Let’s start with personal savings as a percentage of disposable income. It has been in the red (meaning very low) under Billions Biden.
And The Fed is really in the red under Biden’s inflation rattling spending with losses leading to a surge in remittances.
And then we have the growth in the Federal deficit as a % of GDP in the red.
And the S&P 500 is in the red since August.
Even Biden’s pro-censorship buddies in the tech world are in the red since July.
On the black side of the ledge, Bitcoin (along with gold) are through the roof.
The first inflow to golf since May ’23.
But at least Bidenomics has helped the donor class get wealthier and has helped the lessers get part-time jobs.
Yes, Bidenomics is a highway to hell for the 99%. But a stairway to heaven for the donor class and 1%. And the donor class (and defense/banking/tech/drug industries) have Biden under their thumbs.
My foolish US Senator Sherrod “The Mad Marxist” Brown claimed that he hasn’t noticed illegal immigrants.
Of course, Senator Brown could travel with Biden to the border to witness military age men crossing the border under Biden/Mayorkis “:Operation US Chaos.”
Bidenomics new theme song is “Addicted To Gov.” Bidenomics needs lots of Federal spending and borrowing to survive. But all this spending and borrowing is causing rapid price increases and other distortions.
The US is teetering on World War III with tensions soaring in the Middle East, Ukraine, and southeast Asia. And Biden wanders off to Rehobeth Beach Delaware to relax … while over 200 Americans are still held hostage by terrorist group Hamas. The bad news? Biden is back in Washington DC trying to make the border crisis even worse by demanding funding for “border security” in the form of transporting illegal immigrants to US cities. Is The Squad running The White House??
But on the housing/mortgage front, we have another week of declining mortgage demand/applications as mortgage rate hit almost 8%.
Mortgage applications decreased 1.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 20, 2023.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.0 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 Refinance Index increased 2 percent from the previous week and was 8 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was22 percent lower than the same week one year ago.
Mortgage rates followed Treasuries higher, with the 30-year fixed mortgage rate jumping 20 basis points to 7.9 percent – the highest since 2000. Rates have now risen seven consecutive weeks at a cumulative amount of 69 basis points.
Hey Joe, I’ll bet those 200+ US hostages held by Hamas aren’t enjoying ice cream cones.
Back in red? As US fiscal policy deteriorates further thanks to endless Federal spending (not to mention seemingly endless wars under Biden and Nobel Peace Prize winner Obama), we are seeing pain in the bank lending business.
Commercial and industrial (C&I) loan lending standards is tightening (blue line) to levels typically seen in recessions. Even though Barclays HY-10Y spreads remains low.
Bank credit growth remains negative for the twelve straight week.
Billions Biden’s spending spree has led to the budget gap has doubled in the last year.
CDS is now at 55.24, highest after the Covid shock.
Under Biden/Yellen’s economic model, the appropriate themesong is “Hell’s Bells.”
Bidenomics has been a massive windfall for the top 1% of households in terms of wealth due to the emphasis on green energy transformation. But for the 99%, Bidenomics has been a disaster (unless you consider low-paying job creation a victory).
The auto sector, considered a leading economic indicator, pinpoints the arrival of the crushing auto loan crisis and even the possibility of the onset of the next recession. In late January, we Fitch revealed tat consumers are falling behind on auto payments – the most since the peak of the Great Financial Crisis. Fast forward nine months later, to September, that rate just hit the highest level in nearly three decades.
And with interest rates rising the fastest in history,
And Discover projected charge off rate for 2023 would more than double from its current 1.82% to as much as 3.90%!
In what could be the early innings of the auto loan crisis, something we called a “perfect storm” earlier this year, Bloomberg cites new Fitch data:
The percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings.
Source: Bloomberg
“The subprime borrower is getting squeezed,” said Margaret Rowe, senior director with Fitch.
Rowe said, “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”
What has been widely known is the consumer has been funding car purchases with even more debt to afford record-high prices, with many monthly payments exceeding $1,000. Factor in the Federal Reserve’s most aggressive interest rate hiking cycle in a generation, elevated inflation, and the restarting of the federal student loan payments, tens of millions of consumers are under immense pressure this fall.
