US Housing Market Posts $2.3 Trillion Drop, Biggest Since 2008 (Florida Gains, California Loses)

The value of the US housing market shrunk by the most since the 2008 as the pandemic boom (and M2 Money growth) fizzled out.

After peaking at $47.7 trillion in June, the total value of US homes declined by $2.3 trillion, or 4.9%, in the second half of 2022, according to real estate brokerage Redfin. That’s the largest drop in percentage terms since the 2008 housing crisis, when home values slumped by 5.8% from June to December.

Homebuyers, already facing record-high prices, took an additional hit from mortgage rates that more than doubled last year. With less competition in the market, the median US home sale price was $383,249 last month, down from a peak of $433,133 in May.

To be sure, home prices are not collapsing. In December, the total value of US houses was still 6.5% higher than it was a year earlier.

Florida Gains

How much homeowners lost depends on where they bought. The biggest declines were in pricey cities like San Francisco and New York, while buyers who moved to pandemic boomtowns are still seeing the returns on their investment, particularly in Florida.

That was especially true in Miami, where the total value of homes ballooned 20% year-over-year to $468.5 billion in December, the largest annual percentage increase among the top metro areas. While the overall US housing market is down, Miami’s market has about the same value as when it peaked at $472 billion in July. Meanwhile, homeowners in North Port-Sarasota, Florida, Knoxville, Tennessee, and Charleston, South Carolina, all saw annual gains above 17% in 2022.

MBA: Mortgage Purchase Applications Decreased Sharply -18.1%, Lowest Since 1995 (Down -41% YoY, Refi Apps Down -72% YoY)

Mortgage rates increased across all loan types last week, with the 30-year fixed rate jumping 23 basis points to 6.62 percent – the highest rate since November 2022. The jump led to the purchase applications index decreasing 18 percent to its lowest level since 1995.

Mortgage applications decreased 13.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 17, 2023.

The Market Composite Index, a measure of mortgage loan application volume, decreased 13.3 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 Refinance Index decreased 2 percent from the previous week and was 72 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 18 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 41 percent lower than the same week one year ago.

Did Biden appoint “Pothole Pete” Buttigieg to oversee the mortgage market??

US Budget Deficit Projected To Be -$20 TRILLION Over Next 10 Years (Biden Ignores The Inflation Tax, Interest Costs On US Debt Forecast To TRIPLE Over Next 10 Years)

President Biden loves to demonize his opponents like Republicans over spending and the Federal budget. Biden argued that his budget won’t increase taxes on Americans making less than $400,000 a year and will ultimately cut the deficit by $2 trillion over the next decade. The president has yet to release his budget plan but has promised to do so by March 9.

Of course, Biden ignores “the inflation tax” which is crippling American households (negative REAL hourly earnings growth for 22 straight months). And while he won’t raise taxes on Americans making less than $400,000 (he doesn’t have the authority), he loves to spend money like most of Congress. Without tax increases, The Federal Government will have to issue MORE debt and run budget deficits in perpetuity.

Here is the sickening forecast of Federal budget deficits. Budget deficits are forecast to keep rising and are project to hit -$20 TRILLION over the next 10 years.

Here is the spreadsheet of projections from the Congressional Budget Office.

The US is already experiencing irresponsible growth in Federal debt and interest payments on the Federal debt.

Interest costs will nearly triple in the next decade. The Federal Reserve has increased interest rates eight times since early 2022 to combat high inflation — which has contributed to the significant increase in the federal government’s cost of borrowing. In CBO’s projections, such costs would rise from $475 billion in 2022 to $1.4 trillion in 2033. Over the upcoming decade, CBO projects that net interest payments will total $10.5 trillion; relative to the size of the economy, net interest would grow from 2.4 percent this year to 3.6 percent in 2033. In 2030, the ratio of interest to GDP would total 3.3 percent, the highest recorded since 1940 (the first year for which such data are reported).

And don’t forget that the Federal government (meaning taxpayers) are on the hook for $181.6 TRILLION in unfunded liabilities.

Here is my black German Shepherd listening to me talk about the dangers facing the US economy.

Final Destination? US Housing Starts Drop -21.4% Year-over-Year In January As The Fed Continues To Tighten (PPI Final Demand Remains Elevated At 6% YoY)

I feel like I am in the film “Final Destination” but I can’t get off the aircraft.

First, US housing starts are now down -21.4% year-over-year (YoY) and down -4.5% month-over-month (MoM) in January 2023 as The Fed removes its massive monetary stimulus.

PPI Final Demand PRICES are still elevated at 6% YoY, so expect more Fed tightening.

Today’s data dump.

On a final note, I am appalled at the Biden Administration’s “response” to the East Palestine Ohio derailment. Where is Mayor Pete, the US Transportation Secretary??

US Mortgage Applications Decline 7.7% From Last Week As Fed Continues Their Counterattack On Inflation (Purchase Apps Down 43% From Last Year, Refi Apps Down 76%)

US inflation is causing The Federal Reserve to raise interest rates, and mortgage applications are suffering.

Mortgage applications decreased 7.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2023.

The Refinance Index decreased 13 percent from the previous week and was 76 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 43 percent lower than the same week one year ago.

