US Mortgage Applications Drop To Lowest Level Since 1997 (And The Fed Still Hasn’t Unwound Its Enormous Balance Sheet!)

Mortgage application volume dropped and remained at a multi-decade low last week (back to 1997), led by an 8 percent decline in refinance applications, which now make up only 30 percent of all applications. Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook.

Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2022.

The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 23 percent lower than the same week one year ago.

The Refinance Index decreased 8 percent from the previous week and was 83 percent lower than the same week one year ago.

Just wait for The Federal Reserve to start unwinding its enormous balance sheet!

Unfortunately, Powell and Company don’t have a …

US Treasury Yields And Mortgage Rates Rise As Fed Vows To Extinguish Inflation Fire (Caused By Themselves And BAD Federal Policies) Check Out The Eurozone

As inflation burns the US middle class and low wage workers, The Federal Reserve reaffirmed at Jackson Hole that they are the NEW Smoky The Bear (only The Fed can fight inflation fire!) But of course, Federal spending and energy policies can drive up prices too.

Having said that, the 2-year Treasury yield and 30yr mortgage rate are rising rapidly.

The Fed is trying to cool demand by raising rates after lax monetary policy since late 2008.

While the US 2-year Treasury yield is up only slightly today, the Eurozone is seeing their 2-year sovereign yields spiking by 11-15+%.

Fed’s Temporary Repo Facility Looks More Permanent As Inflation Rages (All Is NOT Well In The Economy)

The Federal Reserve’s overnight repo facility where banks park their money is seemingly becoming permanent.

As inflation has soared near the highest in 40 years, banks are increasingly parking their money at The Federal Reserve.

To quote Joe Biden, “All is well in the garden.” But apparently, not is all well in the banking industry or with the mortgage industry.

The Comeback Kid? US Personal Savings Rate Is -51.5% YoY To Cope With Bidenflation Raging At 8.5% YoY (Meanwhile The Fed Is “Slothing” Its Balance Sheet Reduction)

It is amazing that Biden is rising in the polls, simply because he got several inflation-generating, crony pay-off bills passed through a Democrat-controlled Congress. Even more amazing is that Americans aren’t more furious with Biden given that inflation is still raging at 8.5% YoY and the US Personal Savings Rate to cope with raging prices is at -51.5% YoY.

It looks like one quick fix to the inflation problem is for The Federal Reserve to shrink its balance sheet. But they are taking their own sweet time doing it.

And then we have the S&P 500 index which has done poorly since Powell and The Fed have undertaken their “fight inflation” mantra caused by their own folly and Biden’s green, anti-fossil fuel policies. Not to mention Congress spending like drunken sailors in port.

But the same is going on in Europe where inflation is even higher than in the USA and the EUR/USD is plunging like a paralyzed falcon.

And then we have Biden shrinking the Strategic Petroleum Reserve (orange line).

And in Europe, we have Germany suffering through a horrible energy price spike.

Finally, here is a baseball card of former Dodger pitcher Billy Loes. He almost reminds me of Biden trying to think through a complex problem like student loan debt forgiveness that may cost taxpayers an average of $2,000 yet buy votes for Democrats at the midyear elections.

Powell Channels Mr T As Dow Drops 1,000 Points, Home Builder Index Plummets (UMich Buying Conditions For Houses Remains Near 1982 Levels)

‘‘We will keep at it until we are confident the job (i.e. killing inflation) is done.’’

Jerome Powell, Jackson Hole speech

Interviewer : What’s your prediction for the market?

Clubber Lang (Mr T) : My prediction?

Interviewer : Yes, your prediction.

[Clubber looks into camera]

Clubber Lang : Pain!

Of course, Friday was one of those “Black Fridays” for investors. And pension funds.

The Dow Jone Industrial Average fell -1008.38 points after Powell’s “Mr T” remarks on pain. That was a whopping -3%. The NASDAQ composite index fell almost -4%.

Equity markets struggled in Europe as well, particularly the German DAX index.

The UMich Buying conditions for houses rose slightly, but remains near the lowest level since 1982.

Clubber Powell, Federal Reserve Chairman.

The Case-Shiller house price numbers are due out Tuesday for June and it is expected that they will show a significant slowing in home prices. Biden and Clubber Powell could then take “credit” for slowing “inflation.”

Q2 US GDP 2nd Reading Improves … To Just Plain Bad (GDP Price Worsens To 8.9% QoQ As Consumption Growth Dwindles To 1.5% QoQ)

The elite class “economists” (aka, cheerleaders) are meeting at Jackson Hole, Wyoming this week. But while they are planning our future, the revision to the miserable Q2 Real GDP report came out this morning.