An endless stream of retailers, such as Walmart, Nordstrom, Macy’s, and Kohl’s – all of whom have recently warned about a consumer slowdown. Banks have also raised concerns, such as Morgan Stanley’s Mike Wilson, who believes the consumer is ‘falling off a cliff.’ And the latest high-frequency data from Barclays shows card spending has taken another leg down.
As delinquencies rise, Cox Automotive forecasts that 1.5 million vehicles will be seized this year, up from 1.2 million in 2022. That’s still below pre-pandemic levels, but the numbers could soar if a recession materializes in 2024.
Bloomberg cited Bankrate data that shows consumers with excellent credit can lock in an average interest rate of around 5.07% for a new car and 7.09% for a used vehicle. Those with bad credit should expect a new car rate of 14.18% and 21.38% for a used car.
The perfect storm we described earlier this year is unfolding.
At least residential mortgage delinquency rates remain low. With elevated home prices, the incentive to default on a loan is limited.
So The Perfect Storm hasn’t hit residential real estate … yet. But with households needing $114,000 in annual income to afford a typical home …
But at least home prices aren’t rising as fast as olive oil and orange juice!! Wow, that excesssive stimulypto by The Fed and Federal government is really screwing things up in the economy.
Biden is like George Clooney in “The Perfect Storm” sending the US out into stormy, violent seas while obessing about Ukraine and protecting Iran/Hamas.
• Active inventory declined, with for-sale homes lagging behind year ago levels by 2.7%. For 17 straight weeks, the number of homes available for sale has registered below that of the previous year.
• New listings–a measure of sellers putting homes up for sale–were down again this week, by 4.4% from one year ago. Since mid-2022, new listings have registered lower than prior year levels, as the mortgage-rate lock-in effect freezes homeowners with low-rate existing mortgages in place. Although the year over year declines are smaller now than the double-digit pace seen earlier in 2023, declines from the pre-pandemic period are still substantial.
Inventory remains far below levels seen before the financial crisis. But Case-Shiller National Home Price Index (blue) remains elevated along with The Fed’s balance sheet (red) which is barely below $8 TRILLION. And Powell didn’t say much about speeding up the trimming of The Fed ballast.
Bidenomics strikes … again. No, not his inane ramblings about Hamas being “the other team” or that Hamas has to learn to shoot straight. But his policies freezing effects on the economy. Like housing.
Existing-home sales faded in September, according to the National Association of REALTORS®. Among the four major U.S. regions, sales rose in the Northeast but receded in the Midwest, South and West. All four regions registered year-over-year sales declines.
Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – waned 2.0% from August to a seasonally adjusted annual rate of 3.96 million in September. Year-over-year, sales dropped 15.4% (down from 4.68 million in September 2022). … Total housing inventory registered at the end of September was 1.13 million units, up 2.7% from August but down 8.1% from one year ago (1.23 million). Unsold inventory sits at a 3.4-month supply at the current sales pace, up from 3.3 months in August and 3.2 months in September 2022.
The total existing home sales SAAR dropped back below 4mm for the first time since October 2010 (during the foreclosure crisis)…
Source: Bloomberg
Sales fell in all regions except the Northeast in September… and in every price range…
Single-family home sales fell to an annualized 3.53 million pace, the lowest since 2010. Condominium and co-op sales also declined.
“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” said Lawrence Yun, NAR’s chief economist.
“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”
First-time buyers made up a historically low 27% of purchases, down from the prior month.
Cash sales represented 29% of total sales, matching the highest level in over a decade. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 18% of the market.
“It would be very unusual to have higher cash compared to first time buyers,” Yun said on a call with reporters.
And, if mortgage rates (and thus affordability) are anything to go by, things are about to get real…
Source: Bloomberg
The median selling price rose 2.8% from a year earlier to $394,300, the highest September reading on record, pushing affordability even lower. But existing home prices are falling relative to new home prices (with the ratio near record lows)…
It looks like The House may elect a RINO as Speaker (Patrick McHenry, RINO-NC) to replace McCarthy. One RINO replacing another RINO … all so The House can continue its insane, inflation inducing spending.
Despite what whispering Joe Biden says, he didn’t reduce the budget deficit other than briefly. The budget deficit is forecast to run persistemly high because of endless, reckless spending and forever wars (Ukraine, Israel and … Taiwan?).
