Back in 2023, Socialist Paul Krugman declared that “the war on inflation is over!!! “We” won, at very little cost.” I love when elitists claim “We won!” since clearly 99% of Americans lost since food, housing and car prices up are double digits under Biden.
The problem is that food, energy, shelter, and used cars/trucks are a huge part of Americans consumption basket.
Under Biden, food CPI is up 23%. Home prices are up 34% and used cars/truck prices are up 17.7%.
A note to Paul Krugman, YOU may have won, but the rest of Americans lost. Consumer purchasing power of the US Dollar is DOWN 16.5% Under Biden.
… which seems to suggest that at least according to Chicago-based purchasing managers, the economy is in a depression.
This is how the final number looked relative to expectations.
Looking at the report we find the following:
Business barometer fell at a faster pace; signaling contraction
New orders fell at a faster pace; signaling contraction
Employment fell at a faster pace; signaling contraction
Inventories fell at a faster pace; signaling contraction
Supplier deliveries fell at a slower pace; signaling contraction
Production fell at a slower pace; signaling contraction
Order backlogs fell at a faster pace; signaling contraction
Did nothing rise? One thing did:
Prices paid rose at a slower pace; signaling expansion
So we have not just a depression, but a stagflationary depression in which everything else is going to hell, except prices: they keep on rising.
And while it is unclear what has prompted this unprecedented bearishness (the surely negative contribution from Boeing is likely to blame for a substantial portion of the apocalyptic outlook), one thing is certain: Goldman will have to come up with even more goalseeked surveys that explain away reality and tell us how purchasing managers really should feel…
On the good news front, REAL Gross Domester Income rose to 1.5%.
As copper prices keep on rising. Which is bad news for Biden’s shift to EVs! (Once again, Biden is driven around in gas guzzling Chevy Tahoes/Suburbans and owns a Chevy Corvette). There isn’t enough copper production to build the EVs that Biden wants.
I have testified and sat through many trials in New York city and have never seen a court case quite like the one the Trump lost with the Judge effectively telling the jury to find Trump guilty.
What I like about Biden’s economy … nothing. Most of Biden’s economic growth came from Trump’s spending and Fed monetary policy from the Covid shutdown of 2020.
The sharp downward revision primarily reflected a downward revision to consumer spending, which rose 2.0% annualized, down from 2.5% in the first GDP report and below the 2.2% estimate.
Drilling down into the number, the 1.3% increase reflected increases in consumer spending (below previous forecasts) and housing investment that were partly offset by a decrease in inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
The increase in consumer spending reflected an increase in services that was partly offset by a decrease in goods. Within services, the leading contributors to the increase were health care as well as financial services and insurance. Within goods, the leading contributors to the decrease were motor vehicles and parts as well as gasoline and other energy goods.
The increase in housing investment was led by brokers’ commissions and other ownership transfer costs as well as new single-family housing construction.
The decrease in inventory investment was led by decreases in wholesale trade and manufacturing
In terms of bottom-line contributions, we find the following:
Personal consumption accounted for 1.34% (down from 1.68%), or more than the entire GDP print.
Fixed Investment added 1.02%, up from 0.91% in the first estimate.
The change in private inventories subtracted -0.45%, a deterioration from the -0.35% estimated previously.
Net trade (exports less imports), subtracted -0.89% from the bottom line print, comparable to the -0.86% detraction in the first estimate.
Finally, government added just 0.23%, up from 0.21% initially estimated, yet still the lowest contribution since Q2 2022.
Home buyers will be able to buy a home without putting any money down under a new program launched by United Wholesale Mortgage, one of the largest U.S. mortgage lenders.
The Pontiac, Mich.-based company’s new program will be available to first-time home buyers and people earning at or below 80% of an area’s median income, the company said in a press release.
UWM (UWMC) will give eligible buyers a second-lien loan of up to $15,000, in the form of down-payment assistance, for 3% of the home’s purchase price. The loan will not accrue interest or require a monthly payment.
“Homeownership is something we’re very passionate about,” Melinda Wilner, chief operating officer at UWM, told MarketWatch.
The company had previously allowed buyers to put down as little as 1% on their homes, but it wanted to go further to help home buyers, she said. The lender is anticipating a higher volume of borrowers with its new zero-down program, Wilner added.
Poor underwriting practices were a key driver of the subprime-mortgage crisis in the U.S., the International Monetary Fund wrote in 2008. But unlike the low- and no-down-payment loans that proliferated during that time – when lenders made loans to people who eventually were unable to pay them and lost their homes – UWM’s program is different, Wilner said.
