Mortgage Purchase Applications Rise In Latest MBA Survey But Still Down -11% Since Same Week Last Year (MBS Convexity Rising As Rates Decline)

The slowing US economy has a silver lining: Treasury and mortgage rates are declining. And the is spurring faster mortgage prepayments.

Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 2, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 11 percent lower than the same week one year ago.

The Refinance Index increased 16 percent from the previous week and was 59 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) decreased to 6.55 percent from 6.82 percent, with points decreasing to 0.58 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The deciine in rates led to an increase in MBS convexity.

Watch out! Mortgage convexity continues to rise!

Meanwhile, Kamala “The Kommie” Harris laughs.

The Fed Money Printing And Stock Prices And Housing Prices (Why The Fed Must Keep On Printing!)

The Fed’s theme song: Keep on printing!

Look at this chart of the S&P 500 index against M2 Money stock.

And this chart of Case-Shiller home prices against M2 Money.

Bottom line? The Fed has to keep on printing money. Otherwise, the US economy will collapse like a cheap building.

Here is Fed Chair Jerome Powell creating assets bubbles.

Commercial Real Estate Is Dying! NY CRE Property Sells For 97% Discount At Auction (135 W 50th St)

The US commercial real estate sector is dying, like an episode of The Twillight Zone.

Example? This is 135 W 50th St in NYC. In 2006, this building sold for $332 million. Yesterday it sold for $8.5 million at auction. A 97% discount!

It is mostly smaller banks with large CRE exposure.

What Is The Fed Doing? Mortgage Rates Up 102% Since 2022 As The Fed Still Has A Long Way To Go In Shedding Its $2.4 TRILLION MBS Holdings

What’s it going to be? Mortgage rate increases or balance sheet (MBS) reductions?

Since the Covid outbreak in early 2020, The Fed went wild with rate cuts and massive and unpredented balance sheet expansion.

Let’s look at The Fed’s puchase of agency MBS and mortgage rates. From 2020 2022, The Fed continued to buy agency MBS. But in 2022, all hell broke loose as The Fed went crazy RAISING rates, but slowly began unwinding their balance sheet. The result? Mortgage rates began to climb. In fact, the US conforming mortgage rate for 30 years has risen 102% since early 2022. The Fed is only slowing unwinding their MBS holdings.

Despite the struggles in the residential housing market, the COMMERCIAL mortgage market is a trainwreck.

What will The Fed do?? After all, nothing from nothing beats nothing.

Cacklenomics! Buying Conditions For Houses Hits All-time Low (High Mortgage Rates + High Home Prices)

Cacklenomics strikes again!

The University of Michigan consumer survey revealed that buying conditions for housing just hit an all-time low.

High house prices and high mortgage rates aren’t helping.

Purchase loan demand keeps dropping.

US New Home Sales Fall In June As Homebuyer Confidence Crashes To Record Low (Biden/HarrisNomics or Cacklenomics)

From Zero Hedge.

After a disappointing dump in existing home sales in June, new home sales just confirmed the slowdown, dropping 0.6% MoM (notably below the 3.4% MoM expected) and also saw a major downward revision in May from -11.3% MoM to -14.9% MoM. That leaves new home sales down 7.4% YoY…

Source: Bloomberg

That shift dragged the new home sales SAAR down to 617k – basically unchanged since 2016…

Source: Bloomberg

While the median new home price rose in June, it remains below the median existing home price…

Source: Bloomberg

It appears the homebuilder subsidy fad is wearing off as mortgage rates show no signs of easing significantly…

Source: Bloomberg

Of course, none of this should be a surprise as homebuyer confidence has collapsed to an all-time record low…

Source: Bloomberg

Will cutting rates help?

Probably not. Bidenomics is now called Harrisnomics (or Cacklenomics) since Harris as VP was the tiereaker in the US Senate. So, she holds some responsibility for the outrageous, wasteful spending in Washington DC.

