Yellen: Mortgage rates have been so low for so long that it’s created a lock-in effect where people don’t want to sell their homes to buy new ones for fear of losing their attractive rates.
That’s made it “almost impossible” for first-time homebuyers to enter the housing market, U.S. Treasury Secretary Janet Yellen said during her testimony before the House Ways and Means Committee.
Now hold on a minute, Janet. YOU were the one that kept rates too low for too long as Federal Reserve Chair.
What was her record on mortgage rates? Yellen kept the Fed target rate (upper bound) at 25 basis points under Obama/Biden until December 2015, so only one rate hike under Obama/Biden. Then came the election of Donald Trump in November 2016. Then Yellen raised The Fed target rate 4 times after Trump was elected.
Mortgage rates fell to 3.78% by November 2017, so Yellen helped keep mortgage rates low. But mortgage rates soared after Trump’s election to 4.22% by the end of her term.
There are other reasons why first-time homeownership is so difficult, like local NIMBY (not in my back yard) policies and the absolutely lousy labor market.
She added that Biden’s massive tax increase won’t hit middle class households (other than the massive INFLATION tax that was levied by Biden). That is a plain lie. the Tax Foundation says that someone who’s married, two kids, making $85,000 would pay $1,700 more in taxes. A married couple with two children making $165,000 annually would pay $2,450.50 more than in the previous year, while a family with three kids pulling in $200,000 per year will shell out almost $7,500 more per year.
So much for Biden’s “No one making under $400,000 will pay and additional penny of tax.”
New Orders also remain negative (but did improve) and prices continue to rise (though at a slower pace). Labor market measures suggested flat employment and slightly shorter workweeks (hours worked index remained negative for a seventh month in a row) this month.
However, wit that said, wage pressure picked up dramatically this week to a seven-month high…
Source: Bloomberg
However, as always, we glean the most informative perspective from the respondents completed surveys where the pessimism shines through…
The business and political environment is terrible.
Business has not been this slow since COVID, and I’m worried.
Consumer confidence for consumer goods has noticeably worsened.
Customer orders have dropped. The indication is the economy is hurting spending in our area specifically. Customer uncertainty is worsening.
I keep thinking we’ll hit bottom and either level out or turn up, but we keep pushing those hopes out a month, and another month, and another.
There has been a decrease in new orders for three weeks now. Currently, we think this will come around, but we get more concerned as time goes on.
Industrial manufacturing is showing signs of positivity due to the possibility of an interest rate decrease. Please do it. Manufacturing is really hurting.
High prices remain problem for many businesses:
Inflationary pressures on raw materials and construction costs are driving up the cost of public projects. This is causing states to delay or scramble for funding for projects that have long lead times.
Business is generally good, but we’re starting to see more customer resistance to prices. Our costs have increased dramatically over the last two years, and we have customers asking to hold prices to last year’s level, which we just can’t do. We continue to make capital investments to improve productivity and reduce unit labor cost.
And finally, many are fearful of another four years of Bidenomics:
Political instability and politicization have hampered growth.We are entering stagflation.
Fewer governmental regulations would lower our cost of doing business. An example is the 332 report, which we must fill out for the U.S. government; it has no value for us, just expense.
Business is extremely slow, and we see no signs of improvement.We think it will stay slow until after the presidential election, after which, we will either have four more years of slow business or an improving economy.
Joe Biden could barely eat his dinner at the White House Correspondents’ Dinner. And we think he is calling the shots in The White House?? Oh well. Perhaps it is Treasury Secretary Janet Yellen or Klaus Schwab of the World Economic Forum.
In any case, Treasury bond issuance in 2024 is expected to hit $1.9 TRILLION. Surpassing levels seen even during the 2008 financial crisis.
And with inflation, the US personal saving rate is near the lowest level since Obama (2010).
And with the core inflation rate still higher than anytime since 2010, households are paying more for … everything depleting their savings.
With Biden and Congress spending like drunken sailors on shore leave, and no end in sight, this will eventually explode. Ukraine, foreign aid, no border security, virtually no money for Maui fire, E. Palestine Ohio is still a wreck, etc. They always have money for someone else. And if Trump is elected in November, watch CNN and MSNBC and Biden/Congress blame Trump.
