US Housing Starts 1-Unit Decline 17.8% YoY In May Despite Historic Fed Stimulus (Covid-19 Shutdown Damage)

US 1-unit housing starts declined 17.8% YoY in May, another indicator of the damage done by the economic shutdown due to the Covid-19 epidemic.

1-unit housing starts YoY are back to 2006 levels where the ALT-A / subprime virus struck with far more damage.

Notice that The Federal Reserve didn’t react with rate cuts until Q4 2007 that continued through 2008. Notice that the US is back to 25 basis points again, but with 7.09 TRILLION on their balance sheet … and all we get is -17.8% YoY decline.

Meanwhile, mortgage purchase applications have rebounded nicely.

MBA purchase applications have rebounded nicely despite the government shutdown. But in spite of the historic (or hysteric) monetary stimulus from The Federal Reserve, the US in no where the housing bubble years.

Time for more snake juice?

Here is a video of Fed Chair Jerome Powell trying to cope with the blowback from Covid-19.

US Banks Brace For Surge In Loan Losses (S&P 500 Bank / S&P 500 Index Back To Early 2009 Levels)

Here we go again?

With the economic shutdown thanks to the Wuhan virus, the Big Banks are in the US are preparing to be over, under, sideways, down.

(Financial Times) — Loan loss charges at six big American banks reached a total of $25.4bn in the first quarter. This marks a 350 per cent surge in collective provisions across Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley versus a year earlier, as charges soared to levels not seen since the financial crisis.

The change illustrates how banks are ramping up reserves to deal with anticipated loan problems among their clients, as top economists warn that the world economy has already fallen into recession. 

The provisions are additions to reserves so banks have enough in their rainy day fund to cover future losses.

Since the start of the year, US banks have been operating under a new accounting standard, dubbed “current expected credit losses”. It has changed how they calculate loan loss provisions, making it hard to compare the most recent charges with past performance. 

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Previously banks had to ensure reserves were enough to cover ‘incurred losses’, which meant they made provisions for loan losses only when customers actually missed payments.

Under the new accounting standard, banks have to make provisions based on a loan’s lifetime value. In practice, this amounts to predicting the future — a difficult task at the best of times, and nigh on impossible in the current environment, which bank executives describe as the most uncertain they have ever seen. 

It is little wonder that the S&P 500 banks index as a percentage of the S&P 500 index is back near its lowest level since early 2009.

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Despite The Fed’s massive intervention in the financial markets starting in late 2007,  but continues in force.

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The Fed couldn’t get the S&P Bank index / S&P index back to early 2007 levels with massive stimulus?

Fed Chairs Janet Yellen and Jerome Powell pose for recent Fed Chairs painting.

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JPMorgan Chase To Raise Mortgage Borrowing Standards As Economic Outlook Darkens

So much for The Fed’s attempts to lower rates and stimulate borrowing.

JP Morgan Chase is running away from the storm .. sort of.

NEW YORK (Reuters) – JPMorgan Chase & Co (JPM.N), the country’s largest lender by assets, is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value.

In other words, JP Morgan Chase is returning to good, old-fashioned lending standards … at least for the moment while jobless claims skyrocket.

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JP Morgan Chase’s mortgage origination

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Of course, JPMC can always originate a conforming mortgage that can be sold to Fannie Mae and Freddie Mac. I assume that their new underwriting standards apply to loans held in portfolio..

Speaking of darkening economic outlook …

This is beginning to look like Fannie Mae and Freddie Mac are the last men standing.

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