Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Gold and silver. Gold is now outperforming the Stock Market over the last 30 years.
Silver is up 10% on Friday.
Silver (XAG) just hit the $79.2708 price point.
Dino’s song. A shout-out to David Freiberg on the Gibson SG bass and John Cipollina on the Gibson SG guitar. I love the Gibson SG!
Twas the end of the year and mortgage demand is poor, but the new year is just around the corner and mortgage demand will rise.
The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 16 percent higher than the same week one year ago.
The Refinance Index decreased 6 percent from the previous week and was 110 percent higher than the same week one year ago.
Overall mortgage application volume fell last week, despite the slight decline in mortgage rates. I expect the trends of a softening job market, sticky inflation, elevated home inventories, and steady mortgage rates will persist into the new year.
Every time the government tries to make housing more affordable, they make the problem worse. Some people should rent and not fall for the government’s latest folly, the 50-year mortgage.
True, the 50-year mortgage would lower the monthly payment by several hundred dollars (see the following example where the monthly payment falls from $2,349 to $2,083. Or from $2,349 to $2,226 if the most rate increases with the longer mortgage life. BUT total interest paid increases 87% if the 50-year rate remains the same and 105% if the rate rises.
Principal paydown slows to a crawl with a 50-year mortgage, leaving the lender (or mortgage holder) exposed to higher risk if home prices fall.
Government housing policies remind me of the Curly versus the oyster stew skit. where Curly can’t catch the oyster. Yet keeps trying.
The 50-year mortgage reminds me of the ill-fated National Homeownership Strategy under Bill Clinton. By prdering all Federal housing finance entities to work with HUD, the National Homeownership Strategy helped crash the housing market (watch The Big Short!)
𝗠𝘂𝗹𝘁𝗶𝗳𝗮𝗺𝗶𝗹𝘆 𝗗𝗲𝗹𝗶𝗻𝗾𝘂𝗲𝗻𝗰𝗶𝗲𝘀 𝗦𝗼𝗮𝗿 𝘁𝗼 𝟳.𝟭%.🚨
Office CMBS Delinquency Rate Hits Record 11.8%, Much Worse than Financial Crisis Meltdown. (Wolfstreet)
CMBS excess returns are dwindling.
How will New York City commercial real estate returns perform if Madami wins the NYC Mayoral election?
August data for the US housing market has been ‘mixed’ to say the least with a surge in new home sales (thanks to a massive rise in incentives from homebuilders) and a small decline (near multi-year lows), leaving this morning’s pending home sales data as the tie-breaker (with expectations of an ‘unch’ shift MoM).
It appears the drop in mortgage rates is driving some purchase activity as pending home sales soared 4.0% MoM in August – the most since March – dragging sales up 0.5% YoY.
Mortgage rates are falling, helping existing home sales. Note that the 30-year mortgage rate peaked at 18.63% in 1981.
Well, The Fed cut their target rate by 25 basis points.
Following The Fed’s 25 bp cuts, the 10Y yield fell below 4% to 3.9879%.
The Fed Dots??
We shall see tomorrow if mortgage rates fall.
Of course, as soon as I posted this, US Treasury 10Y yields surged. This often happens with The Fed’s incompetent messaging.
It will take a while to recover from Biden’s “Reign of Error.” According the US Census Bureau, housing starts are 6.0 percent below the August 2024 rate.
Housing starts:
Housing permits?
Let’s see if Powell and The Gang drop rates 25 or 50 basis points at today’s FOMC meeting.
Between The Fed’s persistent policy errors and Biden’s centralized mismanagement of the economy, Biden’s Maladministration is the epitome of a “Reign of Error.”
The Fed will have to whip it good with rate cuts if the recession warnings are an indicator of what lies ahead for the US economy.
The ratio of The Conference Board’s Leading Economic Indicators (LEI) vs. The Conference Board’s Coincident Economic Index (CEI) ratio hasn’t been this low since 2008.
Fed Funds Futures are signalling rate cuts at the September 17th FOMC meeting and December 10th meetings.
On the crypto front, Ethereum is soaring.
Debt stress is mounting!
Tavi Costa at Crescat Capital (founded by my former MBA student at University of Chicago Kevin Smith) produced this excellent chart of silver prices showing the cup and handle of silver prices.
The rise in silver prices corresponds with a deterioration of the US bond market. Look at Treasury futures courtesy of Bravos Research.
Of course, Washington DC’s insane spending has led to insane money printing by The Feral Reserve.
Everyone in Washington DC deserves a “Silver Cup of Failure” for uncontrolled government waste and spending and mismanagement by The Feral Reserve.
The US Treasury yield curve is flattening at the short-end (2-3 years) but remains unchanged at the long end (>= 20 years).
And pending US Home Sales remain low.
It will take a while to recover from Biden’s horrid economic follicies.
Confounded Interest - Anthony B. Sanders 
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