MBA Mortgage Applications Drop 0.5% WoW, Refi Apps DOWN 85% YoY, Purchase Apps DOWN 41% YoY (75 Basis Point Increase In Fed Rate Expected Today, Peaking At 5% In May 2023)

US mortgage applications declined for the sixth consecutive week despite a slight drop in rates.

Mortgage applications decreased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 28, 2022. This week’s results include revised data to reflect an update to last week’s survey results.

The Refinance Index increased 0.2 percent from the previous week and was 85 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 41 percent lower than the same week one year ago.

This morning’s WIRP (Fed Funds Futures data) is pointing to a 75 basis point increase from The FED FOMC (open market committee) at 2pm EST, rising to over 5% by the May 2023 meeting before declining again.

I feel like The Fed is fixing to let the economy die.

MBS Returns Extend Negative Streak During Worst Year On Record (MBS Prices Dropping With Fed Tightening And M2 Money Growth Decline)

The housing and mortgage markets are suffering with impending recession and Fed monetary tightening.

MBS returns extended their negative run during their worst year on record as 10-year Treasury yields topped 4% and the trend in MBS spreads widened.

The MBS sector has had only two positive months in both total and excess returns this year — May and July.

Take a look at the 4.5% coupon agency MBS price and risk (duration) with Fed tightening (orange line) and crashing M2 Money growth (green line).

Time for something new in the MBS market?

US Q3 Real GDP At 1.8% YoY, GDP Price Index Falls To 4.1% YoY As M2 Money Crashes Most In History (UST 10yr – 3mo Yield Curve Inverts) Heating Oil UP 162% Under Biden

US Q3 GDP numbers are out and they are … meh. Only Biden and Karine Jean-Pierre would cheer about 1.8% real GDP growth. At least real GDP growth wasn’t negative!

Real GDP rose 2.6% after -0.6% in Q2 and 1.8% YoY. But the most interesting data bit is the GDP Price Index. It fell to 4.1% in Q3 down from a whopping 9.0% in Q2.

But wait! Also declining at a stall speed is M2 Money.

And brace yourself for a cold winter. Heating oil is UP 162% under Biden.

US Mortgage Rates At 7.20% As US Yield Curve 10YR-3MO Inverts (M2 Money YoY Lowest Since 2010)

As the midterm elections get close, the news for Americans gets worse.

On the housing/mortgage front, Bankrate’s 30-year mortgage rate (yellow line) just hit 7.20%, the highest since 2000. Also, the US Treasury 10yr-3mo yield curve (white line) inverted, historically a precursor to recession, before barely climbing back above 0%.

Meanwhile, M2 Money growth has collapsed to the lowest level since 2010.

US GDP numbers are due out at 8:30AM EST for Q3. The numbers are expected to show slow growth (around 2.4%) with rapid inflation (5.3%). While the GDP numbers are better than Q2’s numbers, they are still pretty lousy.

US Mortgage Rate Rises Above 6% As Fed Slow To Withdraw Stimulus (Drives Me Crazy!)

The Federal Reserve drives me crazy!

Thanks to Federal Reserve increases in their target rate, the 30-year mortgage rate has risen above 6%.

What drives me crazy about The Fed is their failure to removed monetary stimulus following the financial crisis of 2008 when they dropped their target rate to 25 basis points (0.25%) and began assets purchases (orange line). The Fed raises their target rate only once during Obama’s Presidency but then raised rates 8 times after Trump was elected President.

Now we are seeing The Fed NOT shrinking their balance sheet in a meaningful way. However M2 Money growth YoY (green line) has slowed to 5.2%.

While it is a good thing that The Fed is FINALLY reducing some of the monetary stimulus in place since 2008, the bad thing is that mortgage rates are rising rapidly.

The Fed’s quantheads are predicted to resume easing in March 2023.