US New Home Sales Down -32% Under Biden While Mortgage Rates Are Up 89%, Framing Wood Up 21.4% (New Home Sales Down -16.6% For April)

I have never seen two Federal entities make such a mess in my life. The Federal Reserve and The Federal government.

The good news? The 10-year Treasury yield is down -12.9 BPS this morning generally resulting in lower 30-year mortgage rates. Of course, the reason why the 10-yield is falling is generally bad news.

The bad news? US New Home Sales fell -16.6% MoM in April as mortgage rates skyrocketed.

Since the installation of Joe Biden as President, new home sales have plunged -31.2%, mortgage rates are up 88.9%, and framing lumber prices are up 29.2%.

Biden is out there bragging about rising energy prices which he views as a necessity to force the conversion of America to electric cars and trucks. Biden is the first President in history to gloat over the suffering of American households.

Under Biden, regular gasoline prices are up 92%, diesel prices are up 111%, and CRB Foodstuffs are up 61%.

Say, framing lumber for housing is cheaper than food. Maybe Biden will suggest Americans transform to being beavers and gnaw on wood.

How The Fed Killed Mortgage Current Coupon Rate – MBS Index, Back To 1985 Levels (As It Tries To Fight Inflation, A Fight It Can’t Win)

As The Federal Reserve tries to fight inflation (it can’t thanks to Federal energy policies and bottlenecks), it is causing a disconnect between mortgage current coupon rate and the MBS index coupon. The disconnect is so bad that it is back to 1985 levels.

The Fed can certainly try to cool inflation, but Biden is intent on raising energy prices (leading to food price increases, and everything else) to shift us to electric cars. So, Biden is unlikely to back off.

So, The Fed is left trying to fight a war against inflation that only Biden can fight.

Meanwhile, the US mortgage market is getting pulverized

Slowing? US Closed House Sales Down -9.50% YoY As Mortgage Rates Rise On Fed Tightening (New Listings Down -5.7% YoY)

US home prices were growing at a near 20% YoY rate for the latest Case-Shiller National home price index report. But mortgage rates have soaring like a SpaceX missile shot.

The result? Closed sales for April 2022 are down -9.5% YoY.

Of course, I am moving to one of the metro areas in the USA where closed sales fell only -1.10% YoY in April: Columbus Ohio. I should move to San Diego CA where closed sales fell -21.4% YoY.

Of course, the US still suffers from lack of available inventory for sale.

April new listings are down -5.7% YoY. Columbus Ohio didn’t change from April ’21. San Diego is down -18.4% YoY for new listings.

Rising mortgage rates? Inflation? What a total fiasco.

Fear The Talking Fed! Mortgage Payments Rise 43.4% YoY As Fed Jawbones Monetary Tightening (But Still Has Not Shrunk Balance Sheet Yet)

Mortgage rates have increased dramatically under “Middle Class Joe” as The Federal Reserve attempts to choke-off inflation caused by … The Fed coupled with Biden’s energy policies (hope you are enjoying those high gasoline and diesel prices!) and the Federal government’s staggering spending spree under Pelosi, Schumer and McConnell.

Thus far, The Federal Reserve has leveled-out out their Treasury Note and Bond purchases, increased their Agency Mortgage-backed Securities (AgMBS) holdings, but strangely have reduced their holding of Treasury Inflation-Protected Securities (TIPS) in the face of rising inflation.

And while The Fed Funds Target rate is a lowly 1%, it is projected to rise to 2.890% by the February 1, 2023 FOMC meeting. That should send mortgage rates up.

As if mortgage rates haven’t skyrocketed already, thanks to The Fed’s jawboning about having to raise rates and extinguish inflation.

With sizzling mortgage rates (cooling a bit as the global economy slows), home mortgage payments have risen +43.4% YoY.

Now we have President Biden trying to scare us about the Monkey Pox, yet leaves the southern border wide open. One would think that Biden would shut the borders (as if the surge in Fentanyl, sex trafficking and other diseases aren’t reason enough. But I do predict another massive spending bill from Biden/Congress to combat Monkey Pox and the resurgence of Covid variants.

Meanwhile The Fed jawbones fighting inflation with monetary tightening in the future, even if they jawboning causes mortgage rates to soar and mortgage payments to spiral.

Weekend Update! Commodities Versus S&P 500 Index (How To Hedge Against The Fed And Biden’s Policies)

We have a double whammy facing investors, The Federal Reserve wanting to take away the monetary punch bowl and Federal energy policies that are crushing middle-class households and lower-wages workers.

But how do you hedge against The Federal Reserve tightening and Biden’s reckless energy policies?

Take a look at investing in commodities (S&P GSCI Commodity-Indexed Trust and the Bloomberg Commodity Index) versus the S&P 500 Total Return index since The Fed began signaling that they would take away the monetary punch bowl.

Yes, commodities like food and gasoline/diesel prices are up dramatically under Biden’s energy policies (not to mention the USA’s proxy war with Russia).

