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?

US House Price Growth Slowing … A Bit … As Fed Slows M2 Money Growth (Slow Stimulus Withdrawal)

John Burns consulting has this interesting chart showing a slight slowdown in home price growth. But HPI growth is still growing strong. At 17% YoY in June.

The Case-Shiller National home price index, growing at 14.6% Yo is lagged with reporting only as of April. But you can see the slowing M2 Money Stock YoY. Although M2 Money stock is still growing at a sizzling 13.84% YoY as of May.

So if John Burns is correct, then we should see an increase in the next Case-Shiller report for May, then a slight slowdown in Case-Shiller’s June report.

But if we look at new home prices (net of incentives), we see a 20% YoY price increase (Source: John Burns)

And the housing pump is primed with the lowest REAL 30-year mortgage rate since 1975.

Here is Fed Chair Jerome Powell talking about The Fed’s monetary policies and housing bubbles.

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.

Wells Fargo’s 41.44% Earnings Surprise In Q2 Despite Lower Lending And Higher Deposits (The New [Ab]Normal?)

Is this the new normal for banking? A big 4 bank actually had a huge upside earning … on declining lending??

Yes, Wells Fargo had a 41.44% earnings surprise on July 14, 2021.

Wells Fargo Earnings Per Share (EPS) plunged during the March 2020 Covid outbreak, but has been recovering … in terms of EPS and share price.

Wells Fargo is seeing booming deposits (green) at virtually zero deposit rates while loans have fallen (green). The recent widening between deposit and loans is in the pink box while the general widening has taken place since Q4 2010.

Total loans to total assets (white) has been falling since The Financial Crisis and housing bubble burst.

Wells Fargo’s total risk based capital ratio dramatically increased after the financial crisis, as it did for all banks.

O-ho the Wells Fargo Wagon is a-comin’ down the street, but to collect deposits and make fewer loans.

Ya got trouble right here in DC city.

UMich Sentiment Declines In July As Inflation Expectations Hits 4.8% (Highest Since 2008), Buying Conditions For Housing Plunges

The University of Michigan consumer survey was released this morning and revealed that their consumer sentiment index fell to 80.8 (the index was around 100 prior to the Covid outbreak in March 2020).

Inflation expectations for the coming 12 months soared to 4.8%.

UMi buying conditions for housing has collapsed (but the measure is lagged one month). House price inflation is running at 14.59% YoY making housing less affordable. Hence, lower consumer sentiment for housing.

Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell are slated to discuss the hot U.S. housing market and the risks it could pose to the financial system at a meeting with fellow regulators on Friday.

The aim of the closed-door session: To make sure the U.S. is not vulnerable to a crisis akin to the one it suffered more than a dozen years ago, when the bursting of a property-price bubble drove top banks to the brink of insolvency and the economy into a deep recession.

The meeting of the Financial Stability Oversight Council, or FSOC, that’s headed by Yellen will come on the heels of two days of testimony by Powell to Congress on the Fed’s semi-annual monetary policy report.

Better late than never?

Milton says hi!

Headline Inflation Rises To 5.4% YoY, Core Inflation Hits 4.5% YoY (Highest Since 1991) While REAL Average Hourly Earnings Prints At -1.7% YoY

Inflation keeps rising and wage earners continue to suffer.

Today’s inflation print shows headline CPI YoY at 5.4% and core CPI YoY are 4.5%, the highest since 1991.

The problem is that real average hourly earnings printed at -1.7% YoY.

0.9% June inflation x 12 months = 10.8% Run Rate Inflation.

If we look at REAL house prices (FHFA HPI Purchase Only YoY – Headline CPI YoY) and REAL US average hourly earnings YoY, we can see a real problem created by excessive Fed money printing and Federal government spending. It is the proverbial “Devil In Disguise.”

Then we have the CPI Owners Equivalent Rent of Residences YoY printing at 2.3%. This compares with home prices growing at 15.7% YoY.

For an alternative inflation measures and better measures of rent inflation, see the Penn State/ACY CPI Index.

Time to cut back on Fed monetary stimulus and/or Federal government spending?

Simply Unaffordable! Global Boom in House Prices Becomes a Dilemma for Central Banks (Throw In China’s Declining Credit Impulse …)

Housing in the USA and across the globe is becoming simply unaffordable.

Surging house prices across much of the globe are emerging as a key test for central banks’ ability to rein in their crisis support.

Withdrawing stimulus too slowly risks inflating real estate further and worsening financial stability concerns in the longer term. Pulling back too hard means unsettling markets and sending property prices lower, threatening the economic recovery from the Covid-19 pandemic.

With memories of the global financial crisis that was triggered by a housing bust still fresh in policy makers minds, how to keep a grip on soaring house prices is a dilemma in the forefront of deliberations as recovering growth sees some central banks discuss slowing asset purchases and even raising interest rates.

Federal Reserve officials who favor tapering their bond buying program have cited rising house prices as one reason to do so. In particular, they are looking hard at the Fed’s purchases of mortgage backed securities, which some worry are stoking housing demand in an already hot market.

Here is a chart comparing REAL house price growth the the growth in the combined balance sheets of The Federal Reserve, the ECB and Bank of Japan.

And in the USA, we see that home prices are simply affordable for many (when we compare home price growth to hourly earnings growth). The bigger the gap, the more unaffordable housing becomes.

As folicymakers consider withdrawing monetary stimulus, consider the China’s declining credit impulse which could slow the global economic recovery.

The bottom line? Housing is getting simply unaffordable. Thanks in part to the Fed’s endless monetary stimulus, but also tight local zoning restrictions.

We also have migration trends, away states like California, Illinois and New York to states like Texas, Arizona and Florida.

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.