(Bloomberg) — The Federal Reserve faces potential policy pitfalls ahead as it wrestles with how to respond to investor angst about the US government’s $33.5 trillion mountain of debt.
It’s exceedingly difficult to have sound monetary policy without sound fiscal policy. Biden/Democrats do NOT equal sound fiscal policy.
Adding to the pain, the long end of the yield curve is getting clobbered.
And bank balance sheets are getting clobbered too.
The King of Endless War! Billlions Biden! Who Janet Yellen said is “vibrant.” This is vibrant??
Trust Biden to muddy the waters about US debt, deficits and foreign wars. Hell, Biden could only say that the infamous missile that landed on the Gaza hospital was launched by “the other team” like he was watching an Eagles/Giants football game instead of a slaughter of innocents by Hamas terrorists.
Under Bidenomics, home prices are up 30% while real weekly earnings growth has been negative for most of Biden’s Presidency. And mortgage rates are up 178% under Bidenomics.
It’s harder than ever for Americans to afford a home.
A homebuyer must earn $114,627 to afford the median-priced U.S. home, up 15% ($15,285) from a year ago and up more than 50% since the start of the pandemic. That’s the highest annual income necessary to afford a home on record.
This is based on a Redfin analysis that compares median monthly mortgage payments for homebuyers in August 2023 and August 2022. The income data in this analysis is adjusted for inflation. See the bottom of this report for more on methodology.
Housing costs are higher than ever because of the one-two punch of sky-high mortgage rates and rising home prices. The average rate on a 30-year fixed mortgage was 7.07% in August. Mortgage rates have climbed even higher since then, hitting 7.57% during the week ending October 12–their highest level in over two decades. But even though soaring mortgage rates have dampened demand, low inventory is causing home prices to increase. The typical U.S. home sold for about $420,000 in August, up 3% year over year and just about $12,000 shy of the all-time high hit in mid-2022.
The typical U.S. homebuyer’s monthly mortgage payment is $2,866, an all-time high. That’s up 20% from $2,395 a year earlier, and by that time payments had already increased substantially from the beginning of the pandemic, a time of ultra-low mortgage rates and yet-to-skyrocket home prices. In August 2020, for instance, the typical monthly payment was $1,581, based on that month’s average mortgage rate of 2.94% and median home price of $329,000. At that time, a homebuyer would have needed to earn $75,000 per year to afford the typical home.
The typical American household earns about $40,000 less than the income needed to buy a median-priced home. The median household income was roughly $75,000 in 2022, the most recent year for which annual income data is available. Hourly wages have risen in 2023, but not nearly as fast as the income necessary to afford a home is rising: The average U.S. hourly wage has increased by about 5% over the last year.
“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that’s not what’s happening now: Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates–and that’s propping up prices,” said Redfin Economics Research Lead Chen Zhao. “Buyers–particularly first-timers–who are committed to getting into a home now should think outside the box. Consider a condo or townhouse, which are less expensive than a single-family home, and/or consider moving to a more affordable part of the country, or a more affordable suburb.”
Affordability is less of a problem for all-cash and move-up buyers. The major increase in income necessary to afford a home hits first-time homebuyers hardest. Buyers who can afford to pay cash aren’t impacted by high mortgage rates, and they likely earn more than the income necessary to purchase a home, anyway. Buyers who are selling a home to buy another one are in a better boat than first-timers because they have likely built up equity in their current home, which takes a bit of the sting out of soaring monthly payments. The caveat to the caveat is those who bought at the height of the pandemic-era market with an ultra-low mortgage rate and need to sell now: Not only are they giving up a low rate, they also may have lost money on their home.
Metro-level highlights: Income needed to buy a home has risen in all major metros, with biggest uptick in Miami and smallest in Austin
August 2023, analysis includes 100 most populous U.S. metros for which data is available
Metros where necessary income has increased most: In both Miami and Newark, NJ, homebuyers must earn 33% more than a year ago to afford the typical home–the biggest percent increase of the major U.S. metros. Homebuyers in Miami need to earn $143,000 annually to afford the area’s typical monthly mortgage payment of $3,580, and Newark buyers need to earn roughly $160,000 to afford that area’s $3,989 payment.
