Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
2020. A year that goes down in infamy. The Covid outbreak and the government’s insane overreaction to it. Masks and massive spending, driving up housing prices.
After 2020, mortgage originations plummeted while housing prices soared.
US home prices took off like a scalded cat after the Federal government went on a massive spending spree in 2020.
The US mortgage market is “livin’ on a prayer.” As a result, former homebuilder and current FHFA Director Bill Pulter has suggested 2 mortgage products to make US homes more “affordable”, adding to the legacy of stupid government policies to increase homeownership.
But first, current mortgage demand. Mortgage applications increased 0.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 7, 2025.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 31 percent higher than the same week one year ago.
The Refinance Index decreased 3 percent from the previous week and was 147 percent higher than the same week one year ago.
Now on to Pulte’s stupid mortgage proposals.
Pulte Doubles Down After 50-Year Backlash, Proposes “Layaway Mortgage”
The 50-year mortgage is a stupid idea. True, it can reduce the monthly mortgage payment by several hundred dollars. But it extends the life of the mortgage from 30 to 50 years, keeping the outstanding mortgage balance elevated for longer, exposing the lender (or mortgage owner) to greater losses in the case of default. Not surprising since the duration risk of a 50-year mortgage is greater than on a 30-year mortgage. Who is going to hold these mortgages??
So, Pulte hearing that the mortgage market thinks this is a stupid idea, introduced another stupid mortgage idea: the “layaway mortgage” where buyers make payments for 5-10 years before they’re allowed to move into the home. This is a variation of “rent to own.”
Under Pulte’s Layaway Mortgage program:
▪️ Buyers select a home and begin making monthly payments immediately
▪️ They continue paying for 5-10 years (the “layaway period”)
▪️ During this time, they cannot live in the home, modify it, or even visit without an appointment
▪️ After the layaway period ends, buyers can move in and begin their 40-year mortgage
▪️ If they miss a payment during layaway, they forfeit everything and the home goes back on the market.
So, in other word, a 50-year mortgage (40+10 layaway).
Note: Japan used to offer 100-year mortgages during their housing bubble, but now 35-year mortgages are more common.
The Federal government is still shut down, so we have to rely on ADP for jobs numbers.
The ADP weekly jobless report pointed to a deterioration in US labor momentum, stating that “for the four weeks ending Oct. 25, 2025, private employers shed an average of 11,250 jobs a week, suggesting that the labor market struggled to produce jobs consistently during the second half of the month.”
Added together that is 45,000 job losses in the month (not including government workers), which would be the largest monthly drop in jobs since March 2023.
A sustained increase in layoffs would be particularly concerning now because the hiring rate is low and it is harder than usual for unemployed workers to find jobs.
It is likely that The Fed will cut rates to compensate. Rate cuts around the corner!
Redfin’s Housing Turnover Report, Q1–Q3 2025
Just 2.8 homes out of every 1,000 changed owners in the first nine months of 2025—the lowest turnover rate in at least three decades. This marks a 38% plunge from the 2021 frenzy, when 44 per 1,000 homes sold, and is 44% below the pre-pandemic 2019 pace of 40 per 1,000.
Why the freeze? – Rate lock-in: Over 70% of homeowners are sitting on sub-5% mortgages and are reluctant to trade them for today’s rates exceeding 6%.
Sticker shock: Record prices combined with high borrowing costs have left many potential buyers on the sidelines. The result is a housing market that remains stagnant.
*Home prices are relatively high as are mortgage rates.
Someone will undoubtedly write me to look at Singapore. Yes, I know. Been there, done that. Or London.
In the US, the lowest turnover rates are in Democrat strongholds New York and California.
Mortgage applications decreased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 31, 2025.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. 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 26 percent higher than the same week one year ago.
The Refinance Index decreased 3 percent from the previous week and was 151 percent higher than the same week one year ago.
Mortgage originations are still strong for the 760+ bucket.
Let’s see how California’s Prop 50 (Gavin Newsom’s attempt to give Democrats a majority in the US House of Representatives) works?
A new week starts! And the all-important 10-year Treasury yields checks in at 4.112%, down from 4.397% one year ago.
Let’s see if Senate Democrats agree to open the Federal government.
Like tuna surprise (bleech!!), Fed Chair Powell announced a move towards reinvesting maturing MBS into ST Treasury bill decreasing the duration of The Fed’s balance sheet.
Fed’s QT Surprise: Powell announced that maturing mortgage-backed securities (MBSs) will be reinvested into short-term Treasury bills instead of longer-duration Treasuries, signaling a shift toward a shorter-duration balance sheet.
🧭 Strategic Implications: This move distances the Fed from potential “yield curve control” strategies and aligns with pre-2008 norms, where the average maturity was under 3 years—suggesting a long-term pivot in portfolio structure.
💰 Market Impact: The decision, coupled with rising Treasury yields and upcoming refunding announcements, intensifies pressure on the 10-year yield, especially as the Treasury seeks to fund a $38 trillion debt load with more short-term instruments.
I just hope the Nittany Kittens (Penn State) don’t surprise Ohio State in today’s football game!
Yesterday, The Federal Reserve Board of Governors lowered their target interest rate by 25 basis points to 4%.
And on that decrease, the US Treasury yield curve rose slightly.
And mortgage rates declined with the cut in The Fed’s target rate.
For an interesting read, try David Stockman’s “How To Cut $2 Trillion Om Federal Spending.”
Case-Shiller home price indices are out today. The Case-Shiller NATIONAL home price index is up 1.5% on a year-over-year basis, but down -0.30% on a month-over-month basis).
Don’t worry. The Fed won’t stop printing money.
Good news! Consumer prices rose only 3% YoY. Lower than the growth in M2 Money of 4.66% YoY and Federal government spending of 7.8% YoY.
While consumer prices rose only 3% YoY, housing (shelter) rose 3.65 YoY.
The US Treasury yield curve remains upward sloping from 2Y-30Y.
Confounded Interest - Anthony B. Sanders 
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