Heartaches By The Number! Under Biden, Mortgage Refi Applications Down -82.4%, Purchase Applications Down -7.5% And Mortgage Rates Up+80.7% (Fed FINALLY Begins Removing Stimulus!)

Heartaches By The Number … for American households and mortgage lenders as The Federal Reserve begins FINALLY removing monetary stimulus.

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 27, 2022.

The Refinance Index decreased 5 percent from the previous week and was 75 percent lower than the same week one year ago.

The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 14 percent lower than the same week one year ago.

Under Biden, mortgage refi applications are down -82.4%, purchase applications are down -7.5% and mortgage rates are up +80.7%.

Then we have this headline: “Fed Starts Experiment of Letting $8.9 Trillion Portfolio Shrink”

The Fed is capping monthly runoff at $47.5 billion — $30 billion for Treasuries and $17.5 billion for mortgage-backed securities — until September. Those thresholds will then double to a combined $95 billion. That compares to a peak of $50 billion a month when the Fed performed the exercise starting in 2017.

As expectation of Fed rate hikes increase, mortgage rates have soared like Tom Cruise’s Super Hornet aircraft from Top Gun: Maverick climbing over the steep mountain.

And mortgage rates are up a bit today.

Meanwhile, The Federal Reserve begins shrinking their balance sheet for the first time since Yellen and company started shrinking it under Trump.

March Madness! Case-Shiller National Home Price Index Soars To +20.55% YoY In March (Fastest In History) As Fed Keeps Monetary Stimulus In Place

Yes, its the housing market’s version of “March Madness!”

The Case-Shiller National Home Price Index for March was released this morning and it was a doozy. The Case-Shiller National home price index YoY accelerated to a whopping +20.55%.

And at +20.55%, it is the fastest price growth in history! Even the peak of the infamous 2000s housing bubble was only +14.51% in September 2005.

Why do we have historic highs in home price growth? The Federal Reserve’s monstrous Covid stimulus (green line) is still in place.

Washington DC is the slowest growing metro area in the US while Tampa FL, Phoenix AZ, Miami FL and Dallas TX are all above 30% YoY.

Let’s see what happens when The Fed FINALLY removes its Covid stimulus as mortgage rates rise.

Remember, Janet Yellen (who left monetary stimulus in place for too long under Obama) is now US Treasury Secretary.

Memorial Day Update! US Dollar Declining, Gasoline UP 92.4% Under Biden, Food UP 60%, Rents UP 14.75x (Traveling Will Cost A Lot More! But So Does Renting)

Memorial Day weekend is one where families often travel to meet relatives and friends, or travel to Washington DC to remember those who have died in the service of our country.

But traveling has gotten a lot more expensive under Biden. Gasoline prices are up 92.4% under Biden, while food prices are up 60%. Those hamburgers and hot dogs for grilling are being replaced by … pizza? Or maybe plant-based products.

Zillow’s Rent Index All Homes YoY was only 0.6234% in February 2021, and has soared to 16.36% YoY under Biden. That is an increase of 14.75x. So, not only is it much more expensive to travel on Memorial Day weekend, but it is far more expensive to stay home in your rental property.

On the currency front, we are seeing the US Dollar falling (greenback line), along with the Yuan/USD cross currency. West Texas Intermediate Crude Cushing OK spot is at $115.07.

At least Venezuela and Iran are benefiting greatly by Biden’s energy policies, even if Americans are suffering. Perhaps this is the new foreign policy of Wynken (US VP Harris), Blynken (US SecState), and Nod (Biden).

Remembering my Uncle Jack Sanders who served in the Battle of The Bulge during World War II, winning an individual Silver Star for bravery and two Purple Hearts. He rose from “buck” private to First Sergeant by the end of WWII.

The Fed Is Pitting Wall Street Against Main Street, Investor Share Of Home Purchases Soars (How Far Will The Fed Go With “Tightening”?)

The Federal Reserve has been signaling a tightening of its loose monetary policy (essentially loose since the housing bubble burst of 2008 and the ensuing financial crisis). It is still loose as The Fed hasn’t really trimmed its massive balance sheet yet and has just raised it target rate to 1%.

So, potential home owners have to pay 5.10% for a 30-year fixed-rate mortgage while the effective Fed Funds rate, the rate at which banks lend to each other, is a measly 0.83%. This puts consumers at a relative disadvantage to large Wall Street firms that are gobbling up houses at an accelerated rate.

RealtyTrac has a Attom-sourced table of investor purchases of housing from Q3 2021, before The Fed started helping to crank-up mortgage rates for consumers.

With the US housing market slowing (thanks to The Fed’s signaling of monetary tightening), the question now is how far will The Fed go in its “War on Inflation!”?

You can see a major cause of inflation in the US since 2000: Federal spending and Federal (public) debt. During The Great Recession of 2008-2009, we saw inflation (CPI YoY) collapse into negative territory as Federal spending and debt soared. But the mini-recession of 2020 caused by the Covid governments shutdowns led to TWO surges in Federal spending and debt: Covid relief followed by the infrastructure spending bill. Combined with Biden’s anti-fossil fuel executive orders and massive splash of Federal spending in to the economy, we have inflation soaring.

If surges in Federal spending (requiring surges in Federal debt) have gone away (except for $40 billion in Ukrainian relief and Biden’s possible student loan cancellation of $10,000 that will cost an estimated $321 billion … and help drive up college tuitions even further), we may be over the “twin gorgings” of the Covid spending spree. This alone may result is a decline in the inflation rate.

