Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Inflation soared under Biden/Harris, primarily due to their outrageous wasteful government spending.
US government spening soared with Covid and politicians enjoyed the unbridled spending.
Let’s see if Trump and Republicans can do any better.
It is a brave new world as the US attempts an Argentina-like shift from an over-regulated, corrupt economy to a more free economy. While Argentina has Javier Milei, the US is stuck with greedy Democrats and RINOs and their bloated spending sinking any attempt to cut wasteful spending.
So as we transition from woefully corrupt and demented Joe Biden to Donald Trump, the labor market is … terrible. The job finding rate of unemployed workers has collapsed.
This occurred as the Philly Fed Business Outlook plummeted.
Here is Javier Milei of Argentina and The View’s image of a libertarian leader, Javier Bardem from No Country For Old Men.
Apparently, the late Hawaiian crooner Don Ho foresaw Biden’s irresponsible spending spree. That is, BIG BUBBLES.
Let’s start with the Buffett Indicator (Warren, not Jimmy!). It indicates that the stock market is STRONGLY OVERVALUED.
The S&P 500 Mean Reversion Model also shows the stock market to be STRONGLY OVERVALUED.
How about the Shiller P/E Ratio? Also showing strong overvaluation.
House prices under Biden have exploded partly due to the outrageous Federal spending following COVID.
The Feral Reserve also had a hand in the housing bubble. While mortgage rates remain high (relative to the Trump years), The Fed’s balance sheet remains elevated.
To be sure, some Republicans were complicit in the spending spree. But mostly it was Democrats and the Biden/Harris Administration … which is still doling out millions.
All aboard the Biden/Pelos/Schumer crazy spending train!
Wage and salary income as a percentage of GDP has fallen from over 50% back in 1970 to 43.1% in 2022. And look at the post Covid decline! And the increase in M2 Money.
Meanwhile the US budget balance as a % of GDP has been plunging downwards in recent years.
Despite the slowing economy, pre-tax profits post Covid have SOARED!
Primarily due to reckless/wasteful Federal spending and FEDERAL DEBT that soared.
There you have it! The Biden/Harris economic “miracle” was simply Federal government malspending that benefitted large corporations and few people.
Joe Biden and his woefully corrupt son Hunter of laptop fame.
It is the Biden Boogie!
Joe Biden is leaving the Presidency with an attrocious record. While saying he is leaving Trump with the strongest economy in modern times, the is actually leaving Trump and Republicans with a hollow shell for an economy. It is the final punch in the jaw from an angry, failed President.
The following chart shows that in October and November, the US deficit exploded to a staggering $624.2 billion, and even though this included several calendar adjustments – which explains the freak September surplus which as we said was due to calendar effects – the November deficit of $367 billion was $14 billion more than consensus estimates of $353 billion. Worse, combining October and November we find that not only was the combined number of $624 billion some 64% higher than the corresponding period one year ago, but it was also the highest deficit on record for the first two-months of the year (and that includes the spending insanity during the covid crisis).
Putting the deficit in context, the budget deficit in October and November – the first two months of fiscal 2025 – are now officially the worst start a year for the US Treasury on record.
No wonder even Statist Janet Yellen (Treasury Secretary who failed utterly at her job) apologized that her abysmal performance. “I am concerned about fiscal sustainability and I am sorry that we haven’t made more progress,” she said adding that “I believe that the deficit needs to be brought down especially now that we’re in an environment of higher interest rates.” Meanwhile Biden keeps handing out $$$ to Ukraine, Africa, Syria, illegal immigrants and anything else that asks … unless it it American citizens. Man, does Biden HATE America!
Here is Yellen’s record on debt. A total of $15.2 TRILLION under her leadership.
Under Biden/Yellen (don’t forget Senate fools like Schumer and McConnell!), debt interest has surpassed Social Security and Medicare as the second largest government agency expense.
Biden is a classic progressive Democrat, spending other people’s money like a wild man (sort of like California Governor “Greasy Gavin” Newsom’s father. Or grandfather. And let’s not forget the $222 TRILLION in UNFUNDED liabilities such as Social Security and Medicare.
“See Joe, I can destroy California’s economy just like you destroyed the US economy!”
CMBS delinquencies are on the rise.
The delinquency rate for commercial mortgage-backed securities (CMBS) tied to office properties reached 10.4 percent in November 2024, approaching the 10.7 percent peak reached during the 2008 financial crisis. The ascent is the fastest two-year increase on record, with rates climbing 8.8 percentage points since late 2022, significantly outrunning the 6.3-point rise seen during the financial crisis nearly 15 years ago.