Real gross domestic product (GDP) decreased at an annual rate of 0.6 percent in the second quarter of 2022, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 1.6 percent.

So, the second pass at measuring Real GDP produced a slightly better number (-0.6% vs -0.9%).

But the GDP PRICE index revision worsened from 8.7% to 8.9%. Look at REAL personal consumption (yellow line) as M2 Money growth slows.

Let’s see how things go at The Fed party at Jackson Hole, Wyoming. It is appropriate for The Fed to hold their party/meeting at Jackson Hole (Teton County) since it has the highest concentration of wealth per household than any other county in the nation.

Yee-haw!

Biden’d? US Mortgage Applications Hit Lowest Level In 22 Years (Purchase Apps DOWN -21% YoY, Refi Apps DOWN -83% YoY As Fed Tightens To Combat Bidenflation)

US mortgage applications just hit the lowest levels in 22 years, January 2000 as The Federal Reserve continues monetary tightening to combat Bidenflation.

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 August 19, 2022.

The Refinance Index decreased 3 percent from the previous week and was 83 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 21 percent lower than the same week one year ago.

Notice that The Federal Reserve is slower than the Geico Sloth is removing balance sheet stimulus.

MBA mortgage applications just declined to their lowest level in 22 years (January 2000) as The Fed has begun raising rates to fight inflation caused by 1) excessive monetary stimulus since late 2008, 2) Biden’s green energy policies driving up transportation costs, 3) distortionary Federal spending (e.g., Covid relief, infrastructure bills and now green energy/IRS spending by Biden/Pelosi/Schumer).

Here is the data summary for the latest MBA applications report.

Fed Chair Jerome Powell shrinking The Fed’s balance sheet.

US New Home Sales Crash And Burn In July, Down -32.26% YoY (-12.65% MoM) While Average Price Rises +19.57% From June

Well, new home sales aren’t coming to the rescue for affordable housing.

July’s New Home Sales crashed and burned. At -32.26% YoY. This is happening as M2 Money growth has declined.

For the month of July, new home sales were down a staggering -`12.65%. However, the average price of new homes rose 19.57% from June. Median price of new home sales were also up 5.91% from June, a large surge.

The supply of new homes? The highest level since the housing collapse of 2008.

US 30yr Mortgage Rate Rises To Near 6% Housing Affordability WORST Since 2006 Housing Bubble (Yield Curve Remains Inverted)

Baby, let me take you home is getting more difficult as mortgage rates approach 6%.

The National Association of Realtors’ Homebuyer Affordability Index for fixed-rate mortgages is now at the lowest reading since 2006 and the peak of the 2005-2007 housing bubble that burst catastrophically.

The reason? The Federal Reserve, in their attempt to put out the inflation fire (caused by 1) excessive monetary stimulus since late 2008, 2) rampant Federal spending and 3) Biden’s green energy policies, driving up prices.

If we compare mortgage rates with the US Treasury 10Y-2Y yield curve, you can see that the yield curve remains inverted (historically a bad sign). This may signal an eventual loosening of monetary policy by March 2023.

Crossing The Fiscal Rubicon! Treasury Debt In Q2 >$10 TRILLION Than Real GDP (And Getting Worse As M2 Money Velocity Crashed And Burned)

The phrase “crossing the Rubicon” is an idiom that means that one is passing a point of no return. Its meaning comes from allusion to the crossing of the river Rubicon by Julius Caesar in early January 49 BC.

Indeed, the US crossed the FISCAL Rubicon in Q4 2012. That is when US Treasury Public Debt outstanding exceeded Real GDP. And the gap has been growing ever since.

In case you were wondering why M2 Money Velocity is so low, it is because the US is in constant crisis management mode as an excuse to spend trillions of dollars …. that generates progressively lower real GDP.

They built this nation on MMT (Modern Monetary Theory) which translates to the Federal government and Federal Reserve just wanting to spend trillions and trillions. Since 2005 (the peak of the housing bubble), the US Federal Reserve has increased the M2 Money stock more than real GDP growth in almost every quarter.

I remember when macroeconomists used to say “Everything is beautiful … as long as M2 Money growth is LESS than real GDP growth.” But we have apparently shifted to MMT when Everything is beautiful as long as there is a crisis and Congress can spend trillions.

Now Biden/Congress are spending billions in trying to reduce inflation (seriously, only in Washington DC would they think that massive spending bills would REDUCE inflation).

You might as well face it, we’re addicted to gov (spending).