Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
US Q3 GDP fell slightly in Atlanta Fed’s GDPNow latest revision to 3.0% from 3.5% last week.
The source of the decline in GDP? Equipment investment fell to 8.9.
From 11.7. Hard to sustain high levels of equipment investment.
On a related note, office CMBS just hit all-time high. Yes, higher than the financial crisis!!
Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 29, 2025.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 17 percent higher than the same week one year ago.
The Refinance Index increased 1 percent from the previous week and was 20 percent higher than the same week one year ago.
Mortgage rates declined last week, with the 30-year fixed rate decreasing to its lowest level since April to 6.64 percent. However, that was not enough to spark more application activity. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.64 percent from 6.69 percent, with points decreasing to 0.59 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
But don’t get your hopes up about The Fed saving the housing market.
Home prices in America’s 20 largest cities fell for the 4th straight month in June (the latest data available from S&P CoreLogic’s Case-Shiller data released this morning).
The -0.25% MoM drop was larger than expected and dragged the YoY price growth down to +2.15% – the weakest since July 2023.
Meanwhile The Federal Reserve keeps on printing money, helping to drive up home prices.
,Metro level? New York and Chicago lead, with Phoenix, Miami, Denver, San Diego, Dallas, San Francisco and Tampa all experiencing price declines.
On a side note, Chicago is even more unaffordable than last year. So much for Mayor Brandon Johnson saying there would be no crime if everyone could afford housing (one of the stupidest comments I have ever heard).
The stupidity is strong with this one!
What do you do with The Federal Reserve who keep printing money?
According to the US Census Bureau, New Home Sales of new single-family houses in July 2025 were at a seasonally-adjusted annual rate of 652,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 0.6 percent (±15.5 percent)* below the June 2025 rate of 656,000, and is 8.2 percent (±14.0 percent)* below the July 2024 rate of 710,000.
Median and Average Sales Price
The median sales price of new houses sold in July 2025 was $403,800. This is 0.8 percent (±5.9 percent)* below the June 2025 price of $407,200, and is 5.9 percent (±8.5 percent)* below the July 2024 price of $429,000. The average sales price of new houses sold in July 2025 was $487,300. This is 3.6 percent (±8.0 percent)* below the June 2025 price of $505,300, and is 5.0 percent (±8.6 percent)* below the July 2024 price of $513,200.
Here is a chart of median sales price of new homes against Fed money printing (M2).
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!
People get ready! Powell and the Fed might actually lower their target rate at The Fed’s Open Market Committee meeting on September 17.
The Fed hasn’t touched rates under Trump, but were hyperactive under Biden.
Let the good times roll? I wonder if Jay Powell and the other Fed honchos are taking Jackalope Rides in Jackson Hole, WYO?
The Federal Reserve is Dazed and Confused. Their money printing is making housing progressively more expensive and unaffordable.
Existing-home sales increased by a measley 2.0% in July, according to the National Association of REALTORS® Existing-Home Sales Report.
Month-over-month sales increased in the Northeast, South, and West, and fell in the Midwest. Year-over-year, sales rose in the South, Northeast, and Midwest, and fell in the West.
• 2.0% increase in existing-home sales – seasonally adjusted annual rate of 4.01 million in July.
• Year-over-year: 0.8% increase in existing-home sales
Median existing-home price for all housing types, up 0.2% from one year ago ($421,400) – the 25th consecutive month of year-over-year price increases.
It will be hard to make housing more affordable as long as The Fed keeps printing money.
Powell et al cutting rates 25 basis points won’t really matter as long as they continue to print money. Unfortunately, M2 VELOCITY peaked under the Clinton Administration and has declined since despite frantic money printing.
What happended in 1995? Clinton’s National Homeownership Strategy that mandated HUD partners (GNMA, FHA, Fannie Mae, Freddie Mac, banks, etc.) to lower credit standards to encourage homeownership.
We need FHFA Director Bill Pulte to avoid doing what Democrats love (everything free or cheap).
Is This My Free One-Way Bus Ticket To Cleveland? Cleveland is leading the nation in home price growth at 4.7% YoY. Followed closely by Hartford CT, Louisville KY, Detroit MI and Buffalo NY.
Well, if The Fed would stop printing money (M2), home prices would decline. But The Fed will keep on printing!
Of course, the top 1% of net worth households are doing quite well thanks to The Fed’s eternal money printing.
On the commercial RE side, US office vacancy rates are approaching 20%.
Lastly, Tampa FL is the slowest growing area. Actually declining at a rate of -6.2% YoY.
Celebrate, dance to THEIR music. Housing construction is massively overregulated leading to a glut in unaffordable housing being built.
I mentioned the glut of new builds in my post yesterday. Construction remains over-regulated driving up the costs of new builds
As you can see, new single family homes for sale is 511,000. But single family homes under construction was 627,000 units in June.
Not surprisningly, housing completions were up in June, but generally down since late 2024.
Multifamily starts soared in June (red line).
The US housing market is a changeling, going from a mega glut during the financial crisis to a tight market, then back to a glut … again. In fact, there are 511,000 new homes for sales in the US, the highest inventory since the financial crisis.
Combine all-time high home prices with RELATIVELY high mortgages, and we have an affordability crisis once again.
While we have the most new homes for sales since 2007, mortgage rates are about the same as in 2007 (orange line). But home prices are 87.5% higher today than in 2007!
When government gets involved, what could go wrong?
Confounded Interest - Anthony B. Sanders 
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