Where do we sit today with the REAL neutral rate? The REAL Fed Funds Target Rate (upper bound) is -4.41%. It was in positive territory during the Trump years. But then Covid struck.

So, we sit here today with Fed Monetary policy “loose as a goose.” And Wall Street investors “drunk as a skunk” on Fed Stimulus.

No wonder Wall Streeters like to go “Down To The Nightclub!” The Fed still has not taken the monetary stimulypto away, but have taken it away for consumers buying housing.

The Biden Bowl! US Personal Savings Declines -65% YoY In April As Inflation Rages (Credit Card Debt Soars As Personal Savings Collapses)

Americans’ Savings Rate Drops to Lowest Since 2008 as Inflation Bites.

Yes, inflation really bites. In fact, as US inflation is near the 40-year high, US personal savings declined -65% YoY as consumers try to cope with rising prices.

Its not only that personal savings is crashing in the face of inflation, revolving debt has soared as consumers try to cope with rising prices. I call this chart “The Biden Bowl.” Soaring consumer credit card debt with crashing personal savings.

Consumer Sentiment For Home Buying Falls To Lowest Point In History, Even Lower Than Housing Bubble Burst And Financial Crisis Of 2008 (Housing Too Expensive, Mortgage Rates Soaring, Inflation Roaring)

The numbers keep getting worse.

The University of Michigan Consumer Survey showed a decline in May to 58.4 (100 is baseline). Soaring inflation is a likely culprit.

But the truly horrible survey result is the UMich Buying Conditions for Houses, plunging to 45. The reason? Crazy, expensive house prices courtesy of The Federal Reserve and rising mortgages (also, courtesy of The Federal Reserve).

The buying conditions for houses is now the lowest in the history of the University of Michigan consumer survey. In fact, consumer sentiment for housing is far lower than during the awful housing bubble burst of 2008 and the subsequent financial crisis.

And the US economic surprise index has turned negative.

Here is Fed Chair Jerome Powell wielding his monetary bat called “Lucille.”

Morning Update: Bankrate’s 30Y Mortgage Rate Rises Slightly To 5.29% (Housing Rents UP 16.4% YoY, Gasoline UP 92% Under Biden, Food UP 60%)

US mortgage rates are up slightly this morning. Bankrate’s 30-year mortgage rate survey is up to 5.29%.

The Biden Scorecard is still a bleak one (for non-elitists). Regular gasoline is UP 92% under Biden, Diesel fuel is UP 110%, foodstuffs are up 60% under Biden, Zillow all-house rents are UP 16.4% YoY.

It hurts to be in the middle class under Biden.

Alarm! US Pending Home Sales In April Decline -11.5% YoY (Down -3.9% MoM (From March)

Alarm!

US pending homes sales in April tanked -11.5% YoY and down -3.9% MoM which was greater than expected.

Not really surprising when you see that REAL home prices are growing at an 11.55% YoY clip while REAL hourly earnings are declining at a -2.8% YoY pace.

Do you feel like I do with Bidenflation crushing my check book and The Fed crushing my hopes for an affordable home.

US Q1 Real GDP Worse Than Expected -1.5% QoQ, Price Inflation Worse Than Expected 8.1% QoQ (At Least Personal Consumption Was Up 3.1%)

Today’s US Real GDP was worse than economists expected.

US Real GDP Annualized QoQ printed at -1.5%. And GDP prices QoQ printed at 8.1%, also higher than expected.

At least Personal Consumption printed higher than expected at 3.1%.

Import prices (goods) led the way at 20.9%. Part of Biden’s brilliant strategy of reducing domestic oil production and import expensive energy from overseas?

Consumers are spending more, but the personal savings rate is down to the lowest level since 2013 at 6.2% as consumers try to cope with inflation.

Simply Unaffordable! Why The US Mortgage Foreclosure Scare Was Just … A Scare (Fed Policies Drove Home Prices Into Outer Space Making Default Less Likely, But Crushing Affordability)

I remember this headline from CNBC from THU, OCT 14 2021: Foreclosures are surging now that Covid mortgage bailouts are ending, but they’re still at low levels.

But the foreclosure surge never materialized.

If we look at 90+ days late for mortgages (yellow line), we see that the surge in unemployment with the Covid outbreak and subsequent government shutdowns (red line) did not lead to a surge in mortgage foreclosures.

This situation is quite unlike 2008 when collapsing home prices and the subsequent surge in the unemployment rate led to a 90+ days late surge on mortgages (yellow line).

Difference between today and 2008? The Federal Reserve’s asset purchase (green line) surge happened twice AFTER the 2008 housing crash. Once in late 2008 through 2014, then a second, bigger surge in March 2020 after the Covid outbreak. One big difference is the surge in home prices, home price growth was 3.69% YoY in December 2019 and skyrocketed to 19.80% as of February 2022. This translates to a massive increase in homeowner equity, leading to a lower probability of default.

So, there you go. Powell and The Federal Reserve made housing unaffordable for millions of Americans, but The Fed did help thwart another mortgage default crisis. BUT we will see what happens with future rate hikes from The Fed.

Here is Attom’s US Foreclosure Starts chart. Yes, that is hardly a surge, although foreclosure starts did rise in Q1 2022.

So, The Fed has helped make housing simply unaffordable. Look at the growth of REAL home prices relative to REAL average hourly earnings.

The kids at The Fed aren’t too sharp when it comes to making housing affordable.