Existing Home Sales Rise 2.4% In September (But Down 1.70% YoY), Back To 2001 Levels

Existing home sales in September rose 2.4% to get back to 2001 levels. Year over year change in existing home sales were down 1.70%.


If it wasn’t for 30% cash sales, the existing home sales numbers would be dreadful.


The growth was mostly in the West and South.

We can thank The Federal Reserve’s quantitative easing programs (particularly QE3) for juicing existing home sales in the face of lower/stagnant real income and “Death Valley” mortgage purchase applications.


The Fed Futures data is pointing to a Carnival Cruise trip with The Fed Funds rate likely to rise in the near future. Or at least more likely than it has been in the past year.


Here is The March of The Federal Reserve as it distorts prices and incentives.


Gone Girl: Yellen Worries That The 90% Of Americans Don’t Own Enough Assets (Low Income, Zero Interest Rates and a Regulatory Wall Hurts)

According to the Fed’s triennial Survey of Consumer Finances, the top 10% of U.S. families are doing just fine, and those in the bottom fifth are essentially being kept afloat by transfer payments; but the inflation-adjusted median family income has shrunk by one-eighth since 2004. Quite simply, middle-class incomes are being gutted.


Citing that same survey, Ms. Yellen expressed concern about “lower-income families without assets” that “can end up, very suddenly, off the road.” She therefore advised families to “take the small steps that over time can lead to the accumulation of considerable assets.” She did not, however, explain how they were to accumulate these assets, in light of falling incomes and zero interest rates.

Not to mention rising home prices when many households can’t qualify for a mortgage due to lower/stagnant incomes. Low interest rates are NOT helping millions of Americans; rather, it is preventing them from earning interest.


And declining real median net worth.


Fed Chair Yellen sounds woefully out of touch with the lower and middle class plight. And starting a new firm leaves the budding entrepreneur facing a wall of regulations and healthcare requirements. Yellen sounds “gone.”

Perhaps “Gone Girl” star Rosamund Pike can reprise her role in “Gone Girl: The Janet Yellen Story.”


And The Rockford Files Stuart Margolin (aka, Angel Martin) as Ben Bernanke.



4 Horsemen of the Bond Market: Rates Below 4% Leave U.S. Refinancing Banker Sleepless (Mortgage Rates More Volatile Than 10Y Treasury Benchmark)

Like the 4 Horsemen of the Apocalypse, the global economy is faced with 1) slow US recovery from The Great Recession, 2) Ebola, 3) Putin and Russia and 4) a stagnant Europe. All these factors are helping push Treasury and mortgage rates down … and increasing uncertainty.


Bloomberg – Prashant Gopal -The drop in mortgage rates below 4 percent has cut into Debra Shultz’s sleep. The New York City banker is busier than she’s been in months, working with three dozen homeowners eager to lower their payments.

Shultz helped a Greenwich Village homeowner on Wednesday lock in a 3.63 percent interest rate for a 30-year fixed jumbo mortgage of more than $900,000. An hour later, the rate jumped to 3.75 percent. One lender changed its rate sheet six times that day.

“It just went crazy,” said Shultz, a senior vice president of mortgage lending at Guaranteed Rate in New York. “I sent out a blast e-mail to 1,600 clients and had 30 responses right away.”

Mortgage rates are following a slide in 10-year Treasury yields as weaker-than-expected economic data from Germany to China combine with concern about the Ebola virus, sparking demand for safe investments. The average rate for a 30-year fixed mortgage dropped to 3.97 percent, the lowest since June 2013, Freddie Mac said yesterday. Borrowing costs spiked in September before dropping for the last four weeks, giving owners a new opportunity to refinance.

“This is bizarro world,” said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Virginia. “Usually we associate lower interest rates with lower volatility. Now you’re seeing the opposite.”

Yup, the Bankrate 30Y mortgage continues to fall with the US Treasury 10 year yield, yet the Bankrate 10 year rate is showing considerably more volatility.


