Financial Markets And Real Estate
The various talking heads from The Federal Reserve keep jawboning about whether to raise rates or not. One of the major drivers of inflation is … money. M2 Money growth YoY is growing again (blue line)! And with it, inflation has been rekindled.
Mortgage rates? There is a lag between M2 Money printing and conforming mortgage rate growth.
Fear the talking Fed.
South of the border, down Mexico way.
I was expecting MORE housing construction given the 10+ million illegal immigrants that Biden/Mayorkas have waived across the border.
Sales of new single‐family houses in April 2024 were at a seasonally adjusted annual rate of 634,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent below the revised March rate of 665,000 and is 7.7 percent below the April 2023 estimate of 687,000.
The previous three months were revised down.
The second graph shows New Home Months of Supply.
The months of supply increased in April to 9.1 months from 8.5 months in March.
The all-time record high was 12.2 months of supply in January 2009. The all-time record low was 3.3 months in August 2020.
This is well above the top of the normal range (about 4 to 6 months of supply is normal).
After (unexpectedly) tumbling in March, existing home sales were expected to rise modestly (+0.8% MoM) in April. Analysts were wrong as March’s data was revised marginally up from -4.3% MoM to -3.7% MoM and April printed -1.9% MoM (a big miss). That left existing home sales down 1.9% YoY…
That pushed the existing home sales SAAR back near COVID lockdown lows…
This really should not come as a surprise because, while homeBUILDERS remain optimistic that things will pick up, homeBUYERS are the least enthusiastic they have ever been about buying a home… going back almost 50 years…
And with mortgage rates still above 7%, we don’t see things picking up meaningfully anytime soon…
…and then there’s this…
Sales declined in all four regions, including a 2.6% decrease in the West and a 1.6% drop in the South
The median selling price increased 5.7% from a year ago to $407,600 – the highest for any April in data back to 1999.
Unlike in the new-home market, where rising inventories and the prevalence of incentives by builders have pushed prices down on an annual basis, the home-resale market is experiencing rising year-over-year price growth.
“Home prices reaching a record high for the month of April is very good news for homeowners,” NAR Chief Economist Lawrence Yun said in a statement.
“However, the pace of price increases should taper off since more housing inventory is becoming available.”
About 68% of the homes sold were on the market for less than a month, up from 60% in March, while more than a quarter sold above the list price.
It’s a sign of the times under Bidenomics!
Mortgage applications increased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 17, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 1.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.1 percent compared with the previous week. 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 11 percent lower than the same week one year ago.
The 30-year fixed mortgage rate declined for the third straight week, dropping to 7.01 percent – the lowest level in seven weeks. Thus, the Refinance Index increased 7 percent from the previous week and was 21 percent higher than the same week one year ago.
VA-insured mortgages prepay the fastest, followed by FHA-insured mortgages then conventional mortgages.
I know a place where the housing market is hot! Florida and Texas!
You know “Green Joe” is desperate for re-election when he approves the release of 1 million barrels of gasoline from the Northeast Reserve in an attempt to lower gasoline prices. Jennifer Granholm, US energy Overlord, said it is to lower gasoline prices for 4th of July weekend (LOL!). Or in time for the November Presidential election.
Remember, gasoline prices are up 60% under Biden. While Biden brags that gasoline prices has fallen recently, they are still up 60% nationally.
Gasoline futures prices are down a little today after the announcement by Granholm.
I never thought Biden really believed what he was spewing, trying to force us to buy electric vehicles while he drives a gas-guzzling Chevy Corvette.
I’ll bet his green zanies won’t like this!
What a creep!
I learn something new everyday. Like Biden yesterday claimed has was VP during Covid (uhm, Covid was in 2020 and Biden left the office of VP in 2017). But nothing gets in the way of Biden and a good story! Like his whopper that he inherited 9% inflation from Trump (even CNN fact-checked this whopper and found it was false. It was only 1.4%!)
But inflation is still at 4.5%, according to the Cleveland Federal Reserve.
Now, there are many measures of inflation to choose from, from Core CPI of 2.1% YoY to Cleveland Fed’s Median CPI of 4.5%.
Is it sundown for the US economy and its middle class? Or the wreck of the USS Economy under Biden?
The US is on a “Highway to Hell!” thanks to flawed economic policies under Biden.
First, interest and mortgage rates under Biden have soared driving buying conditions for housing to all-time lows. Combine sky-high home prices with high mortgage rates and we have as serious affordability crisis.
Second, on the interest rate front, the 30-year Treasury bond is on track for the 3rd worst annual return since 1919 and Russia’s invasion of Ukraine. Not not the current invasion, but the 1919 invasion.
Third, China is dumping their holdings of US Treasuries and Agency Debt at record rates.
Of course, mortgage rates hit 18% in 1981. So, the term high mortgage rates is relative. The US had low rates for too long (Bernanke/Yellen) and mortgage rates are now in the 7% range, up 165% under Biden. And home prices are up 34% since Biden was sworn-in as President. Wow! Mortgage rates up 165% and home prices up 34% under Biden’s Reign of Error.
Well done, gentlemen! … NOT!
Biden’s green energy zealots got another piece of bad news. Or as Queen sang, “Another One Bites The Dust.”
It turns out unionized employees extorting you on labor costs while the government mandates you produce a money-losing product isn’t a combination that leads to prosperity and profit. Go figure.
Now, it isn’t just car manufacturers that are balking from the idea of all electric vehicles: the trucking industry, once expected to eventually make the shift to all electric as well, is seeing tepid demand for new rigs, according to a new Wall Street Journal article.
Of course, the producer price index for electric trucks and equipment has soared under Biden (like everything else). PPI for electric trucks and equipment are up 33.6% under Biden and his disastrous green energy fiasco.