Commodities are a way to protect yourself against the government and their insane spending and debt.
My point? Gold keeps rising!
The leading foreign holder of US debt is Japan, which is following the insane path as the US and resembles a banana republic.
Former Fed chair under Obama and current Treasury Secretary Janet Yellen under Biden is Doctor Wonderful. NOT!!
I don’t know what Biden thinks is so funny. Maybe it is because House “Majority” Leader Mike Johnson (RINO-LA) gave Biden and Schumer everything they wanted (Ukraine, Israel funding but nada for security our borders). Life is good when you are stupid and mean-spiritied like Joe Biden!
Biden is so vain: capped teeth, hair plugs, constant tan, face lifts, etc.
Then the numbers spiraled out of control. Yet Biden/Congress keep shoveling money to Ukraine and leave our borders unsecured.
Washington’s fiscal situation has drastically changed since then; total debt has surpassed $34 trillion, the annual budget shortfall exceeds $1 trillion, and interest costs have topped $1 trillion.
David Walker, the former comptroller general of the United States and a Main Street Economics advisory board member, is unsurprised.
Seventeen years ago, Mr. Walker rang fiscal alarm bells. Like Ross Perot before him, he took his case to the American people and delivered the cold, hard truth: The government’s books are unsustainable, and interest charges on the mounting debt will swallow a significant portion of federal revenues.
During this time, the former head of the Government Accountability Office (GAO) appeared on a widely viewed episode of “60 Minutes,” toured the country to spotlight worrisome trends in the U.S. government’s budget (he did this again in 2012), and attempted to convince lawmakers of the unsustainable fiscal path.
He also penned a 2009 book titled “Comeback America: Turning the Country Around and Restoring Fiscal Responsibility.”
Given the treasure trove of budgetary numbers coming out of the nation’s capital almost daily, such as nearly half of income tax revenues being dedicated to interest payments, Mr. Walker’s warnings have not been heeded nearly two decades later.
According to the Congressional Budget Office’s long-term outlooks, the national debt will eye $50 trillion by 2034, fueled by around $17 trillion in cumulative deficits. As a percentage of GDP, debt held by the public and the deficit will reach 166 percent and 8.5 percent by 2054, respectively, the CBO forecasts.
“Washington has become addicted to spending, deficits, and debt, and they’re charging the credit card and planning to send the bill to younger and future generations of Americans,” Mr. Walker told The Epoch Times.
“That’s irresponsible. It’s unethical, and it’s immoral, and it needs to stop.”
Is the United States past the point of no return?
“Only God knows when the tipping point is going to occur, and God’s not telling us,” he said.
He combs through various metrics to gauge the situation.
One of these is the debt-to-GDP ratio, which is presently at about 122 percent. Outside of the coronavirus pandemic, this is a record high.
Mandatory spending as a percentage of the federal budget is another metric. It currently stands at around 73 percent.
Another one is interest as a percentage of the budget, which is close to 15 percent.
For Mr. Walker, it is not only raw numbers but what the trends are displaying, which requires a deep dive into demographics.
“We have an aging society with longer lifespans, relatively fewer workers, supporting more retirees, and a skills gap,” he noted.
Last year, two notable developments happened: a majority of Baby Boomers were at least 65, and the birth rate tumbled to the lowest in a century.
This will metastasize into a costly burden for the federal government, particularly Social Security.
The Peter G. Peterson Foundation estimates that the current worker-to-beneficiary ratio is 2.8-to-1, down from 5.1-to-1 in 1960. By 2035, the Social Security Administration projects the ratio will further slide to 2.3-to-1.
Republicans and Democrats
President Joe Biden has claimed that he has acted fiscally responsibly, telling a crowd at a North America’s Building Trades Unions event on April 24 that he cut the national debt. (Insert a TV laugh track here). President Biden has repeatedly touted this claim over the last 18 months, although he has added close to $7 trillion to the national debt since taking office in 2021.
