbers from the National Association of Realtors.

US existing home sales were up 1.38% in June from May, but up 22.85% YoY.

But the scary numbers were median price of existing home sales YoY printing at +23.4% while EHS inventory increased to the highest level … in 2021 but 2021 is sill lower than anytime since 2000. Maybe July’s numbers will show that incredible spike.

Existing home sales were largely in the South, then Midwest, then West and finally the Northeast.

But look at distribution of EHS prices. Houses in the $100K-$250K range (green line) are rapidly vanishing while houses in the $500K-$750K (pink line) are rapidly increasing.

Where have all the affordable house gone?

The good news? Freddie Mac’s 30 year commitment rate fell again.

The housing and mortgage markets are being washed in The Fed’s dirty water.

US New Home Sales Rise 6.3% Since May, Back To Pre-Housing Bubble Levels

U.S. housing starts increased in June by more than forecast, suggesting residential construction is stabilizing despite lingering supply-chain constraints and labor shortages.

Initial home construction rose 6.3% last month to a 1.64 million annualized rate, a three-month high, according to government data released Tuesday. The median estimate in a Bloomberg survey called for a 1.59 million pace.

Both 1 unit and multifamily (5+ unit) starts for June increased over 6% from May.

So, 1-unit housing starts are back to 2000-2003 levels prior to the housing bubble.

You can see the housing bubble of post-2001 recession in terms of single-family home construction, the peak in January 2006 then the demise of SF housing starts until 2009, then the upswing in starts following The Great Recession. Housing starts have increased following the ultra-short Covid recession of 2020.

Existing home sales inventory remains low (orange box) despite rising new home sales.

Once again, why all the monetary stimulus since the Covid recession ended in April 2020?

Freddie’s 30Y Mortgage Rate Drops To 2.90% (Pre-Covid February Level) As Fed Keeps Purchasing Agency MBS Amid Vanishing Low-end Housing

Freddie Mac’s 30-year mortgage rate index fell to 2.90% as The Fed keeps buying agency mortgage-backed securities.

As The Fed helps to lower mortgage rates, the supply of low-end housing keeps vanishing. Particularly out west for houses less than $250,000.

Throwing gas on a housing fire isn’t a great idea with limited inventory of houses, particularly for starter homes. The Fed is not operating for the benefit of lower-income home buyers.

The Fed isn’t fixing a hole, its creating a bigger hole in home affordability.

US Job Openings Rise 9.2 MILLION And Declining Labor Force Participation? (Mortgage Purchase Applications In Decline With Rising Job Openings)

Ain’t this a kick in the head.

The job openings data was released this morning and we found out that 9.2 million jobs were added!! But at the same time, we saw DECLINE in labor force participation in last month’s jobs report.

It seems something is broken. Likely numerous states still payment extraordinary unemployment benefits and this is preventing a surge in labor force participation.

So, why does The Fed keeps its foot on the accelerator pedal??

And really has never slowed much since The Great Recession and housing bubble burst?

Here is a chart of mortgage purchase application SA against jobs added and labor force participation. Mortgage purchase applications are falling despite a huge surge in job openings.

Ah, uncontrollable home price increases! Yes, housing is becoming unaffordable for those who are renting or just entering the housing market for the first time.

The Fed, on the one hand, is creating asset bubbles and the Biden Administration essentially paying people not to work, but then worries why more households are going along for the house price ride.

“Biden’s new dilemma: How to slash housing costs for low-income borrowers” Answer? Lower credit standards for low-income households for loans purchased by Fannie Mae and Freddie Mac.