The Fed’s Little Red Book … Of Asset Bubbles: Commercial Real Estate Prices Have Over Doubled Since Post Financial Crisis Low (Equity REITs Have Quadrupled)

No, not The Fed’s little beige book. This is The Fed’s little red book of assets bubbles.

Speaking of asset bubbles, the RCA CPPI commercial real estate index has over doubled since May 2010 (that is just over 9 years!). And the NAREIT all-equity index has over quadrupled since 2009. Notice the lack of volatility in the RCA CPPI index.

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The S&P 500 Index has over tripled since 2009 and the Russell 2000 index has almost quadrupled since 2009.

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The math is pretty simple. Real estate equity and stock market indices have doubled to quadrupled since 2009/2010.

7 + 7 is …

Don’t Panic! Mortgage Purchase And Refi Applications Drop 5% and 3.5% Despite Plunging Mortgage Rates (Seasonal Effect)

Don’t panic. It is June. Mortgage purchase applications typically peak in May and it is generally downhill from there until the beginning of January.

Mortgage purchase applications dropped 5% for the week ending June 14. Mortgage refi applications dropped 3.5%.

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Mortgage purchases applications have been trending down since 2007 until 2015 when they began rising again. Note that mortgage originations with FICO scores below 620 also plunged after 2007.

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Mortgage purchase applications rose after the first of the year with declining mortgage rates, but that happens every year (even when rates rise!). But mortgage purchase application are remaining strong relative to previous years, likely due to declining mortgage rates.

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Mortgage refi applications declined 3.5% WoW as mortgage rates were steady. But we are not seeing the surge in refi applications with a large decline in mortgage rates since the pool of eligible refi applications has shrunk.

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So, don’t panic! The Fed is likely going to cut their target rate again in July.

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