Mortgage Purchase Demand Decreases, Lowest Level Since 1995 As Fed Removes Punch Bowl (Punch Bowl To Dust Bowl)

Today’s mortgage application (demand) numbers from the Mortgage Bankers Association was disappointing to say the least. Mortgage purchase demand just sank to it lowest level since 1995.

Typically, mortgage purchase applications peak in May or June of each year before beginning their annual lemmings drive downwards. But this year is seeing a early turn for the worse.

The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 44 percent lower than the same week one year ago. The Refinance Index decreased 6 percent from the previous week and was 74 percent lower than the same week one year ago.

The Fed is hell bent on removing the punch bowl to fight inflation. Looks like Biden’s economic plan is turning the punch bowl into a dust bowl.

Simply Unaffordable! US Housing (Un)affordability Hits An All-time Low As Fed Tightens (22 Straight Months Of NEGATIVE Real Wage Growth Isn’t Helping)

US housing is simply unaffordable.

Janet Yellen and The Federal Reserve held rates too low for too long and now we are paying for it. Now, after a massive run-up in home prices, The Fed is raising rates helping make US housing the most unaffordable in history (or at least since the early 1980s).

And negative real wage rate growth for 22 straight months isn’t helping!

US Pending Home Sales UP 8.1% MoM In January, But Down -22.4% YoY (Negative YoY Growth For 19 Of Last 20 Months)

US pending home sales rose 8.1% in January. At the same time, pending home sales declined -22.4% on a year-over-year (YoY) basis.

So, YoY pending home sales growth has been negative for 19 of the last 20 months.

US Durable Goods NEW ORDERS Fall -4.5% In January As Fed Retreats (Defense Capital Goods New Orders UP 25.4% YoY)

The Federal Reserve is retreating from its Covid-era monetary expansion. And with the retreat, US durable goods NEW ORDERS fell -4.5%% in January. The worst reading since … Covid in 2020.

A breakdown of new orders shows that while NONDEFENSE capital goods orders dropped -5.4% YoY in January, DEFENSE capital goods orders increased by 25.4% YoY.

Damn, it feels good to be a gangster.

Gap Between VIX Put-Call Volume And CBOE Put-Call Ratio Is Widest Since 2006, Precursor To Major Volatility Spike (The Deregulation That Buttiegieg Blamed Trump For Would NOT Have Prevented The East Palestine Ohio Train Derailment)

The gap between the VIX Put-call volume and CBOE Put-call ratio is the widest since 2006, the precursor of a major volatility spike.

Meanwhile, for those of you interest in railroad regulatory issues, as a general matter, regulations are rarely ever “reversed,:” but rather modified or replaced with changes. No administration would be able to outright “repeal” a major safety regulation because it almost certainly be immediately enjoined by a court and found to be counter to Congressional delegation.

I assume most of the attention will be on this final rule (https://www.federalregister.gov/documents/2020/10/07/2020-18339/rail-integrity-and-track-safety-standards) published and effective on Oct 7, 2020. It is considered”deregulatory” in the sense that it results in an economic or compliance cost savings, mostly owing to a change in the permissible type of track integrity monitoring, and decrease in the resulting number of “slow orders.”

Unlike Pete Buttigieg who apparently did not read the regulations when he blamed Trump, read the actual published “deregulation.” A faulty railcar axel which was the cause of the East Palestine Ohio trail derailment was NOT impacted by the “deregulation.” Instead of Mayor Pete, he should be called “Cheap Shot Pete.”

US New Home Sales Collapse (-19.4% YoY) In January As Fed Withdraws Stimulypto

Another sign of a not healthy economy is housing. New Home Sales collapsed -19.4% from January 2022 (aka, year-over-year or YoY).

If I were Joe Biden, I would be touting the month-over-month numbers, up 7.20% from December to January. But the reality is that year-over-year new home sales are down -19.4%.

Also, on the “Alarm!” front, US banks are expecting higher delinquencies, including on residential mortgages.

University of Michgan consumer sentiment for housing is rising, but still woefully below the 100 benchmark.

Uh-oh! January Personal Consumption Expenditures Soar 1.8% MoM, PCE Deflator UP 5.4% YoY, 2-year Treasury Yield Rises 10 Basis Points (Here Comes The Fed!)

Not really a surprise, but January’s personal spending numbers came in hot at 1.8% MoM. Also, Personal Consumption Expenditures PRICE index (aka, inflation) rose to 5.4% YoY.

Here comes The Fed! The 2-year Treasury yield rose 10 basis points this morning.

Pelsoi and Schumer (with McConnell) got the gold mine and American consumers got the shaft.

Is That All There Is? US Q4 Real GDP Up Only 0.91% YoY Despite $54.8 TRILLION In Federal Debt (+36%) Added Since January 2020

The US Federal government reminds me of the Peggy Lee song “Is That All There Is?” Since the outbreak of Covid in 2020 and the absurb spending spree by Pelosi and Schumer, the Federal government has increased their debt by 36% to help pay for the Federal spending spree. That amounts to $54.8 TRILLION in additional Federal debt since January 2020.

What did the US economy get for all that Federal spending? In Q4 2022, Real GDP rose by … 0.91% YoY. Seriously? Is that all there is from $54.8 TRILLION in additional Federal debt?

What do you expect when low-life lobbyists shuffle in and out of Congressional offices and the White House. Lobbyists don’t represent middle class America, but represent the elites.

Another bit of lousy news. Look at the trend in S&P 500 Earnings Surprise (5 year).

On the housing front, the US housing market was hit with the biggest six-month wipeout since 2008.

At least US Transportation Secretary “Pothole Pete” Buttigieg FINALLY showed up (three weeks after that East Palestine Ohio train disaster). Here is Buttigieg practising for his press conference.

Summertime Blues! US Treasury 3m30y Curve In Bear Steepening Mode, Indicating A US Recession By Summer 2023

The US economy has a case of the summertime blues.

Bull steepenings in the yield curve are generally seen as a precursor to a recession, but they are often preceded by bear steepenings. The 3m30y curve is currently bear steepening, indicating a recession could begin as early as the summer. In fact, the 3m30y curve is now inverted at -94.628 basis points pointing to a recession in summer 2023.

This is happening as the US house payment to income ratio near all-time highs.

Terminal Velocity! Fed Implied Terminal Rate Now 5.363% At July ’23 FOMC Meeting As US GDP Report Revised Lower On Weaker Consumer Spending In Q4 ’22 (GDP PRICE Index Revised UP To 3.9%)

Yesterday, we saw The Federal Reserve release the minutes of the last meeting. In a nutshell, The Fed is going to keep raising rates.

The terminal Fed Funds target rates is now 5.363% for the July FOMC (Fed Open Market Committee) meeting in 2023.

This comes as US Q4 GDP was revised lower on weaker consumer spending, revised downward to 1.4%

With the revision of Personal Consumption, real GDP was revised downward to 2.7% annualized QoQ.

The Taylor Rule estimate for The Fed Funds Target rate is 10.15%. The Fed is only at 4.75%, so there is a long way to go! Except that The Fed doesn’t follow any useful rule like the Taylor Rule. Just the “seat of the pants” rule.