The office real estate sector has been grappling with a severe downturn for several years now, but are accelerating recently as they are driven by persistently high vacancy rates and declining rents. Property values, particularly for older office buildings, have plummeted, with many losing 50 to 70 percent of their market value and in some cases becoming effectively worthless. Those conditions have left real estate portfolio managers and building owners unable to borrow, refinance or sell properties, contributing to rising delinquencies and foreclosures. (Mortgages become effectively delinquent when payments are missed beyond a standard 30-day grace period.)
On the CMBS front, there have been no upgrades in 2023 and 2024.
Efforts to convert office buildings into residential spaces are increasing but remain limited by structural and economic constraints. Many office towers are unsuitable for conversion due to their large floor plates or prohibitively high retrofitting costs which often exceed the cost of demolition and rebuilding. In 2024, 73 office-to-residential conversions were completed, with an additional 30 underway. Despite plans to increase the pace in 2025, the cumulative impact remains minimal, addressing just 7.9 percent of the 902 million square feet of vacant office space nationwide.
Milton Waddams personifies the disastrous progressive politics of Biden/Harris.
The last gasp of the Biden/Harris reign of (economic) error!
After existing home sales unexpectedly ticked up in October, analysts expected new home sales to slow after their recent resurgence (-1.8% MoM). They were right… BUT… the magnitude is mind-boggling!
New Home Sales collapsed 17.3% MoM in October. That is the largest MoM drop since July 2013.
That MoM plunge dragged sales down 9.4% YoY to 610k SAAR – the lowest since Nov 2022
Of course, all the revisions are lower…
Hurricanes Helene and Milton, which tore through parts of the Southeast, delayed sales in the nation’s biggest housing region and dragged down sales overall.
Sales in the South decreased 28% to 339,000, the slowest pace since April 2020. Sales also fell in the West, but rose in the Northeast and the Midwest.
Finally, we note that the median sale price of a new home increased to $437,300 in October, the highest in 14 months.
Does this mean November’s data will see a massive surge in new home sales? …even as rates have increased significantly?
Its a slow down in the housing market.
Existing Home Sales were expected to rebound modestly in October (+2.9% MoM) after dropping for 6 of the last 7 months to the lowest levels since 2010, and they did. Sales rose 3.4% MoM (a beat) but thanks to a downward revision for September from -1.0% to -1.3% MoM. What is most shocking about the shift is that it pushed the YoY change for existing home sales positive (+2.9% YoY) for the first time since July 2021…
…but in context, that shift up to 3.96mm SAAR homes sold is nothing…
High borrowing costs have led to a shortage of previously owned homes on the market, discouraging many would-be home sellers from listing their properties for sale and having to part with their current low financing costs.
“Additional job gains and continued economic growth appear assured, resulting in growing housing demand,” NAR Chief Economist Lawrence Yun said in a prepared statement.
“While mortgage rates remain elevated, they are expected to stabilize.”
Last month, the inventory of available homes edged up 0.7% to 1.37 million, continuing to trend higher although well below pre-pandemic levels.
Despite the weakness in sales, tight inventory is keeping prices elevated, yielding one of the least affordable housing markets on record. The median sale price last month increased 4% from a year earlier to $407,200, the highest ever for any October, the NAR figures show.
Contract signings rose in all four US regions, led by a 6.7% jump in the Midwest.
Sales of single-family homes increased 3.5% in October; purchases of condominiums and co-ops were up 2.7%
Finally, while that’s all very exciting – a scintilla of growth off almost record lows – the fecal matter is about to strike the rotating object as rising mortgage rates lagged impact threatens…
In October, 59% of homes sold were on the market for less than a month, compared with 57% in September, and 19% sold above the list price. Properties remained on the market for 29 days on average, compared with 28 days in the previous month. First-time buyers made up 27% of purchases, still historically low.
Fortunately, the Biden/Harris administration is winding down. On the mortgage side, the mortgage market is already gone under Biden/Harris where mortgage purchase applications are down a whopping 60%.
Mortgage applications increased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 15, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 1.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 1 percent lower than the same week one year ago. And down -60% under Biden/Harris.
The Refinance Index increased 2 percent from the previous week and was 43 percent higher than the same week one year ago.
Slowing economy, rising rates, too expensive housing. Not a good sign for the mortgage market.
There is one way out of the inflation trap. And it’s drill, baby, drill!
For the 53rd straight month, core consumer prices rose on a MoM basis in October with the YoY pace re-accelerating to +3.33%.
The shelter index increased 4.9 percent over the last year, accounting for over 65 percent of the total 12-month increase in the all items less food and energy index.
Thank goodness Harris can’t try to impliment her ridiculous plans to boost housing!
Glad to see Vivek Ramaswamy and Elon Musk (the NEW Two Bobs from Office Space) cleaning up the mess in Washington DC.
Confounded Interest - Anthony B. Sanders 
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