Curly’s Oyster Stew? April Home Prices Grow At 20.9% YoY As Fed Is Slow To Remove Massive Monetary Stimulus (But Watch Out!)

US home prices are still skyrocketing as The Federal Reserve kept its massive foot on the monetary accelerator pedal.

CoreLogic’s home price index grew at a 20.9% YoY pace in April, but is expected to slow to 5.6% YoY in late 2022.

Remember peeps, The Fed still have its staggering monetary stimulypto in place.

The Fed is signaling its withdrawal of stimulus, causing mortgage rates to soar.

Given the slowdown of the US and global economy, we shall see if The Fed keeps to its tightening plans. As of today, the market is expecting The Fed to raise its target rate from 1% to 3.819% by February 2023. That is a 291% increase in The Fed’s target rate.ng

The Fed trying to tame inflation (caused by The Fed and Biden’s energy policies and Congressional spending) is like Curly trying to eat oyster stew.

Simply Unaffordable! Real Home Price Growth At 12% YoY, Real Wage Growth At -1.864% (Inflation Making Americans Suffer As Mortgage Rates Rise FAST)

Simply unaffordable!

President Biden met with Federal Reserve Chairman Powell to discuss how to control the inflation that is crushing the middle class and low-wage workers.

Here is a good example of why Biden is worried. There is a mid-term election on the horizon and people are angry and scared. Housing, generally the largest asset owned (or rented) by a household is simply unaffordable thanks, in part, to the over-stimulation of the economy by 1) The Federal Reserve in terms of money printing and 2) the Federal government in terms of fiscal stimulus in response to the Covid outbreak in March 2020.

In nominal terms, the gap between US home prices (Case-Shiller National Home Price Index YoY – US Average Hourly Earnings YoY) is near the all-time high.

Yes, home price growth exploded upwards when The Fed rapidly expanded their balance sheet in response to the Covid outbreak … and only now are considering shrinking the balance sheet.

In terms of house prices, CoreLogic has a nice chart depicted the odds of home prices dropping over the coming year. I circled Columbus Ohio because that is where I am moving (knock on wood).

And then we have the 30-year mortgage rate rising with The Fed’s expected tightening of monetary policy. That will certainly make housing even less affordable, unless house price growth cools dramatically.

You might as well face it, we’re addicted to gov.

Doctor, doctor (Yellen), we’ve got a bad case of UNAFFORDABLE HOUSING.

Bond Rout! Treasury Curve Settles In At 20BPS (10Y-2Y), SOFR Coupons Slow To Adjust To Fed Rate Hikes, While Mortgages FAST To React (CoreLogic March Home Prices UP 20.0% YoY In March)

The U.S. Treasury market is showing signs of stress that may have implications for whether the curve keeps steepening. 

Over the past month the curve has retraced from an inversion to a steepening driven by a surge in yields on benchmark 10-year bonds. That has led to interesting outlier indications, as traders weigh the outlook for Federal Reserve interest rate increases and inflation.

The US Treasury yield curve has settled-in at 20.383 bps (effectively zero) as The Fed continues its war on inflation.

On the SOFR front, we see SOFR Coupons being slow to benefits from Fed rate hikes. So, SOFR Coupons are behaving like Stouffer’s lasagna, frozen and tasteless.

On the other hand, mortgage rates continue to soar on EXPECTATIONS of Fed rate hikes.

Meanwhile, CoreLogic revealed that March 2022 home prices were still sizzling at 20.9% YoY.

Phoenix AZ leads the top ten at 30.4% with Washington DC lagging at 9.9%.

So, its official. The Federal Reserve is best exemplified by former Yankee/Mets first baseman “Marvelous” Marv Throneberry. When players presented Mets’ manager Casey Stengel with a birthday cake but neglected to give piece of cake to Throneberry, Stengel replied to Throneberry when asked why no cake, “Because I was afraid your were going to drop it.”

Just like The Federal Reserve, the honorary Marv Throneberry of the the global economy.

Here is Marv’s baseball card from better days with the Yankees before they figured out that Marv was a terrible fielder. And strikeout quite a bit, like The Federal Reserve.

Feeling Hot, Hot, Hot! US Home Prices Grew At 19.1% YoY In January (Is US Housing Market Addicted To Gov?)

Feeling hot, hot, hot!

Corelogic released their January housing report and its a doozy.

Home prices nationwide, including distressed sales, increased year over year by 19.1% in January 2022 compared with January 2021. On a month-over-month basis, home prices increased by 1.4% in January 2022 compared with December 2021 (revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results).

But Corelogic is still forecasting only 3.8% YoY growth in 2022.

Home prices are hot, hot, hot in all states except North Dakota and New York. The fastest growing states are lower taxes, higher growth states.

Phoenix, Las Vegas and San Diego are booming. But Chicago and Washington DC are growing at near 9% YoY.

