Darkness, Darkness! Recession Fears Push Mortgage Rates Down And MBA Purchase/Refi Applications Up (Home Prices Up 20.9% YoY In May)

Biden’s new campaign theme for the midterms: economic darkness, darkness.

Well, this is one way to get inflation under control … crash the economy. And inflation fears growing, we are seeing mortgage rates declining and mortgage applications increasing.

Mortgage applications decreased 5.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 1, 2022. This week’s results include a holiday adjustment to account for early closings the Friday before Independence Day.

The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 17 percent lower than the same week one year ago.

The Refinance Index decreased 8 percent from the previous week and was 78 percent lower than the same week one year ago.

In May, CoreLogic’s national home price index was up 20.9% YoY. But home prices are expected to grow at a 5.6% clip over the coming year.

Today, we are seeing global sovereign debt yields declining which should help US mortgage rates decline further.

And the US Treasury yield curve (10Y-2Y) continues to invert, signaling recession.

Under Bidenflation, we will be forced to eat the daisies instead of meat.

Ted Day! Spread Between 3M Libor And 3M Treasury Yield Rising Fast (Recession Alert!)

Its Ted Day!

TED refers to the difference between the three-month Treasury bill and the three-month LIBOR based in U.S. dollars, a measure of fear in the market.

The 3-month TED spread is rising awfully fast. A sign of impending recession.

US bank credit default swaps (CDS) are rising fast as inflation gets ugly.

The US Treasury 10Y-3M curve is bumping against the zero barrier.

I am still shaking my head at President Biden chastising gasoline stations for not lowering prices at the pump when refiners are near full capacity and the Biden Administration is doing nothing to increase the supply of US-source non-green energy.

But what the heck. It’s Ted Day!

Slip, Slidin’ Away! US Q2 Real GDP Descends To -2.1% (Late In The Evening For The Midterm Elections!)

Slip slidin’ away
Slip slidin’ away
You know the nearer the midterm elections
The more you’re slip slidin’ away

As Bill Clinton once said about elections, “It’s the economy, stupid.”

Which is bad news for Biden and Democrats after Q1’s bad GDP report of -1.6% “growth”, we now see the Atlanta Fed’s real-time GDP report for Q2 at -2.1%.

Today’s miserable construction spending report helped tank Q2’s real GDP forecast.

Its getting late in the evening since the midterms are only a couple of months away and Biden’s approval rating is miserable.

Sing it, Joe!

Reversal Of Fortune! Fed Funds Futures Point To Feb ’23 Reversal Of Fed Rate Hikes (Recession Alert!) As Crippling Inflation Soars

No, not the Claus von Bülow kind of reversal of fortune where has was accused of killing his wife. But this murder is coming from The Federal Reserve hiking interest rates even when they know that doing so could lead to a recession. And Biden’s anti-fossil fuel energy policies.

“Fed Chair Powell Admits That Fighting Inflation Could Lead To Recession.”

And investors in the Fed Funds Futures market see The Fed changing its rate-hiking ways in February 2023.

Inflation is what is killing the US economy and millions of households. Financially speaking.

And Biden’s approval ratings are sinking faster than The Titanic. In other words, he’s just killing us.

And then we have turbulence in the housing market as Fed intentions are driving up mortgage rate which helped listings with price reductions at 98.2% YoY.

Biden’s energy policies plus The Fed’s war on inflation will result in an economic reversal of fortune.

Slowing! US Personal Consumption Expenditures Drop To 0.2% MoM In May As PCE Deflator Hits 6.3% YoY (US Mortgage Rates Slip to 5.7%, the First Decline in Four Weeks)

The US economy is slowing as inflation ravages consumers. US Regular Gasoline prices, for example, are up 104% under President Biden which helps to slow the economy.

US personal consumption expenditures fell to +0.2% MoM in May as “inflation” or real personal consumption expenditures PRICES rose +6.3% YoY as The Fed’s balance sheet (aka, Master Blaster!) remains.

As I mentioned above, US regular gasoline prices are UP 103% under President Biden, diesel prices (the cost of shipping goods to markets like … food is up 119% under Biden while CRB foodstuffs is up 55% under China Joe.

Now we have mortgage rates in the US falling for the first time in four weeks. The average for a 30-year loan was 5.7%, down from 5.81% last week, Freddie Mac said in a statement Thursday.

This year’s Fourth of July celebration is going to cost 18% more than last year’s celebration.

Lastly, the Atlanta Fed GDPNow real time tracker for Q2 is showing … -1% GDP “growth.”

So, yes, the US economy is slowing.

Home Listings Surge in Turnabout for Supply-Starved US Market (Are Homeowners Seeing An End To Home Price Growth With Fed Rate Increases??)

The Federal Reserve under Berananke, Yellen and Powell kept monetary stimulus out there too long and rates too low, but Powell is now trying to reverse that trend to fight inflation. But how will that impact the housing market?

(Bloomberg – Prashant Gopal) The housing slowdown is helping to solve one of the US real estate market’s most intractable problems: tight inventory.

With fewer buyers competing, the number of active US listings jumped 18.7% in June from a year earlier, the largest annual increase in data going back to 2017, Realtor.com said in a report Thursday. And new sellers entered the market at an even faster rate than before the pandemic housing rally began.

