US Housing Starts Plunge -21.8% Since Last December (But 1 Unit Starts UP 11.26% Since November)

December’s housing construction numbers are a mixed bag. On the one hand, US housing starts are down -1.36% from November to December, but down -21,8% since December 2021 (YoY).

The good news? 1-unit (single family detatched) rose 11.26% from November to December (MoM). But 5+ (multifamily) starts are down -18.91% MoM.

But 5+ unit PERMITS are up 7.14%. Perhaps Hunter Biden can now rent an apartment rather than pay his father $50,000 a month in rent for Joe’s Wilmington Delaware house.

KB Homes experienced a 68% cancellation rate in Q4 2022.

This version of The Scream is one of four made by Edvard Munch, and the only one outside Norway. It is coming up for auction at Sotheby’s in New York.

US Pending Home Sales Fall -36.7% YoY In October, MBA Purchase Applications Fall -31.22% YoY As Fed Tightens

The Federal Reserve continues to remove the monetary punch bowl despite the global yield curve inverting and The Fed fighting Bidenflation.

On the mortgage front, mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 25, 2022. This week’s results include an adjustment for the observance of the Thanksgiving holiday.

The Refinance Index decreased 13 percent from the previous week and was 86 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 31 percent compared with the previous week and was 41 percent lower than the same week one year ago.

On the housing front, US pending home sales fell for a fifth month in October as demand continued to sag under the weight of high mortgage rates.

The National Association of Realtors index of contract signings to purchase previously owned homes decreased 4.6% last month, according to data released Wednesday. And fell -36.7% YoY.

All together now. Look at pending home sales YoY and mortgage purchase applications SA compared with M2 Money YoY.

Is this part of The Great Reset??

US Mortgage Rates Drop Below 7% in Biggest Decline Since July (But MBA Purchase Applications Drop -9.52% WoW, Refi Apps Drop -11.44%)

US mortgage rates fell last week by the most since the end of July, slipping below 7% and helping generate a bounce in purchase applications that otherwise remain depressed, but only in the Seasonally Adjusted data. The NON-Seasonally Adjusted data show a hefty decline.

The contract rate on a 30-year fixed mortgage decreased 24 basis points to 6.9% in the week ended Nov. 11, according to Mortgage Bankers Association data released Wednesday. The group’s index of applications to buy a home rose 4.4% — the most since June — but is still near the weakest level since 2015. 

But the bounce was in Seasonally Adjusted data only. The NON-seasonally adjusted data remained depressed.

Mortgage applications decreased -10.0 percent SA from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 11, 2022. This week’s results include an adjustment for the observance of Veterans Day.

The Refinance Index decreased -11.44% percent from the previous week and was 88 percent lower than the same week one year ago. The unadjusted Purchase Index decreased -10 percent compared with the previous week and was 46 percent lower than the same week one year ago.

Mortgage purchase applications will continue to fall in NSA terms since it is the Winter and home buying season won’t really start until January. Refinancing applications actually dropped -11.44% even with the drop in mortgage rates.

The data. As my former students know, I like the “raw” data, better known as NON-seasonally adjusted (NSA) data and avoid seasonally-adjusted data (SA) since it hides what is going on.

And on The Fed Futures Front, The Federal Reserve is still looking a hiking their target rate from 4% to just under 5%.

The Gap! US Mortgage Demand Crashes As Fed Tightens (Taylor Rule Estimate Now 13.85% Versus 4.00% Current Target Rate)

The October Senior Loan Officer Opinion Survey on Bank Lending Practices came out yesterday and its a doozy.

The Net Percentage of Domestic Banks Reporting Stronger Demand for Mortgage Loans is sinking faster than Joe Biden’s oratory skills as The Fed tightens their monetary belts.

Jumbo mortgages, those that are greater than FHFA’s conforming loan limit, are tanking as well.

And today, the University of Michigan (BOOO!!) consumer survey for housing buying conditions fell to the lowest level in recorded history.

Given the latest inflation numbers (improving from disastrous, 8.2% YoY to really horrible, 7.70% YoY), and unemployment rate rising from 3.5% to 3.7%, we now see that Taylor Rule estimate for Fed Funds is now … 13.85%. The US is currently at 4.00%. THAT is a big gap!

Yes, The Fed will not be able to fill the gap between the Taylor Rule and the current Fed Funds Target Rate, without incredible damage being done.

Unfortunately, this is an ACTIVE FAILURE for The Fed which has left monetary stimulus too high for too long since late 2008.

On a personal note, I am glad the midterm elections are over. We saw John Fetterman arguing until he was blue in the face that he loved fracking and will continue to let Pennsylvania frack. Then PA governor-elect Josh Shapiro came out yesterday and said that PA will end all fracking. And we are to believe that Lt Gov Fetterman did not talk with PA Attorney General Shapiro about fracking? To quote Joe Biden, “C’mon man!”