Case-Shiller’s December report show home prices growing at 18.84% YoY thanks to Fed stimulypto and historic low inventory of homes available for sale.

Is the US housing market addicted to gov?

Let’s see if the five expected rate hikes from The Fed materialize.

Double Whammy, Staglflation Style! US Rents Soaring (12%) As Real-time Q1 GDP Slows To 0.7%

Call this a double whammy! Red-hot rents combined with a slowing economy.

According to CoreLogic, single-family annual rent growth finished 2021 at a new record: 11.7% YoY for high tier rental properties and 10.4% YoY for low tier rental properties.

Of course, southern and southwest rental properties are seeing the fastest rent growth. Particularly Miami at 36% YoY. Phoenix is no slouch at 19% growth in rents.

Inflation is really ripping the insides out of America’s working class. Especially with real-time GDP slowing to 0.7%.

Double whammy, indeed!

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CoreLogic: Home Prices Rise Record 18.1% In November (When Will Fed Take Its Foot Off The Pedal??)

  • Home price growth especially strong in Mountain West and Southeastern states
  • By November 2022, annual home price growth is predicted to slow to 2.8%

Yes, US home prices continue to rage with CoreLogic’s home price index rising 18.1% YoY.

Their forecast for 2022 is only 2.8% YoY likely due to forecast mortgage rate increases and fiscal stimulus wearing out.

Arizona, of course, is leading at 28.6% YoY. Florida is in second place followed by Idaho.

Slowdown? Let’s hope the slowdown doesn’t turn into a Matchbox and lead to declining home prices.

The Fed’s Gilded Age: A Tale of Today’s Housing Market (REAL Home Prices Rising At 14.6% YoY As REAL Hourly Earnings Fall (-0.41% YoY)

Welcome to The Fed’s Gilded Age … for housing! The gilded age refers to the thin-veneer of gold covering up problems in the late 1800s.

Today’s gilded age is largely fueled by The Federal Reserve’s uber-easy monetary policies combined with absurd Federal government policies. The result? Thanks to inflation, REAL home prices are growing at 14.6% YoY while REAL hourly earnings are declining (-0.41% YoY).

Redfin predicts a more balanced housing market in 2022. Part of their rationale is that they predict mortgage rates will rise to 3.6%. This growth in the mortgage rate is predicted to slow home price growth to 3.2% from double digit growth currently.

While this scenario is plausible, it will require a change in direction of the 10-year Treasury yield which has been declining since 1981. 5.39% YoY inflation may encourage The Fed to raise rates.

Today’s REAL 30-year mortgage rate is -3.08% while the REAL 10-year Treasury yield is -4.67%. It will require a reduction in inflation AND an increase in the nominal rate to get to 3.6%.

With the Freddie Mac 30-year survey rate at 3.10, will a 50 basis point increase in mortgage rates send the market crashing? Not likely.

After all, the US economy is under the thumb of The Federal Reserve.

US Homeowner Equity Surged +29.3% YoY (California The Biggest Gainer) Thanks Mostly To Federal Reserve

Since Q2 2020, US homeowners have been big winners in terms of home price gains and equity in their homes. Unfortunately, this means that renters are big losers. Once again, The Federal Reserve is benefiting once segment of the population while punishing the other segment.

Homeowner Equity Q2 2021

CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63% of all properties*) have seen their equity increase by a total of nearly $2.9 trillion since the second quarter of 2020, an increase of 29.3% year over year.

*Homeownership mortgage source: 2016 American Community Survey.

Figure 1 National Homeowner Equity YOY Change

National Homeowner Equity

In the second quarter of 2021, the average homeowner gained approximately $51,500 in equity during the past year.

California, Washington, and Idaho experienced the largest average equity gains at $116,300, $102,900 and $97,000 respectively. Meanwhile, North Dakota experienced the lowest average equity gain in the second quarter of 2021 at $10,600.

Figure 4 National Homeowner Equity Average Equity Gain

10 Select Metros Change

CoreLogic provides homeowner equity data at the metropolitan level, in this graphic 10 of the largest cities, by housing stock are depicted. 

Negative equity has seen a recent decrease across the country. San Francisco-Redwood City-South San Francisco, CA, is the least challenged, with Negative Equity Share of all mortgages at 0.6%.

Figure 5 National Homeowner Equity

Loan-to-Value Ratio (LTV)

The graph represents National Homeowner Equity Distribution across multiple LTV Segments.

Figure 6 National Homeowner Equity Loan-to-Value Ratio

Since growing home equity lead to lower default risk (or at least losses to the mortgage holder), we are seeing mortgage delinquencies fall after the Covid surge.

Of the top ten cities, Chicago leads in negative equity.

Maybe Fed Chair Jerome Powell is trying to soothe us, like Sam and Dave.