“The aspect of this program that makes me nervous is the silent second mortgage,” Anneliese Lederer, senior policy counsel at the nonprofit Center for Responsible Lending, told MarketWatch in an interview. “It’s great that there’s no interest on it, but it’s a balloon payment, and borrowers need to understand what a balloon payment is.”
A balloon payment refers to a bigger-than-usual one-time payment that is required by the lender at the end of the loan term, according to the Consumer Financial Protection Bureau.
On its website, UWM states in the fine print at the bottom of the page that the second loan “has no minimum monthly payment requirements, a term of 360 months and is fully due as a balloon payment upon the occurrence of either a refinance of the [first mortgage], [or] payoff of the [first mortgage] or the final payment.”
Not Like 2008?!
Housing prices are stretched
The economy is slowing
The lender has no cushion against falling home prices
There are indications of steeply falling homes in many markets.
OK, we don’t have massive liar loans like we did in 2008. But mortgage affordability is the lowest ever, and unemployment is starting to tick up.
Anything to Keep the Bubble Going
To top it off, these mortgages are explicitly for people who make 80% or less of an area’s median income.
How dumb is that? In general, such borrowers have no down payment, if any savings at all, and many are already likely on the edge.
It would make more sense giving these mortgages to those who make 120% or more of an area’s median income, provided they also have little debt, and just lack the down payment.
President Joe Biden called on Congress to provide up to $25,000 in down-payment assistance to first-generation home buyers in his State of the Union Address.
These vote buying proposals to keep the economy humming long enough to win an election are always at the expense of those who fall for the scheme.
The loss of a job or any unexpected debt will throw these buyers right over the cliff.
The Commerce Department revised March durable goods orders from +2.6 percent to +0.8 percent. Now it reports a 0.7 percent gain vs an expectation of -0.5 percent.
Existing-home sales fell 1.9 percent in April and are also down 1.9 percent from a year ago. Sales have not gone anywhere for 17 months.
Key Highlights
Existing-home sales faded 1.9% in April to a seasonally adjusted annual rate of 4.14 million. Sales also dipped 1.9% from one year ago.
The median existing-home sales price rose 4.8% from March 2023 to $393,500 – the ninth consecutive month of year-over-year price gains and the highest price ever for the month of March.
The inventory of unsold existing homes climbed 9% from one month ago to 1.21 million at the end of April, or the equivalent of 3.5 months’ supply at the current monthly sales pace.
Big Negative Revisions to BLS Monthly Jobs in 2023
On April 24 the BLS released a little-read jobs report that shows reported jobs in 2023 may be wildly overstated.
Business Employment Dynamics (BED) data and and Monthly Job Data both from the BLS, chart by Mish
The BED report is based on records on 9.1 million private sector establishments. Current Employment Statistics (CES) is the monthly jobs report based on 670,000 establishments.
Obviously, the BED report is more timely, but it lags. CES provides an opportunity for economists (and the president) go gaga over numbers likely to be wildly wrong.
CES Overstatement
2023 Q2 CES Overstatement: 489,000 Jobs
2023 Q3 CES Overstatement: 832,000 Jobs
Q2+Q3 Overstatement: 1.321 Million Jobs
Thus, the BLS says that the BLS monthly job reports for 2023 Q2 and Q3 are overstated by a total of 1.321 million jobs.
Zero Percent Down Synopsis
An economic slowdown is underway (see five previous links).
Jobs are overstated by 1.3 million, discretionary spending is faltering, and UWM (UWMC) is offering zero percent down mortgages to buyers most likely to get in trouble if anything goes wrong.
The Case-Shiller national home price index hit a new high in February. That’s the latest data. Economists don’t count this as inflation.
Other than the late stages of the 2008 housing bubble, there has been no worse time in history to offer zero percent down mortgages.
My own personal comments: Will UWM be retaining these loans on their balanace sheet? Or simply resellling them to Fannie Mae, Freddie Mac? Likely the latter.
I saw former President Obama criticizing former President Trump for not passing “transformative” changes. That is, Trump didn’t sign any Obama-like transformative changes (like Obamacare). Truimp did try to slow down the damage done by Obama and his transformative agenda (e.g., open borders, wealth redistritution, green energy) that Biden has attempted to continue.
As we approach the party conventions and Presidential election of 2024, we saw the Economic Surprise Index (ESI) in May decline to -0.126.
Coupled with Biden’s negative buying conditions for housing (higher mortgage rates and soaring house prices), Obama’s Jacobian transformative economic fantasty is on thin ice.
Speaking of higher interest rates, US debt servicing costs currently make up 12% of government spending. Jacobin revolution = Cloward-Piven.
