US existing home sales in November collapsed by -38.6% YoY as M2 Money growth runs out of gas.
The above chart is similar to yesterday’s “Ski Slope” chart of US home prices YoY.
Unfortunately, pending home sales YoY are the worst in recorded history.
What will President Biden do about this dire situation? Our “Vacationer in Chief” is off on yet another vacation to St. Croix in the US Virgin Islands, so probably nothing. Now that Biden is sunbathing, what will his Treasury Secretary Janet Yellen do?
The market began downshifting earlier this year as the Federal Reserve started hiking its benchmark interest rate, with the goal of easing high inflation that’s been driven in part by skyrocketing housing costs.
Rates for 30-year, fixed mortgages reached 7.08% in October — and again in November — though they have since retreated, Freddie Mac data show. With borrowing costs roughly double where they were at the start of the year, and inflation leaving less savings to put toward a down payment, homebuyers have pulled back. Sellers are also reluctant to list their properties, yet houses that are on the market are lingering and getting discounted as demand slumps.
The Case-Shiller National Home Price Index “cooled” to 9.24% YoY growth as The Federal Reserve tightens its monetary noose.
Of the top twenty metro areas, both Miami and Tampa Florida were up over 20% YoY. Hot ‘Lanta, Charlotte and Dallas were over 10% YoY. Mordor on the Potomac was up “only” 6% and all other metro areas were under 10%.
But if we look at October/September changes, all metro areas are down (MoM) with San Francisco the worst.
Finally, The Federal Reserve’s massive balance sheet is still out in force.
Look at this chart of the Case-Shiller National home price index again The Fed’s balance sheet. Uh-oh.
Let’s look at San Francisco (my hometown) since The Federal Reserve began interest rate tightening.
A classic good news, bad news story. The good news? US new home sales rose 5.8% in November, better that the expected -5.1%, The bad news? On a year-over-year basis, US new home sales FELL
Sales of new US homes unexpectedly rose in November, suggesting some stabilization in demand as mortgage rates eased late in the month from their highs.
Purchases of new single-family homes increased 5.8% to an annualized 640,000 pace last month after rising in October, government data showed Friday.
A mid-month retreat in 30-year mortgage rates back below 7% along with an increase in builder incentives may have helped support demand. Still, the sales data are volatile from month to month. With home prices remaining elevated and the Federal Reserve poised to raise interest rates further, headwinds for the housing market will persist into 2023.
The increase in sales last month was concentrated in the West and Midwest.
The report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home was up 9.5% from a year earlier to $471,200.
There were 461,000 new homes for sale as of the end of last month, though the grand majority remain under construction or not yet started. The number of homes sold in November and awaiting the start of construction — a measure of backlogs — rose to the highest since the beginning of the year.
But for all the cheerleading, new home sales were DOWN -15.3% on a year-over-year basis. The ninth straight month of negative new home sales growth.
At least the median price of new home sales was down -2.79% from October to November.
Here are the Lords of Darkness (Schumer and Pelosi) who concocted this witch’s brew of crony payoffs that will be ulitmately signed by El Stupido (Biden).
Do I detect a trend in the US Leading Economic Indicator data?
The Conference Board’s US Leading Economic Indicator was released this morning and it wasn’t pleasant. The US Leading Index was down -1% MoM in November.
On a year-over-year basis, it is down -4.5% YoY as The Fed withdraws its massive monetary stimulus.
The good news … for military contractors … is that Biden and Congress have given Ukraine’s Zelenskyy ANOTHER $47 BILLION.
On a year-over-year (YoY) basis, US real GDP rose to a measly 1.9%. US core PCE YoY fell slightly to 4.93%. M2 Money growth is at 2.6% YoY.
The Misery Index (U-3 inflation rate + inflation) remains elevated and above 10% (it currently clocks-in at 12%), far above the pre-Covid reading of around 5%.
Here is the rest of the story. On a quarter-over-quarter basis, real GDP rose to 3.2% QoQ. Personal consumption rose 2.3% QoQ. Core PCE (Personal Consumption Expenditures) rose to 4.7% QoQ. If we use core PCE as a measure of inflation, inflation is rising.
Here is a video of Fed Chair Jerome Powell (doubling as President Joe Biden) saying creating inflation and then raising interest rates to fight it “It’s for the best.”
(Bloomberg) — Bank of Japan Governor Haruhiko Kuroda just gave investors a glimpse of what to expect when the world’s boldest experiment with ultra-loose monetary policy comes to an end.
In the face of sustained market pressure, Kuroda shocked markets Tuesday by saying he’ll now allow Japan’s 10-year bond yields to rise to around 0.5%, double the previous upper limit of 0.25%.
Whether this is a strategic tweak to buy time for his yield-curve control settings until his decade-long term ends in Aprilor the start of the end for his unprecedented monetary easing remains to be seen.
Here are the BOJ’s rate. bands being widened.
The yen?
And with the ECB, Fed and now Bank of Japan all tightening, we are seeing sovereign yields rising across the board.
The Japanese sovereign yield curve is upward sloping unlike the humped US Treasury yield curve.
The 12-month-ahead probability of recession spiked in November across all of yield curve models. The deterioration in the outlook was most significant in the one that relies on the 3-month/18-month forward spread — Fed Chair Jerome Powell’s favored model — which now sees a 59% chance of recession next year, compared with almost 0% six months ago. Yield curve models see the strongest signal for recession starting around September 2023.
We assess the probability of recession in the months ahead by looking at a suite of models: three yield curve models — which take as their sole input the spreads between 2-year/10-year, 3-month/10-year, and 3-month/18-month forward US Treasury yields, respectively — as well as a model that takes 13 financial and macroeconomic indicators as inputs.
All three yield curves inverted further in November, indicating higher probability of a downturn next year. Notably, the 3-month/18-month forward curve inverted for the first time this year, and the model based on that indicator suggests a 59% chance of recession in 12 months (vs. 32% for the same reference period in the prior update) — that would be in November 2023.
My favorite yield curve is the 10-year – 2-year curve which has been inverted for 112 straight days.
Like the Mel Gibson movie “Apocalypto!”, we are seeing the US middle class and low-wage workers being economically sacrificed by The Federal Reserve, the Biden Administration and Congress.
Despite the rhetoric that Fed stimulus (aka “Stimulypto!”) is being removed, the US remains plagued by NEGATIVE real 10-year Treasury yields, NEGATIVE real Fed Funds Target rate and NEGATIVE real average hourly earnings growth under Inflation Joe.
This chart demonstrates the Stimulytpo problem. Prior to Covid, US wage growth was consistently higher than headline inflation. But starting in March 2021, three months after Biden became President, headline inflation became higher than wage growth.
Even with all these negative REAL rates, the US economy is forecast to have almost no growth in 2023.
To quote Peggy Lee, Is That All There Is? Trillions in Federal spending and Fed monetary stimulus and all we get it 0.50% Real GDP??
Confounded Interest - Anthony B. Sanders 
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