Economic Vertigo! US Interest Payments Expected To Keep Rising Under Marxist Harris (And Why The Fed MUST Try To Lower Interest Rates)

After watching the Democrat hate fest last night (Aka, the Democrat National Convention), I was not shocked that the DNC platform looked like a playbook to destroy the US economy. High taxes, endless spending, more regulations, etc. Not a word about the staggering side of the US debt load … with Harris’ economic plan projected to add a whopping $25 trillon in debt to the already massive $35+ trillion debt load.

And not a mention that US interest payments on the national debt already exceeds defense spending. And is booming!

Of course, Harris’s economic vision is a continutation of Biden’s disastrous visions (which are Obama’s vision of US obliteration). Most politicians in Congress are millionaires (including Bernie Sanders) and won’t suffer from their insane “progressive” policies. Watching last night’s DNC hatefest was like watching nasty 2nd graders having a party.

Of course, the drove of anti-American, anti-properity speakers spewing venom (I hate Hillary’s flat-tone speaking style) like Hillary, Jaime Raskin (aka, Rasputin), AOC, etc. all failed to acknowledge to acknowledge the already monstrous size of the US debt ($35+ trillion) or the massive size of the unfunded promises ($218+ TRILLION). Of course not.

The handle the staggering interest payments that will crowd out other spending, The Federal Reserve will be forced to lower rates.

Of course, Democrats will wheel out “economists” like Robert Reich who say that the debt doesn’t matter.

July Housing Starts Drop -6.8% MoM, Lowest Since Covid Economic Lockdowns Of 2020

Another bad housing report for July, this time its housing starts.

Housing starts declined in July to the lowest level since the Covid economic lockdowns.

Housing starts fell -6.8% in July.

On a YoY basis, housing starts fell -14.8% YoY.

Goin’ Down! Traders Expect Fed’s To Cut Four 25bps By End Of Year And More Cuts In 2025 (Mortgage Rates Will Fall!)

Freddie King said it best! Interest rates are goin’ down!

Yes. traders expect The Fed to cut their target rate from 5.50% (current rate) tp 4.297% by the December meeting. That is a whopping 120 basis points.

And expect another 100 basis points of cuts by the September 2025 Fed FOMC meeting. Down to 3.232%.

Mortgage rates will fall.

Like the Roman Empire. Et tu Kamala?

Kama Kameleon! Fed Loses Record Amount, Bankrupty Filings (Chap 11) Highest In 13 Years, Foreign Investors Pulling Out Of China

Kama Kameleon.

Kamala Harris, despite being VP for almost 4 years, is going to annouce her plans for taming inflation. Why doesn’t she do it now?? What Harris can’t control is The Federal Reserve that is losing money at breakneck speed.

Here is The Fed’s balance sheet.

I shudder to think what Harris will propose to solve the highest bankrupty (Chap 11) rate in 13 years. Probably more Bidenomics (big wealth transfers to large corporations/donors).

Meanwhile, foreigns pulled a record amount of funds from ailing China.

Kamala Harris will say anything to get elected, then fall back on her Communist agenda.

Trouble With The Curve! US Yield Curve Rises Above 0 Slope While Mortgage Rates Fall

We know several things about the yield curve. First, it goes negative before recessions. Second, it is related to the inverse of The Fed’s target rate (blue line).

How about the US mortgage rate? Generally, US Mortgage rates are inverse to the 10Y-3M yield curve, but lately the US mortgage rate (pink circle) have declined with the 10Y-3M yield curve.

The yield curve does forecast recessions, but is unreliable in forecasting mortgage rate movements.

Mortgage Purchase Applications Rise In Latest MBA Survey But Still Down -11% Since Same Week Last Year (MBS Convexity Rising As Rates Decline)

The slowing US economy has a silver lining: Treasury and mortgage rates are declining. And the is spurring faster mortgage prepayments.

Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 2, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 11 percent lower than the same week one year ago.

The Refinance Index increased 16 percent from the previous week and was 59 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.55 percent from 6.82 percent, with points decreasing to 0.58 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The deciine in rates led to an increase in MBS convexity.

Watch out! Mortgage convexity continues to rise!

Meanwhile, Kamala “The Kommie” Harris laughs.

Mortgage Purchase Demand Dropped 14% Compared To 1 Year Ago

Mortgage applications decreased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 26, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.

Note the decline in mortgage purchase demand after Biden/Harris were sworn into office in Janaury 2021.

The Refinance Index decreased 7 percent from the previous week and was 32 percent higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) remained unchanged at 6.82 percent, with points increasing to 0.62 from 0.59 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Because of rising rates under Biden/Harris economic policies, mortgage refinancing demand has gotten crushed.

We are in the latter half of the year, so seasonalility will kill off purchase mortgage demand compared to the Spring and early Summer.

What Is The Fed Doing? Mortgage Rates Up 102% Since 2022 As The Fed Still Has A Long Way To Go In Shedding Its $2.4 TRILLION MBS Holdings

What’s it going to be? Mortgage rate increases or balance sheet (MBS) reductions?

Since the Covid outbreak in early 2020, The Fed went wild with rate cuts and massive and unpredented balance sheet expansion.

Let’s look at The Fed’s puchase of agency MBS and mortgage rates. From 2020 2022, The Fed continued to buy agency MBS. But in 2022, all hell broke loose as The Fed went crazy RAISING rates, but slowly began unwinding their balance sheet. The result? Mortgage rates began to climb. In fact, the US conforming mortgage rate for 30 years has risen 102% since early 2022. The Fed is only slowing unwinding their MBS holdings.

Despite the struggles in the residential housing market, the COMMERCIAL mortgage market is a trainwreck.

What will The Fed do?? After all, nothing from nothing beats nothing.

Cacklenomics! Buying Conditions For Houses Hits All-time Low (High Mortgage Rates + High Home Prices)

Cacklenomics strikes again!

The University of Michigan consumer survey revealed that buying conditions for housing just hit an all-time low.

High house prices and high mortgage rates aren’t helping.

Purchase loan demand keeps dropping.

US Yield Curve Is Least Inverted 2 Years (Signal Of Impending Fed Rate Cut)

Shape of things. Thw Fed will likely cut rates shortly helping the flagging mortgage market

The US Treasury yield curve, of Jay Powell and The Blackhearts, .js the least inverted in 2 years, signalling an impending Fed rate cut.

The Fed loves manipulating interest rates!