(Bloomberg) — US mortgage rates jumped to a 16-year high of 6.75%, marking the seventh-straight weekly increase and spurring the worst slump in home loan applications since the depths of the pandemic.
In fact, mortgage application just fell to the lowest level since May 1997.
The contract rate on a 30-year fixed mortgage rose nearly a quarter percentage point in the last week of September, according to Mortgage Bankers Association data released Wednesday. The steady string of increases in mortgage rates resulted in a more than 14% slump last week in applications to purchase or refinance a home.
Over the past seven weeks, mortgage rates have soared 1.30 percentage points, the largest surge over a comparable period since 2003 and illustrating the abrupt upswing in borrowing costs as the Federal Reserve intensifies its inflation fight.
The effective 30-year fixed rate, which includes the effects of compounding, topped 7% in the period ended Sept. 30, also the highest since 2006.
The Refinance Index decreased 18 percent from the previous week and was 86 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 13 percent from one week earlier. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 37 percent lower than the same week one year ago.
Here is today’s table of MBA mortgage applications and its ugly.
On the real estate side, Bankrate’s 30-year mortgage rate dropped to 6.85% as the 10-year US Treasury yield drops.
On the home price front, according to the Black Knight Home Price Index (HPI), median home prices fell 0.98% in August, only marginally better than July’s upwardly revised 1.05% monthly decline July. August 2022 marked the largest single-month price declines seen since January 2009 and rank among the eight largest on record. The monthly rate of home price decline is now rivaling that seen during the Great Recession – the question is how long it will continue to do so, and how far off peaks prices will fall.
Now, will The Fed pivot to correct the plunging M2 Money growth?
With all the turbulence in markets thanks to the war in Ukraine and Biden’s green energy mandates and spending (not to mention Statists like Klaus Schwab screaming about a Great Reset), I was reminiscing about more simple times.
19 nations now have inverted 10yr-2yr yield curves.
And housing inventory for sale growth is soaring out West and in Tennessee?
At least Ohio is seeing a modest increase in housing inventory for sale.
On a parting note (before I watch the Ohio State Buckeyes annihilate the Rutgers Scarlet Knights tomorrow at 3pm EST, reverse repos parked overnight at The Fed just hit an all-time high. Apparently, banks don’t believe Janet Yellen’s inflation is transitory mumbo-jumbo.
$32 TRILLION of global stock value has been wiped out since December 2021.
Today’s core PCE deflator reading of 4.9% YoY shows that the inflation surge is not over. With a core PCE deflator of 4.9%, the Taylor Rule suggests that The Fed Funds Target Rate should be at 9.65%, far below its current level of 3.25%. So, IFF The Fed is following any sort of rule, rates should continue to soar.
And if we use headline inflation of 8.30% YoY, the Taylor Rule suggests hiking the target rate to 14.75%.
Fire! European stock valuations have dropped to lowest since 2012.
The US Dollar index is soaring (not helping Europe) as The Federal Reserve tightens monetary policy to combat the inflation fire.
Meanwhile, the Atlanta Fed’s GDPNow real-time forecast for Q3 is at least above zero (barely) at 0.271%.
Fed officials continued to hammer home the central bank’s hawkish outlook, with Atlanta President Raphael Bostic saying he backs raising rates by a further 1.25 percentage points by the end of this year. Meanwhile, the People’s Bank of China said it will accelerate usage of targeted loans.
Banks get to park money at The Federal Reserve overnight in the form of repurchase agreements (or repos). But as inflation is raging in the US, banks have parked a record $2.366 TRILLION at The Federal Reserve.
The MOVE bond volatility index keeps rising as inflation roars and The Fed fights back,
The US bond volatility index is now almost as high as during the Covid Crisis and approaching financial crisis levels.