The Fed seems determined to remove the Fed “Snake juice” from the economy.

Here Comes The Night! US Inflation Rate Rising, Expected Growth Declining (10Y Treasury Yield Down, US Equities Down >-1%)

Here comes the night!

The US economy us approaching recession as inflation soars and expected growth declines.

Food and energy prices are soaring, hitting middle class and low-wage households like a hammer. While the headline inflation rate is 8.3% YoY, food is up 63% under Biden and gasoline is up 92%.

The 10-year Treasury note yield is down today, which bodes well for 30-year mortgage rates.

The Dow, S&P 500 and NASDAQ are all down over -1% today.

Baby please don’t go! Down the economic drain.

Inflation Fightin’ Fed? Fed Can’t Fight Food And Energy Inflation, But They Can Crash The Housing Market (To Tame Total Inflation, Fed Would Have To Raise Rates To 21.38%!)

Inflation Fightin’ Fed?

Kansas City Fed President Esther George said The Fed isn’t focused on impact of rates on stocks (or pension funds, apparently).

The inflation that is crushing Americans is due to energy and food price increases. That is, the non-core inflation. Under Biden, food is up 63%, gasoline is up 92% and diesel prices are up 112%. But The Fed doesn’t consider food and energy prices, per se.

If we look at the Taylor Rule considering fighting inflation including food and energy, The Fed would have to raise their target rate to … 21.38%.

Now, The Fed can clearly cool-off the housing market by raising rates. In fact, my fear is that they go too far and crash the housing market. The Fed will NEVER get to 20% again like we last saw under Volcker in 1981. 20% rates certainly cooled home prices back then and Fed rate hikes helped crash the housing market in 2008.

So, when The Fed says they want to be the inflation-fightin’ Fed, we must be aware what The Fed can and cannot do. They can’t tame the inflation beast in the form of food and energy prices (unless they crash the economy), but they can crush home prices.

Still Hot, Hot, Hot! US Existing Home Sales Fall -2.4% MoM In April, But Median Price Is 14.85% YoY And Inventory For Sale Remains MIA (Fed Stimulypto Still Helping Housing Bubble)

US Existing Home Sales were 5.61M SAAR in April, down -2.4% from March’s -3.0% MoM reading. But median prices YoY for existing home sales printed at 14.85%, still hot, hot, hot.

With 3 consecutive declines in MoM existing home sales, how can prices still be raging at 14.85%? First, inventory for sale in April remains low compared to 2010 (yellow line). Second, The Federal Reserve’s Stimulypto (excessive monetary easing) is still out there in force despite Jerome “Slowhand” Powell signaling rate increases (green line). 30Y mortgage rates are still rising.

Where do we go from here? 30 year mortgage rates have been climbing as The Fed signals its intents to tighten monetary policy. But with global economic slowing, Treasury yields have been coming down (like today’s -5.2 BPS drop (Germany’s 10Y Bund Yield dropped -8 BPS on slowing global economic growth).

But remember, the Existing Home Sales numbers are for April.

Demolition Men! Gasoline Prices UP 85% Under Biden, Mortgage Rates UP 93.4% Under Powell

I feel like we are in an economic demolition derby under Joe Biden and The Federal Reserve (with freshly reappointed Fed Jerome Powell at the helm).

Under Biden, regular gasoline prices are UP 85%. The Biden Administration recently cancelled 0il-and-gas drilling leases in Gulf of Mexico and Alaska Coast, helping to drive up gasoline prices even higher.

In the two-pronged attack out of Washington DC, The Federal Reserve is tightening their monetary policy in an effort to combat 40-year highs in inflation (caused by excessive Federal spending and Biden’s ill-advised energy policies), causing residential mortgage rates to soar 93.4% under Biden’s Reign of Error.

It is almost like the Biden Administration and The Federal Reserve are engaged in an economic demolition derby to see who can cause the most destruction to America’s middle class and lower-wage workers.

We should call the current administration and The Federal Reserve “Demolition Men.”

And here is Biden’s Disinformation Chief giving out penalties for whatever Biden doesn’t like.

1984 anyone?

Dark Night! Consumer Sentiment And Home Buying Sentiment Plunge With Bidenflation And Fed Monetary Tightening

A picture is worth a thousand words.

Nothing has been the same since Covid and The Federal Reserve’s massive overreaction to the government shutdowns of the economy.

Notice how the University of Michigan Consumer Sentiment Index (white line) has plunged since Covid and the ensuing rise in inflation. University of Michigan’s Buying Conditions for Houses has also plunged to new depths.

Yes, Bidenflation is just killing us.

Rising inflation (highest in 40 years) and hottest home price bubble (even hotter than the infamous housing bubble of 2005-2007) AND rising mortgage rates have placed a damper on home buying sentiment.

The theme song for the Biden economy is The Blasters’ Dark Night.

Meanwhile, the middle class is left with leftovers.