While Republicans have griped over the current administration’s spending endeavors, experts assert that the GOP has also contributed trillions of dollars to the debt pile. One of the GOP-led expansionist initiatives was Medicare Part D under former President George W. Bush.
This program, which was designed to utilize private health care plans to offer drug coverage to Medicare beneficiaries, added $8 trillion in new unfunded obligations. Mr. Walker accepted that “the politicians were totally out of touch with fiscal reality,” considering that Medicare was already underfunded by $19 trillion.
Put simply, both parties have been fiscally irresponsible, and now the bills are coming due.
Mr. Walker purported that politicians suffer from myopia as they are too focused on the next election and, as a result, fearful of making tough decisions. They also experience tunnel vision, he says, meaning they only concentrate on one issue at a time “without understanding the interdependency” and “the collateral effect.”
Self-interest is another malady infecting both sides of the aisle as they aim to keep their jobs and ensure their party stays in power.
“We’ve lost our sense of stewardship,” he said.
“Stewardship is not just generating results today, not just leaving things better off when you leave them when you came, but better positioned for the future,” Mr. Walker explained. “We’ve lost that sense. We need to regain it if we want our future to be better than our past.”
He identified Rep. Jody Arrington (R-Texas), who chairs the House Budget Committee, as one of the few lawmakers to realize the fiscal issues by committing to the Fiscal Commission Act and supporting a constitutional amendment that would limit government growth and stabilize the debt-to-GDP ratio.
“There are others, but there’s not enough,” Mr. Walker said.
Earlier this year, the House Budget Committee advanced the Fiscal Commission Act of 2024 out of committee with bipartisan support.
The bill would establish a 16-member panel featuring six Republicans, six Democrats, and four outside experts without voting power. The group would explore strategies to balance the budget as soon as possible and assess mechanisms to enhance the long-term solvency of various entitlement programs, especially Social Security and Medicare.
Despite some consternation from several Democrats, the bipartisan push received applause, including from the Committee for a Responsible Federal Budget.
“The federal debt is on an unsustainable course, and lawmakers have been unable or unwilling to correct it,” the organization stated. “A fiscal commission would bring Members of both parties and chambers together to facilitate a conversation over how to solve these problems, without pre-prescribing any particular solution (or a solution at all).”
Hope and Change
Whether the United States can improve its fiscal trajectories remains to be seen.
Mr. Walker is hopeful about some of the legislative efforts coming out of the nation’s capital. The country is beginning to face the consequences of years of fiscal mismanagement, making it harder to sell its debt to the rest of the world.
In recent months, many Treasury auctions have led to lackluster demand among domestic and foreign investors. Market watchers have warned that global financial markets might share Fitch and Moody’s concerns about America’s fiscal deterioration.
But when discussing trillions of dollars, percentages, GDP, and servicing costs, how can the average person, worried about paying his mortgage or replacing a broken-down refrigerator, grasp or even be concerned with these trends?
According to Mr. Walker, you tap into their “head and heart.”
“You have to help them understand that we’re already seeing some of the implications of fiscal irresponsibility,” he said, adding that the causes of the Roman Empire’s demise are familiar to what is transpiring in the United States today: fiscal irresponsibility, a decline in moral values, an overextended military, and an inability to control its borders.
However, while it is vital to translate these gigantic numbers into terms the layman can understand, experts also need to “hit their heart.”
“Do they love their country? Do they love their kids, and do they love their grandkids?” he said. “We’re mortgaging their future at record rates.”
Ever worse, politicians have promised $215 TRILLION in unfunded entitlements to the bottom 99%. When this all explodes, who will be left standing to make good on these promises??
The Green Slime! The global movement towards Green Energy (or global Marxist movement) is really The Green Slime! Or maybe it should be renamed “The Red Slime.”
And then we have Hertz dumping its inventory of EVs. A slew of used Teslas have hit the Hertz car sales website after the company announced Thursday it planned to sell off 10,000 more electric vehicles from its fleet than originally planned, bringing the fire sale’s total to 30,000. Perhaps one of the reasons you can get such a good deal on a Tesla at Hertz right now is that the outlook for EV value retention is pretty grim at the moment.