Other metros where necessary income has increased by over 30%: The income necessary to afford a median-priced home has increased by over 30% in four other metros, all in the eastern half of the country: Bridgeport, CT ($183,000); Dayton, OH ($60,000); Rochester, NY ($66,000); and Hartford, CT ($95,000).
Buyers need to earn more in every major metro: Skyrocketing mortgage rates have caused the income necessary to buy a home to increase in every major metro, even the places where prices have declined over the last year.
Necessary income has increased least in pandemic homebuying hotspots: Austin, TX homebuyers must earn $126,000 to afford the median-priced home, 8% more than a year ago–the smallest increase of all the major U.S. metros. That’s despite Austin home prices falling 7% year over year in August after they skyrocketed during the pandemic, with remote workers flocking in. Boise, ID, another pandemic homebuying hotspot where demand has since dropped, experienced the next-smallest increase: up 9% to $127,000. Salt Lake City, Fort Worth, TX and Lakeland, FL come next, with year-over-year increases of about 13% each. Home prices are down from a year ago in all those metros.
Homebuyers must earn six figures to buy a home in half the major metros in the country: In 50 of the 100 metros in this analysis, buyers must earn at least $100,000 to afford the median-priced home in their area. Buyers must earn at least $50,000 everywhere in the country.
Bay Area buyers must earn $400,000: Buyers in the most expensive markets in the country–San Francisco and San Jose, CA–must earn more than $400,000 to afford the median-priced home in their area, both up nearly 25% year over year. The next five metros are all in California: Anaheim ($300,000), Oakland ($250,000), San Diego ($241,000), Los Angeles ($237,000) and Oxnard ($233,000).
Rust Belt buyers need the least income–but it’s still up from a year ago: Detroit homebuyers must earn about $52,000 to afford the area’s median-priced home, up 19% from a year ago. That’s the lowest income required to afford a home in the U.S. Next come three Ohio metros (Akron, Dayton and Cleveland) and Little Rock, AR, all of which require roughly $60,000 in annual income to buy a home.
Face it, the US economy and housing/mortgage markets are addicted to gov!
The Federal Reserve thinks economic growth comes with lots of debt and low interest rates. The Fed succeeded in that banks, consumers and The Federal government went wild in borrowing money, but now a hangover is happening as inflation surged and interest rates rose.
First, debt laden banks.
Paper losses on the most opaque part of US banks’ bond portfolios are now close to $400bn — an all-time high, and 10 per cent above the peak at the start of the year that caused the collapse of Silicon Valley Bank.
Rising interest rates are really causing havoc at banks, particularly small banks. The US 10-year Treasury yield rose again after a brief respite in rate increases.
iShares 20+ Treasury Bond ETF is getting crushed with inflation and Fed rate hikes.
And The Federal government is seeing interest payments on their massive $33 TRILLION debt load. Rising Treasury yields = higher US interest payments on debt … really fast.
And with interest rates rising, Americans are seeing a surge in debt.
With rising Treasury yields, the 30-year conforming mortgage yield is up 173% under Biden’s Reign of Economic Error.
And then we have US Debt Clock, Federal debt is now above $33.56 TRILLION that is causing no consternation for Treasury Secretary Janet Yellen who said that the US economy is great and we can afford to fight wars in Ukraine AND Israel! Of course, Yellen believes in the foolish Modern Monetary Theory (aka, just keep printing money and hope nobody cares).
Multifamily rents turned negative in September, with the average U.S. rent declining $6 from August and $3 during the third quarter. It marked the first time since 2009 when national rents decreased in September.
Hopefully a downturn in rent growth will let buying a home more affordable relative to rent in San Jose, San Francisco, Honolulu, Los Angeles and Seattle.
Headline NAHB confidence index printed at 9-month lows (down 5 to 45, vs 49 exp). That is the 4th straight monthly miss in a row (and 5 upside surprises).
I remember when economists used to say, “Inflation? No problem! Inflation allows us to devalue the massive debt!” Except that inflation crushes the middle class and low wage workers.
Introducing Treasury Secretary Janet Yellen, the actual Nutty Professor who still thinks that the US can spend and borrow unlimited amounts without consequence.
Confounded Interest - Anthony B. Sanders 
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