The Federal Reserve is cooling off the red-hot housing market as it fights to curb inflation by driving up interest rates. The resulting spike in mortgage costs is making homes less affordable and pushing would-be buyers to the sidelines. That means properties aren’t selling as quickly and must compete with the growing number of new offerings.

I wonder if it is all the Covid monetary and fiscal stimulus that is finally getting homeowners to put their houses on the market, perhaps fearing the end of the housing price run-up with Fed-induced rate hikes?

Let’s see if The Fed’s Frolic Room (aka, open market committee) keeps driving rates up and home affordability down. Or is it The End for the house price bubble?

Fed Is ‘Just at the Beginning’ of Raising US Rates, Mester Says, MBA Mortgage Purchase Applications Drop -21% WoW As Rates Rise (Mester Channels The Carpenters)

Cleveland Fed’s Mester is channeling The Carpenter’s song “We’ve only just begun … to raise rates.”

Financial markets are anticipating what Mester is saying: rapidly rising interest rates. But as you can see from the following chart, gasoline prices (orange line) are driving rising US prices. So it is doubtful that monetary tightening will slow price increases. But Mester and company can only control monetary stimulus.

Mortgage rates have soared as The Fed attempts to crush inflation. And mortgage purchase applications fell -21% WoW in the most recent Mortgage Bankers Association survey.

The Refinance Index increased 2 percent from the previous week and was 80 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 0.1 percent from one week earlier. The unadjusted Purchase Index decreased 21 percent compared with the previous week and was 24 percent lower than the same week one year ago.

It almost seems like Mester is following the Taylor Rule (not really). But using CPI YoY, the Taylor Rule is saying that The Fed Funds Target Rate should be … 22.10%. It is only 1.75% after years of excessive stimulus following the banking crisis of 2008/2009. And Yellen who seemingly never met a rate hike that she liked.

If we use core PCE as our measure of inflation, the Taylor Rule is still high at 13.25%, a whopping 11.50 spread over the current target rate.

Will The Fed drive up rates and risk a recession ala Paul Volcker? Are we sitting on top of the world or about to get fried?

Bear in mind that gasoline prices are up 104% under the Biden Administration and mortgage rates are up 105%.

Hot, Hot, Hot! Case-Shiller National Home Price Index Slows … To 20.4% YoY In April As Fed Stimulypto Remains

Housing market is still hot, hot, hot!

A national measure of prices climbed 20.4% in April, down from the 20.6% gain in March, the S&P CoreLogic Case-Shiller index showed Tuesday. Craig Lazzara, a managing director at S&P Dow Jones Indices, noted that April data was showing initial, but inconsistent, signs of a deceleration in price gains.

Mortgage rates have nearly doubled since the end of 2021. The run-up in rates, combined with high prices, are squeezing potential buyers and starting to slow housing markets in some of the most popular pandemic boomtowns.

Covid monetary stimulus remains in place at inflation hits 8.6%.

Washington DC has the slowest growth in home prices at 11.9% with Chicago and Cleveland close behind. Phoenix barely beat Tampa, FL for hottest home prices with both above 30% YoY.

Fed inferno!

Blitzkrieg Bop! ECB to Activate First Line of Defense in Bond Market July 1 (Lagarde Calls For Monetary Maginot Line) WIRP Forecasts US Rate Hikes Until March 2023, Then Declining Rates

The ECB is planning on a Blitzkrieg Bop, monetary style.

When Lagarde talks about the first line of defense, all I can picture is The Maginot Line in France, a failed defensive line that was easily bypassed by the German Wehrmacht (army).

The European Central Bank will activate the bond-purchasing firepower it’s earmarked as a first line of defense against a possible debt-market crisis on Friday, according to President Christine Lagarde.

Applying “flexibility” to how reinvestments from the ECB’s 1.7 trillion-euro ($1.8 trillion) pandemic bond-buying portfolio are allocated is aimed at curbing unwarranted turmoil in government bonds as interest rates are lifted from record lows to curb unprecedented inflation.

Net buying under a separate asset-purchase program is also set to end on Friday.

In other words, Euro-area inflation has exploded in 2021, just like the USA.

But the US also has an inflation problem caused in part by Covid and the government’s reaction to Covid: economic shutdown and massive Federal monetary and fiscal stimulus. The stimulus is still in play.

The bond market is already anticipating an about-face by The Federal Reserve (implied overnight rate peaking at the March 2023 FOMC meeting, then receding.

Again, nothing has been the same since the Covid outbreak of 2020 and Fed monetary blitz. Here is the US Dollar Swaps curve before Covid (yellow line) and today’s Fed-enhanced curve (green).

Mortgage rates in the US have climbed to 6% then backed-off slightly. The good ole Back-off Boogaloo as The Fed attempts to unwind its monetary stimulypto.

The French Maginot Line, easily bypassed by German tanks. The Federal Reserve is the US’s Maginot Line. The Yellenot Line??

How Blue Can You Get? US Pending Home Sales Plunge -12% YoY In May As Fed Cranked-Up Rates (PHS Down 11 Of Last 12 Months)

How blue can you get?

US pending home sales declined -12% YoY in May as The Fed cranked up mortgage rates. That was 11 out of the last 12 months had declining pending home sales.

How about something a little more upbeat … like Gary US Bonds and New Orleans?

The original!