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.
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.
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.
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.
The value of the US housing market shrunk by the most since the 2008 as the pandemic boom (and M2 Money growth) fizzled out.
After peaking at $47.7 trillion in June, the total value of US homes declined by $2.3 trillion, or 4.9%, in the second half of 2022, according to real estate brokerage Redfin. That’s the largest drop in percentage terms since the 2008 housing crisis, when home values slumped by 5.8% from June to December.
Homebuyers, already facing record-high prices, took an additional hit from mortgage rates that more than doubled last year. With less competition in the market, the median US home sale price was $383,249 last month, down from a peak of $433,133 in May.
To be sure, home prices are not collapsing. In December, the total value of US houses was still 6.5% higher than it was a year earlier.
Florida Gains
How much homeowners lost depends on where they bought. The biggest declines were in pricey cities like San Francisco and New York, while buyers who moved to pandemic boomtowns are still seeing the returns on their investment, particularly in Florida.
That was especially true in Miami, where the total value of homes ballooned 20% year-over-year to $468.5 billion in December, the largest annual percentage increase among the top metro areas. While the overall US housing market is down, Miami’s market has about the same value as when it peaked at $472 billion in July. Meanwhile, homeowners in North Port-Sarasota, Florida, Knoxville, Tennessee, and Charleston, South Carolina, all saw annual gains above 17% in 2022.
But before I go for experimental therapy for my brain tumor, I will leave you with this diddy. Inflation expectations are on the rise, not falling like Biden and Yellen keep screaming.
On the corporate side, US bankruptcies in 2023 had the worst start to a year since 2010 and the financial crisis.
On the personal finance side of the ledger, the delinqueny rate on credit cards is growing at the faster rate since 2010.
Throw in 22 straight months of negative REAL wage growth, and have a scary situation facing middle America.
And the shate of outstanding subprime auto debt (30 days or more delinquent) is up to the highest rate since … well, you know when. The financial crisis of 2009-2010.
President Biden touts his economic plan as being a great success. But the data says otherwise. Real Disposable Personal Income, for examplge, was down -6.4% year-over-year (YoY) in 2022. That is the WORST reading since The Great Depression.
And to cope with inflation, Americans have expanded their credit useage, but credit card delinquencies are through the roof.
So much for “Middle Class Joe” and The Forgotten Man. Biden hasn’t forgotten, he just doesn’t care.
Well, here we are again. Back to 2007 and the housing bubble and subsequent financial crisis. The US Treasury 6-month yield is back over 5%, a yield we haven’t seen since August 8, 2007.
Well, there is one notable difference. The Fed’s balance sheet is still at $8.4 TRILLION whereas it was only $866 billion on August 8, 2007.
The US Treasury yield curve? It remains deeply inverted as The Fed withdraws liquidity.
And then we have this diddy. US household debt balances increase, the largest nominal quarterly increase in 20 years.
Also, we have the year-over-year EPS growth has turned negative for the first time since Covid.
Confounded Interest - Anthony B. Sanders 
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