Nothing From Nothing! Conference Board Leading Economic Indicators Remains Negative At -4.8 YoY (US Unfunded Entitlements Now Exceed Total US National Assets!)

Nothing from nothing should be the slogan of Bidenomics.

Conference board’s leading economic indicators remains negative YoY at -4.8.

Worried? What if I told you that the promises of unfunded entitlements from the Federal government now exceeed the TOTAL national assets of the US??

Way to go, Joe! But he had plenty of help from Congress.

Something Stupid! Biden Proposes Rent Control Of 5% Annual Cap Rent Increases

President Biden was expected yesterday to propose a cap of 5% on annual rent increases for tenants of major apartment landlords, and he did. Whether it can happen is something else.

As the White House communicated on Tuesday, the administration is looking for Congress to pass legislation for landlords with more than 50 units in their portfolios, that being the proxy for institutional owners, although it would also affect private investors, family offices, and others that might own at least that many units. According to administration calculations, the total pool would cover 20 million rental units.

The law would then give landlords a choice. They could either restrict annual rent increases to no more than 5% a year or they would forfeit the ability to take fast depreciation of rental housing. There would be an exception for new construction or “substantial renovation or rehabilitation.”

So, Biden is dusting off the old Jane Fonda/Tom Hayden Santa Monica, CA rent control scheme.

I am guesing that this will not pass the House, but will probably pass in the Confederacy of Dunces: the US Senate.

Going Down! US Producer Prices Rise At Fastest Pace In 15 Months As Services Costs Soar (Buying Conditions For Housing Hit All-time Low!)

We’re going down!

After May’s MoM deflationary impulse (thanks to a plunge in energy costs), June was expected to see a modest 0.1% rise (and we have seen energy prices starting to rise again). Sure enough, headline PPI printed HOT at +0.2% MoM (and May was revised higher), pushing the YoY print up to 2.6% (well above the 2.3% expected)…

Source: Bloomberg

That is the highest PPI since March 2023.

Core PPI rose by 0.4% MoM (double the 0.2% exp), sending the YoY price rise up by 3.0% (also the hottest since March 2023)…

Source: Bloomberg

The jump in PPI was driven by a resurgence in Services costs as Energy remains deflationary (for now)…

Source: Bloomberg

The June rise in the index for final demand can be traced to a 0.6-percent increase in prices for final demand services. In contrast, the index for final demand goods decreased 0.5 percent

Perhaps worse still, the pipeline for PPI (intermediate demand) is accelerating…

Source: Bloomberg

On the housing side, buying conditions for housing tanks to all-time low.

Inflation Slows To 3.0%, But Shelter Still Rising At 5.2%, Electricity Up 4.4% (Core Prices Continue To Rise And Have Never Been Higher)

Are you ready? You can tell an election is on the radar since inflation numbers are settling down for the most part. According to the BLS, overall inflation fell slightly in June to 3.0%.

Shelter CPI is up 5.14% YoY as M2 Money growth has been rising slowly … again.

Core CPI also ‘missed’, rising just 0.1% MoM (vs +0.2% exp), dragging the YoY Core CPI down to +3.27% – its lowest since April 2021…

Source: Bloomberg

Goods deflation also dominates core prices disinflationary trend…

We do note that Core consumer prices have still not seen a single monthly decline since Bidenomics began.

Core consumer prices are up just under 18% since Bidenomics began (+4.9% per annum) – that is dramatically higher than the 2.0% per annum Americans experienced under Trump…

Core consumer prices have never been higher.

The much-watched SuperCore CPI rose on a MoM basis but declined (back below 5.0%) on a YoY basis (but obviously remains extremely elevated)…

Source: Bloomberg

Transportation Services are seeing prices fall…

Finally, we can’t help but get a sense of deja vu all over again here. What if… The Fed cuts (because bad – recession – data), Biden loses (because dementia), and inflation re-accelerates (just like in the 80s)…

Source: Bloomberg

Challenger job cuts in construction we the highest since 2008 putting downward pressure on wages.