Let’s hope the Obama/Biden Jacobin revolution doesn’t get to this point!
Mortgage applications increased 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 May 17, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 1.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.1 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 11 percent lower than the same week one year ago.
The 30-year fixed mortgage rate declined for the third straight week, dropping to 7.01 percent – the lowest level in seven weeks. Thus, the Refinance Index increased 7 percent from the previous week and was 21 percent higher than the same week one year ago.
VA-insured mortgages prepay the fastest, followed by FHA-insured mortgages then conventional mortgages.
I know a place where the housing market is hot! Florida and Texas!
I learn something new everyday. Like Biden yesterday claimed has was VP during Covid (uhm, Covid was in 2020 and Biden left the office of VP in 2017). But nothing gets in the way of Biden and a good story! Like his whopper that he inherited 9% inflation from Trump (even CNN fact-checked this whopper and found it was false. It was only 1.4%!)
But inflation is still at 4.5%, according to the Cleveland Federal Reserve.
Now, there are many measures of inflation to choose from, from Core CPI of 2.1% YoY to Cleveland Fed’s Median CPI of 4.5%.
The US is on a “Highway to Hell!” thanks to flawed economic policies under Biden.
First, interest and mortgage rates under Biden have soared driving buying conditions for housing to all-time lows. Combine sky-high home prices with high mortgage rates and we have as serious affordability crisis.
Second, on the interest rate front, the 30-year Treasury bond is on track for the 3rd worst annual return since 1919 and Russia’s invasion of Ukraine. Not not the current invasion, but the 1919 invasion.
Third, China is dumping their holdings of US Treasuries and Agency Debt at record rates.
Of course, mortgage rates hit 18% in 1981. So, the term high mortgage rates is relative. The US had low rates for too long (Bernanke/Yellen) and mortgage rates are now in the 7% range, up 165% under Biden. And home prices are up 34% since Biden was sworn-in as President. Wow! Mortgage rates up 165% and home prices up 34% under Biden’s Reign of Error.
The US middle class and low-wage workers are back on the chain gang while the top 1% party hearty.
The Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 0.6 percent in April 2024 to 101.8 (2016=100), after decreasing by 0.3 percent in March. Over the six-month period between October 2023 and April 2024, the LEI contracted by 1.9 percent—a smaller decrease than its 3.5 percent decline over the previous six months.
It is surprising that Americans trusts the millionaires in the Administration (like Biden) or Congress (like Schumer, McConnell, etc) to have our backs on the roaring inflation rate. At least Speaker Mike Johnson isn’t a millionaire … yet. But that might explain his selling out conservatives.
Bloomberg reports that PBoC Deputy Governor Tao Ling announced the new 300 billion yuan ($41.5 billion) nationwide program of cheap funding to allow state-owned companies to purchase unsold homes.
Ling said the funding will be directed at 21 providers, including policy banks, state-owned commercial lenders, and joint-stock banks. A rate of 1.75% will be offered. The low-cost loans have a one-year term and can be rolled over four times.
The new program powerfully signals that policymakers are pushing for property policy easing and measures to balance the supply-heavy housing market, which casts a dark cloud over the world’s second-largest economy. This announcement appears to be a step in the right direction in a national-level policy.
Also, on Friday, policymakers eased mortgage rules and removed the mortgage rate floors for first and second homes. PBoC also lowered the minimum downpayment ratio for first-time homebuyers to 15%. The downpayment ratio for second-home purchases was lowered to 25%.
Chinese Vice Premier He Lifeng said that authorities in cities with excess home inventories should purchase unsold properties and convert them into affordable housing. He also urged local governments to repurpose inactive land parcels held by property developers to alleviate their financial troubles.
This was a very policy-heavy week to save the debt-stricken real estate market. Data showed that property investment and new home sales in April experienced larger contractions, while housing prices slid even further.
China’s ailing property sector is a drag on GDP.
Housing sales are tumbling.
And apartment and commercial property sales are sliding.
In markets, the CSI 300 Real Estate Index closed up 9%, with gains from April 24 totaling about 36%. Yet the latest gains in the property index are still 68% below the early 2018 peak.
The index’s weekly gain was the most since early December 2015.
It isn’t in a Communist countries’ DNA to let markets solve the problem … like letting prices correct no matter how painful that adjustment is. Biden and his “economic” advisor Jared Bernstein (not an economist but a public policy hack) would likely follow China’s idiotic solutions to the problem.
I debated Bernstein once at a Washington DC conference. He was arrogant but eventually confessed that he didn’t know anything about housing or mortgages. Nice economic advisor, Joe!
Confounded Interest - Anthony B. Sanders 
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