Given the incidents of electric cars catching fire, perhaps saying its a fire sales is a bad choice of words. But what it says is that DESPITE massive incentives to buy EVs, consumer demand stinks. Although Transportation Secretary Pete Buttigieg will claim the market is booming.
How bad is the trainwreck that is the Biden Regime? China is bailing on US Treasuries.
The Biden Regime is hereafter known as The Green Slime, given their horrible policies. Unfortunately, The Green Slime is here already … and Hertz knows customers don’t want them at least on a temporary basis.
The Federal Reserve is playing the song “Don’t rock the boat” ahead of the Presidential election. Despite the horrible economic news.
1) 4 months of hotter inflation (like today’s stagflationary GDP report)
2) Nearly 1.5 million full-time jobs decline with 1.9 part-time jobs created over a year
3) $2 trillion annual deficits
Leading traders to price in 1 rate cut in December 2024. AFTER THE PRESIDENTIAL ELECTION!
Under Biden, home prices are up 32.5% and conforming 30Y mortgage rates are UP 160%.
One of my colleagues at George Mason University in finance (an economics PhD) constantly quoted Lenin’s famous “You have to break a few eggs to make an omelet.” But why is it always OUR eggs that have to be cracked, never the wealthy elite.
Manufacturer’s Durable Goods New Orders growth peaked in April 2021, thanks in part to M2 Money Growth peaking in February 2021. And its been all downhill since then.
This is the 8th downward revision of durable goods orders in the last year…
Source: Bloomberg
Under the hood, defense and non-defense capital goods orders rose with non-defense aircraft orders surging over 30% MoM…
Source: Bloomberg
But… it looks like the AI bubble just burst as Computer & related Products orders plunged 3.9% MoM – the biggest drop since COVID lockdowns…
Source: Bloomberg
Finally, and more problematically, core capital goods shipments – a figure that is used to help calculate equipment investment in the government’s gross domestic product report – saw only a small 0.2% MoM rise, which left core shipments down 1.2% YoY – the biggest YoY drop since the COVID lockdowns…
Source: Bloomberg
Now that Biden is considering a NATIONAL CLIMATE EMERGENCY granting him 130 War-like powers, I shudder to think for much green spending he will initiate.
Biden: “How many times does Trump have to prove we can’t be trusted?”
Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 19, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.2 percent compared with the previous week and was15 percent lower than the same week one year ago.
The Refinance Index decreased 6 percent from the previous week and was 3 percent higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.24 percent from 7.13 percent, with points increasing to 0.66 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The latest report from real estate data provider ATTOM shows CRE foreclosures topped 625 in March, up 6% from February and 117% from the same period last year.
ATTOM has been tracking commercial foreclosures since 2014. The number of foreclosures is approaching the peak of 889 in October 2014.
“California began experiencing a notable rise in commercial foreclosures in November 2023, surpassing 100 cases and continuing to escalate thereafter,” the report said.
New York, Florida, Texas, and New Jersey also showed increases in CRE foreclosures last month.
Regional banks provide a bulk of the financing for the space. The ongoing mess in the lending space due to tighter conditions adds pressure to the CRE downturn. Banks are expected to set aside more money to cover potential CRE losses.
Last month, Federal Reserve Chair Jerome Powell testified on Capitol Hill, “We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot,” adding, “This is a problem that we’ll be working on for years more, I’m sure. There will be bank failures, but not the big banks.”
Data from a recent Treasury Department’s Financial Stability Oversight Council (FSOC) warned office vacancy rates have climbed sharply in recent years, reaching a record of 13.1% at the end of 2023.
CoStar analyst Phil Mobley recently noted the “reset in office demand has rocked US markets.”
Morgan Stanley warned earlier this year that office prices could plunge 30% due to sliding demand.
For those wondering why the excess supply of office towers can’t be converted into affordable housing, Goldman also noted that prices must drop 50% for housing conversions to make sense.
Powell has a rolling crisis on his hands. And the goal is to save the fireworks for after the election.
Confounded Interest - Anthony B. Sanders 
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