“The economics just don’t work for most companies,” Robert Sanchez, the chief executive of Ryder, said earlier this month.
Ryder’s experience highlights the difficulties state and federal governments encounter in encouraging truckers to transition from polluting diesel rigs to zero-emissions vehicles, the report says.
It also indicates that significant improvements in battery weight, range, and charging times are necessary for battery-electric trucks to effectively compete with diesel rigs in the cost-sensitive freight industry.
Rakesh Aneja, head of eMobility at Daimler Truck North America, told Wall Street Journal: “Quite frankly, demand has not been as strong as what we would like.”
Aneja said orders for its Freightliner eCascadia battery-electric semi truck are about the same this year as they were in 2023.
Battery-electric trucks are about three times more expensive than diesel rigs, the Journal notes. And while federal and state programs help offset purchase costs, significant hurdles remain due to high operating costs and setup challenges.
Truckers find these electric trucks difficult and costly to run, with installation of on-site charging facilities taking years. These trucks travel less than half the distance of diesel rigs per charge and require several hours to recharge.
Ryder launched a service a year ago to assist companies in setting up and maintaining battery-powered fleets. So far, it has sold only 60 vehicles, mostly light-duty trucks. Three companies use five battery-electric heavy-duty trucks, but only within yards for shuttling trailers.
Sanchez noted that unlike individual electric car buyers, companies will only switch to battery-electric trucks when they can compete with diesel on operational costs.
The cost of changing a fleet over is also expensive. Using data from 13,000 vehicles, Ryder analyzed the annual operating expenses of battery-electric commercial trucks and found they are significantly higher than those of diesel rigs. The analysis, assuming existing fast-charging infrastructure, considered costs like vehicle purchase, maintenance, labor, and fuel.
Ryder found that light-duty battery-electric vans increase annual operating costs by several percentage points, with the gap widening for heavier trucks. Operating battery-electric big rigs costs about twice as much annually as diesel trucks.
In California, converting a fleet of 25 commercial vehicles, including 10 heavy-duty trucks, from diesel to battery power would raise annual operating costs by 56%, or $3.4 million. In Georgia, the increase would be 67%, or $3.7 million. Ryder stated that these higher costs would add 0.5% to 1% to inflation.
The American Trucking Associations said of the U.S. EPA’s new rules mandating more BEV semi truck sales by the end of the decade: “Considering that 96% of U.S. trucking companies operate 10 or fewer trucks, these mandates are simply cost-prohibitive for most truckers.”
Meanwhile, Biden is lazing on a Sunday afternoon … and 40% of his Presidency.
The US middle class and low-wage workers are back on the chain gang while the top 1% party hearty.
The Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 0.6 percent in April 2024 to 101.8 (2016=100), after decreasing by 0.3 percent in March. Over the six-month period between October 2023 and April 2024, the LEI contracted by 1.9 percent—a smaller decrease than its 3.5 percent decline over the previous six months.
It is surprising that Americans trusts the millionaires in the Administration (like Biden) or Congress (like Schumer, McConnell, etc) to have our backs on the roaring inflation rate. At least Speaker Mike Johnson isn’t a millionaire … yet. But that might explain his selling out conservatives.
Don’t show Biden this story. Biden has never met a bad central planning scheme that he didn’t like and this one is TERRIBLE.
China’s struggling housing market is set to receive a boost from a new nationwide program funded by the People’s Bank of China to address oversupplied conditions. As a critical driver of the domestic economy, the nation’s housing market has been in a multi-year slump. This latest initiative by policymakers aims to stabilize the housing market and stimulate the broader economy.
Bloomberg reports that PBoC Deputy Governor Tao Ling announced the new 300 billion yuan ($41.5 billion) nationwide program of cheap funding to allow state-owned companies to purchase unsold homes.
Ling said the funding will be directed at 21 providers, including policy banks, state-owned commercial lenders, and joint-stock banks. A rate of 1.75% will be offered. The low-cost loans have a one-year term and can be rolled over four times.
The new program powerfully signals that policymakers are pushing for property policy easing and measures to balance the supply-heavy housing market, which casts a dark cloud over the world’s second-largest economy. This announcement appears to be a step in the right direction in a national-level policy.
Bloomberg first leaked the new rescue policies days earlier. We titled the note “Fiscal Bazooka: China Considers Buying Millions Of Homes To Save Property Market.”
Also, on Friday, policymakers eased mortgage rules and removed the mortgage rate floors for first and second homes. PBoC also lowered the minimum downpayment ratio for first-time homebuyers to 15%. The downpayment ratio for second-home purchases was lowered to 25%.
Chinese Vice Premier He Lifeng said that authorities in cities with excess home inventories should purchase unsold properties and convert them into affordable housing. He also urged local governments to repurpose inactive land parcels held by property developers to alleviate their financial troubles.
This was a very policy-heavy week to save the debt-stricken real estate market. Data showed that property investment and new home sales in April experienced larger contractions, while housing prices slid even further.
China’s ailing property sector is a drag on GDP.
And apartment and commercial property sales are sliding.
In markets, the CSI 300 Real Estate Index closed up 9%, with gains from April 24 totaling about 36%. Yet the latest gains in the property index are still 68% below the early 2018 peak.
The index’s weekly gain was the most since early December 2015.
It isn’t in a Communist countries’ DNA to let markets solve the problem … like letting prices correct no matter how painful that adjustment is. Biden and his “economic” advisor Jared Bernstein (not an economist but a public policy hack) would likely follow China’s idiotic solutions to the problem.
I debated Bernstein once at a Washington DC conference. He was arrogant but eventually confessed that he didn’t know anything about housing or mortgages. Nice economic advisor, Joe!
Confounded Interest - Anthony B. Sanders 
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