The MBA contract rate rose 3.4% from 6.18% to 6.39% as The Fed tightens.

And if you believe the Taylor Rule (as opposed to The Fed’s current politically-based decisions), The Fed’s target rate should be 10.15% and The Fed is less than half way there at 4.75%.

The Fed is expected (by investors in Fed Funds Futures) to rise to 5.283% by the July FOMC meeting, then decline to under 5% by January ’24.

Speaking of Fed rate hikes, January’s red hot retail sales (up 3% MoM) is surely going to drive inflation UP and The Fed will keep raising rates.

Inflation Nation! US REAL Average Hourly Earnings Negative For 22 Staight Months In January As Inflation Heats Up … Again (CPI Rises 0.5% MoM, Food Rises 11.3% YoY)

The January US inflation numbers are out and they were grim.

US REAL average hourly earnings fell … again … to -1.8% year-over-year (YoY) from a revised -1.6% YoY in Deember. That makes 22 straight months of negative hourly earning growth.

CPI Month-over-month (MoM) was revised upward for December, and increased from 0.1% in December to 0.5% in January. CORE CPI remained unchanged from the upward revision in December to 0.4% MoM.

Components of inflation include FOOD AT HOME (up 11.3% YoY), utility (piped) gas service (up 26.7% YoY) and shelter (up 7.9% YoY). So, the middle-class inflation tax (food, heating, housing) remains high.

Do I detect a trend in shelter inflation??

Hey, I thought Treasury Secretary Janet Yellen said inflation was transitory. 22 straight months of negative hourly earnings growth seems more permanent than transitory.

Fed Tightening Pushed Fed Funds Target Rate Above MBS Yields For First Time In History (Biden Administration Ready To Unleash A $27 Billion Green Slush Fund)

The most recent tightening by the Federal Reserve has pushed the federal funds target rate above mortgage-backed securities yields for the first time in history. Though this poses clear challenges of carry for MBS holders, selective investments in specified pool and collateralized mortgage obligations (CMOs) could provide incremental returns.

While Biden brags (redundant) about lowering inflation (that his energy policies and massive Federal spending caused), apparently he never learns. Now we learn from Mish that the Biden Administration is ready to unleash a $27 billion green slush fund on the US middle class.

Inflation started under Biden, but the massive expansion in money supply (M2) begin with Covid in 2020.

Once this latest spending splurge kicks in, we will see rising inflation again. After all, Biden and Congress have gotten the taste for massive spending bills (like vampires) and spending likely won’t slow down.

Don’t Be Misled By The Low US Unemployment Rate, It Goes Low Just Prior To A Recession (Treasury Curve Remains Deeply Inverted, Mortgage Rates Rise)

Biden’s State of the Union address saw him bragging about his record job creation (actually, it was the private sector, not Biden than created jobs) and historic unemployment rate. What Biden didn’t mention (along with not discussing the porous Mexican border with fentanyl pouring across or why he failed to shoot down a Chinese spy balloon until after it has passed over numerous military reservation) is that the unemployment rate always hit a low point just prior to a recession.

So, here we sit at 3.4% unemployment. But we also see the US Treasury yield curves (10Y-3M and 10Y-2Y) remaining deeply inverted.

The US Treasury 10-year yield is up 5.5 basis points today.

And Bankrate’s 30-year mortgage survey rate is up slightly today.

Help US, McCarthy! Price of Insuring Against US Debt Default Remains Elevated As No End In Sight (Effective Rate Of Interest On US Mortgage Rate Rises)

Everyone seems to have amnesia about Joe Biden’s hatred of Social Security and Medicare. He has tried to cut Social Security, Medicare and Veteran’s benefits as a US Senator. In addition, it was Biden that led the charge to TAX Social Security benefits for seniors. Now Biden has pivoted and is claiming that Republicans are the ones that want to cut Social Security. Wow. Biden simply goes where the political winds blow.

Here is where we set today. The cost of insuring for a US debt default remains elevated as the US has hit its statutory debt limit. This is happening at the effective rate of interest on US mortgage debt is rising.

Help us McCarthy! Because Biden and Schumer don’t want to cut ANY spending.

We need somebody like Mr. Garvey from Key and Peele to lead the debt ceiling debate.

But never fear! Congress LOVES to spend your money, so will eventually raise the debt ceiling.

Just Like The Fed! Despite Cooling Inflation, Forecasts Of Fed Rate Hikes Increase To Peaking In July 2023

It’s just like The Fed to ignore what is going on and do something else.

The one statement that Biden made in his State of the Union Address that was factually accurate was that inflation is coming down. Of course, he then blew it by saying he inherited inflation from Trump which was not true. Headline inflation (CPI YoY) was only 1.4% when Biden was sworn-in as President and rose to 9.1% YoY by June 2021 before finally starting to decline.

But despite the cooling of inflation (and M2 Money growth), The Fed seems hell bent on increasing their target rate, now forecast by Fed Funds Futures to peak in July 2023 at 5.123% before pivoting.

The Fed’s themesong. Drinking with my low-companions, dancing with a woman that’s not my wife, laughing at a joke I’ve heard before, welcome to a night in their life.