And here is the interest rate volatility cube in 3D.


Yes, it is a Bizarro World for bonds and mortgages with head Bizarro Janet Yellen calling the balls and strikes.


Confidence Among U.S. homebuilders Dropped In October To Three-month Low (Despite Declining Rates)

Oct. 16 (Bloomberg) — Confidence among U.S. homebuilders dropped in October to a three-month low, interrupting momentum as the industry approaches the quieter winter months.

The National Association of Home Builders/Wells Fargo builder sentiment gauge declined to 54 this month from 59 in September, figures from the Washington-based group showed today. Readings greater than 50 mean more respondents report good market conditions.

Yes, homebuilder confidence is still above 50, but is declining as we approach Winter.


Still, homebuilder confidence seems a little out of whack given the declining/stagnant income of Americans and the return of mortgage purchase applications to 1995 levels.

Perhaps The Federal Reserve is pumping hopium into homebuilders.


The 10 year Treasury rate off which the 30 year mortgage rate is geared keeping declining, but even that decline isn’t thrilling homebuilders.


Perhaps the homebuilder enthusiasm is about RENTING and multifamily optimism.


Still, homebuilder enthusiasm remains above 50. Perhaps that is reason to celebrate.


Americans Poorer Now Than In 1989 (Wonder Why The Housing Market Isn’t Recovering?)

Americans, or at least the Middle Class, is poorer now than in 1989.

According to The Federal Reserve, real median net worth for the USA is now lower than in 1989.


The primary reason for the lower real median net worth is the explosion of the housing bubble in 2008.

A chart showing only real median household income shows a similar pattern. Americans have lower real incomes than in 1989.


Of course, Americans that invested heavily in the stock market have seen large gains, particularly since the Fed intervention of 2008.


Because of stalled income growth (and inability to meet Debt-to-income (DTI) requirements, housing for the Middle Class remains “snookered.”


If this is economic “recovery,” can we try something else?

Sink The Treasury Yield! Treasury 30 Yield Continues To Sink As Global Economic Recovery Stalls (US Too!)

Thank goodness markets are closed in the US today. Maybe a breather will turn the downward trend in the US Treasury 30 year yield back around. It feels like the old Johnny Horton classic “Sink the Bismarck” is an appropriate tune for the 30 year Treasury yield … since it has been sinking since January 1st.


The US economy is not what it was back in 2007. Income growth and the employment to population ratio are lower and not recovering. At least the S&P 500 index has been rising along with The Fed’s monetary easing.


Europe, of course, is sick. When their economic powerhouse, Germany, is limping along at 1.20% GDP growth, you know things are bad.


The good news? Mortgage interest rates should decline. If only income would start growing again. But even with the downturn in Treasury and mortgage rates, there is NO housing recovery.


Thanks to The Fed and global Central Banks for trying to Sink The 30 Yr Treasury Yield!


Lethal Taper: The Buffett Valuation Indicator Flashing Red (Are Stocks And Housing Too “Frothy”?)

Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett, the Oracle of Omaha.

Here is a chart of the market cap to nominal GDP, aka the Buffett Valuation Indicator. Note that we are currently in the second highest spike since 1952.


Here is the Buffett Valuation Indicator since 2000 versus the Wilshire 5000 Total Market Full Cap Index. Note that they both peak in 2007, then decline.


In fact, both the Buffett Valuation Indicator (BVI) and Wilshire 5000 index are higher than their peaks in 2007.

But what about house prices? Like the BVI, they peaked in 2007 (if I use the FHFA Purchase Only House Price Index). But while BVI is now higher than in 2007, house prices are not. But they are rapidly increasing.


Of course, the Federal Reserve’s massive intrusion into capital markets certainly helped float the Buffett Valuation Indicator to frothy heights.


The question is whether these frothy stock and house prices can withstand the withdrawal of the unprecedented Fed stimulus.

Doctor, Doctor (Yellen), give me the news, have we got a bad case of … asset bubbles?