Mortgage Rates in the U.S. Soar to the Highest Since March 2020 (3.45% Nominal Rate, -3.59% REAL Rate)

Mortgage rates in the U.S. rose for a third straight week, reaching the highest point in almost two years. 

The average for a 30-year loan was 3.45%, up from 3.22% last week and the highest since March 2020, Freddie Mac said in a statement Thursday.

Rates tracked a jump in yields for 10-year Treasuries, which climbed to levels not seen since early 2020, before the pandemic roiled financial markets. Signs point to borrowing costs rising further as the job market improves and the Federal Reserve steps up its efforts to tame inflation.

That would increase the burden on homebuyers who are already stretching to afford a purchase. Rates for 30-year mortgages tumbled to a record low of 2.65% a little more than a year ago.

Cheap loans have helped fuel a housing rally that’s still running hot even as home prices soar out of reach for many Americans.

But wait! The REAL 30-year mortgage rate (nominal 30-year rate – CPI YoY) is -3.59%.

Lael Brainard, Biden’s nominee to be Vice Chairman of The Federal Reserve, has been one of the “inflation is transitory” crowd. US Senator Toomey is questioning Brainard in today’s hearing. From Toomey’s opening statement:

Last year, Governor Brainard repeatedly insisted that inflation was transitory. We have now had nine consecutive months where inflation has been more than two times the Fed’s 2% target. That makes it pretty clear that inflation is not transitory. Yesterday’s CPI release of 7.0%—the highest in 40 years—confirms that.

Inflation is a tax that is eroding Americans’ paychecks every day. Even though wages are growing, inflation is growing faster and causing workers to fall further and further behind.

At least the REAL mortgage rate is negative!

I hope Senator Toomey shows Brainard this chart of “transitory” negative wage growth.

Negative wage growth and negative REAL mortgage rates. What a total mess!

Biden’s Build Back Better Act May Add $3 Trillion To The Federal Deficit (And Cost $4.73 Trillion)

Call it “The Letter That Phil Swagel Wrote.”

The letter from Phil Swagel, Director of the Congressional Budget Office, sent a letter to Congress stating that

“The Congressional Budget Office and the staff of the Joint Committee on
Taxation project that a version of the bill modified as you have specified
would increase the deficit by $3.0 trillion over the 2022–2031 period.”

In short, members of Congress asked the CBO “What would happen if the programs in the bill would be made permanent (which they almost always are made permanent). The result? The Letter That Phil Swagel Wrote: Federal Deficits would increase by $3.0 trillion over the next 10 years.

The Center For A Responsible Federal Budget is even more glaring. The permanent cost of Build Back Better is $4.73 trillion … and a deficit of $3.01 trillion.

Here is all 2,466 pages of the Build Back Better Act (or Build Back Deficits Act).

The Penn-Wharton Budget Model estimates that — if Congress follows White House policy to make most provisions permanent — then Build Back Better will reduce the long-term GDP by 2.8 percent, reduce wages by 1.5 percent, and reduce work hours by 1.3 percent. The only thing it will expand is government debt, by 25 percent.

Build Back Badly?

What’s Wrong With This Picture? M2 Money Growth “SLOWS” To 12.8% YoY As Real Earnings Growth Slows To -1.6% YoY (Will Omarova As Comptroller Make This Better??)

Highlights for Children has a popular segment called “What’s Wrong With This Picture?”

I give you my economics version of “What’s Wrong With This Picture?” It features The Federal Reserve’s M2 Money year–over-year compared with Real Average Weekly Earnings year-over-year.

Yes, M2 Money growth has “slowed” to 12.8% YoY while US Real Average Weekly Earnings YoY is now -1.6%. In other words, while M2 Money is still growing at a rapid pace, real weekly earnings growth is NEGATIVE.

The Fed continues to pump money into a bottle-necked economy while The Federal government pays people NOT to work.

The US Senate has a plan to fix the problem: Biden has nominated Saule Omarova, a dingbat law professor from Cornell (alma matter for The Office’s Andy Bernard), who proposes the following:

(1) Moving all bank deposits from commercial banks to so-called FedAccounts at the Federal Reserve;

(2) Allowing the Fed, in “extreme and rare circumstances, when the Fed is unable to control inflation by raising interest rates,” to confiscate deposits from these FedAccounts in order to tighten monetary policy;

And Ohio Senator Sherrod Brown (D-of course) thinks there is NO MORAL HAZARD PROBLEM with The Fed confiscating bank deposits for its own use?????

If I was attending Omarova’s confirmation hearing, my verdict would be ..

.

JOLT! Job Openings Changed Little (10.4 Million In September) As UMich House Buying Sentiment Declines Even Further (To 62 From 144 Last Year On This Date)

The Federal Reserve continues to JOLT markets with excessive monetary stimulus despite numerous reasons why they should back off.

For example, today’s JOLT report (US job openings) revealed that 10.4 million jobs were open in September. This is the fourth consecutive month of 1 million plus job openings, yet The Fed refuses to raise their target rate.

At the same time, the University of Michigan survey revealed that buying conditions for houses dropped to 66 (baseline of 100). To show how bad this is, buying conditions for houses was at 144 this time last year.

UPDATE: UMich revised their number downward to 62, the lowest since 1981.

In The Fed’s mind, they are still chasing at least 3.5% unemployment, the lowest rate under President Trump prior to COVID. But with perpetual million plus job openings GOING UNFILLED, trying to get to pre-COVID unemployment rate of 3.5% is a fool’s errand.

Of course, with The Fed helping to pump up house prices to largely unaffordable levels, it makes sense that enthusiasm for buying expensive homes has crashed.

Meanwhile, The Fed continues to JOLT the economy with excess stimulus.

Overall inflation fears are leading to lowest consumer confidence since 2011.

PLEASE stop JOLTING US!!