Fed Is NOT Unwinding MBS, 30yr Mortgage Rate Falls To Under 7% (Will The Fed ACTUALLY Unwind Its Balance Sheet??)

Now that the midterm elections are over (except for counting of million of mail-in ballots, a massive moral hazard risk), President Biden has proclaimed that he isn’t changing any of his horrid policies. And apparently, neither is The Federal Reserve.

Despite the headlines that The Federal Reserve is rapidly downsizing its massive balance sheet of assets, The Fed is just letting their enormous holdings of mortgage-backed securities (MBS) run off. That is, just letting MBS mature. So, The Fed’s System Open Market Holdings of Agency MBS has barely declined.

Here is the table of MBS run-off. The mass of MBS doesn’t start to mature until … 2039. It is Treasuries that are maturing.

So, The Fed is raising its target rate rapidly, although that is likely to reverse course in the first half of 2022.

Meanwhile, mortgage applications fall to lowest level since 1997 with Fed tightening.

“So Mr Bond…let me tell you my plan for global domination.”

US Mortgage Rates At 7.32%, Up 154% Under Biden (As Fed Fights Soaring Bidenflation)

Biden’s magic trick was to turn the economy into a train wreck.

Example? The 30-year mortgage rate was 2.88% on Biden’s inauguration day (January 20, 2021). They are now 7.32%, a 154% increase under Biden.

The US economy is suffering from knucklehead energy policies, reckless Federal spending and rampant inflation.

Here is Joe Biden doing economic magic tricks, turning a vibrant economy into an inflation-ravaged one.

And why I won’t watch of subscribe to Peacock.

MMT Alert! US Debt At $10.7 Trillion In Q4 2008, Now At $30.6 Trillion, +186% In 14 Years (M2 Money UP +162.5%) US Unfunded Liabilities At $172.4 TRILLION!

Ever since the financial crisis of 2008 and the election of President Obama and a Democrat Congressional sweep, the US has embraced Modern Monetary Theory (MMT or borrow, print and spend without consequence). And between the financial crisis and the Covid crisis of 2008, we have seen an increase in US public debt from $10.7 trillion in Q4 2008 to a staggering $30.6 trillion as of Q2 2022. That is a staggering increase of 186% in only 14 years.

How about US Money stock? M2 Money stock has grown by 162.5% since the beginning of 2009 and the “Blue Wave” of 2008. And nothing has been the same.

The Covid outbreak in early 2020, we saw Fed money printing that has never seen before … or since. But one thing is for sure, M2 Money Velocity (GDP/M2) is near all-time lows.

Then we have headline US inflation as a function of M2 Money growth YoY.

To paraphrase Alexander Dayne from Galaxy Quest, “They broke the financial system, they broke the bloody financial system!”

And it is the midterm election “silly season” where no politician will discuss the complete and utter mess they have made. According to US Debt Clock, US national debt is already up to $31.26 trillion (OMG!), but the REALLY scary number that not a single politician will address is UNFUNDED LIABILITIES OF $172.4 TRILLION.

Can we go back to the gold standard? Or silver standard? Or ANY standard for that matter??

Instead, we have porous borders and patently UNSOUND money, thanks to MMT.

US Pending Home Sales Collapse -30.4% YoY In September (10th Negative Month In A Row) As Fed Plans MORE Rate Hikes (Personal Saving Rate DOWN -59.3% YoY)

I was in an MRI tube getting a scan of the brain tumor that is causing me problems. So, I missed this morning’s new dump. And what a dump it was!

First, pending home sales have collapsed (down -30.4% YoY) for September. Look at pending home sales against M2 Money growth.

Then we have the employment cost index, up 5%. This will encourage The Fed to tighten further, even if it causes a recession.

How about the US Personal Saving Rate YoY?? It is down -59.3%.

But were living on Washington DC time!

Deceleration Nation! US Home Price Growth Slows Most On Record In August As Fed Hits Brakes, But Still Growing At 12.99% YoY (US Treasury 10-yr Yield DOWN -17 BPS Today)

Alarm! US home prices are decelerating as inflation rages and The Fed tightens.

Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.

A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.

The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated. 

While 13% growth sounds good, it is not good for renters looking to buy a home.

According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.

It looks like some people have taken three steps and left blue states for red states.

On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.

Its that smell of impending recession.

Well, they certainly aren’t calling Biden “The Breeze.” Except for the recession that is going to clobber the US.

The Fed’s Limbo Rock! How Low Can Consumer Sentiment For Housing Go? (Lowest Reading Since 1992 As Fed Counterattacks Bidenflation)

The Fed’s Limbo Rock! How low can consumer sentiment for housing go?

The University of Michigan’s consumer sentiment index for housing for October just fell to its lowest level since 1992 as The Fed counterattacks against Bidenflation, causing mortgage interest rates to rise.

Of course, despite slowing home price growth, expensive home prices are really hurting along with expensive rents. But how sustainable are high home prices when REAL average hourly earnings growth is negative??