The Keep: All Households Created During “Recovery” Were Renters

There was a movie from 1983 called “The Keep” with Scott Glenn, Gabriel Byrne, Jürgen Prochnow and Ian McKellen. A great cast, to be sure, but the nemesis in the movie was … a man in a rubber suit.


The title “The Keep” is more appropriate for the NON recovery of the US economy and housing in particular. That is, did The Fed’s monetary policy help KEEP households in rentership mode? (And its another name for The Federal Reserve building on Constitution Avenue in Washington DC).

If we look at households created during “the recovery” and all The Fed’s monetary stimulus, all households created were renters.


This is not all that surprising since home price growth is 13.3X wage growth.

median home price vs wages_0

But the US is not alone in poor wage growth. Europe, UK, Japan and the US are all suffering stagnant wage growth. While house prices are booming in many countries.


The US homeownership rate keeps falling despite The Fed’s massive intervention.


Any wonder why the M1 Money Multiplier and M2 Money Velocity are so low?


Like in the movie “The Keep” you will have to rent.


Janet Yellen’s “Pat Paulsen” Speech: The Fed May Or May Not Raise Rates

Janet Yellen gave yet another speech, this time in her home base of San Francisco. Here it is! 260150092-Yellen-Speech-March-27

In short, she said … nothing. The Fed may raise rates or they may not. And they don’t know when.

To conclude, let me emphasize that in determining when to initially increase its target range for the federal funds rate and how to adjust it thereafter, the Committee’s decisions will be data dependent, reflecting evolving judgments concerning the implications of incoming information for the economic outlook. We cannot be certain about the underlying strength of the expansion, the maximum level of employment consistent with price stability, or the longer-run level of interest rates consistent with maximum employment. Policy must adjust as our understanding of these factors changes. However, if conditions do evolve in the manner that most of my FOMC colleagues and I anticipate, I would expect the level of the federal funds rate to be normalized only gradually, reflecting the gradual diminution of headwinds from the financial crisis and the balance of risks I have enumerated of moving either too slowly or too quickly. Nothing about the course of the Committee’s actions is predetermined except the Committee’s commitment to promote our dual mandate of maximum employment and price stability.

While I only have the written speech, here is a film of Pat Paulsen speaking. It contains the same gibberish as the Yellen speech.


Bubbles In The Wind: US Home Prices Rising Over 13X Wage Growth (Blistering Home Price Growth Since QE3 With Dormant Wage Growth)

Kansas once sang “Dust In The Wind” that reminds me of rapidly rising home prices that are 13.3 times wage growth.

I close my eyes only for a moment, and the moment’s gone
All my dreams (of homeowernship) pass before my eyes, a curiosity

Dust in the wind, all they are is dust in the wind (with low wage growth

RealtyTrac has a new study that verifies what I have been saying since 2012: home prices are growing faster than wages (in fact, 13.3 times faster).

median home price vs wages_0

Here is my version of the RealtyTrac chart:


Detroit, San Francisco and Atlanta lead the nation is home price growth/wage growth disparity. Even Washington DC made the list.


There are urban areas where wage growth exceeds home price growth, such as in Tulsa and Oklahoma City.


Here is a snapshot of home price growth and wage growth since The Fed enacted the third round of quantitative easing (QE3).


Here is Fed Chair Janet Yellen singing “All YOU are is dust in the wind.”


‘Twas The Night Before The GDP Report: Atlanta GDP NOW Forecasts 0.2 Percent Q1 GDP Growth

‘Twas the night before THE GDP RELEASE, when all through the house
Not a creature was stirring, not even a mouse

Apparently the same applies to the US economy. The Atlanta Federal Reserve’s GDP NOW is forecasting a pathetic Q1 GDP read of 0.2 percent.


Here is the breakdown. From the beginning of February until today, Personal Consumption Expenditures (PCE) on Goods dropped severely. And Fixed Investment in Structures fell as well.


Meanwhile, the 10 year – 2 year yield curve slope is near the low since December 2007.


Let’s see what Friday’s GDP release brings. I forecast … a lump of coal.

Lump-Of-Coal-Cachette (1)

I wonder if The Fed will still consider raising interest rates this year?


The Mordor Mortgage Market: Mortgage Purchase Applications Rise ( But UP Only 2.7 Percent From Last Year)

Mortgage applications increased 9.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 20, 2015.


The NON seasonally adjusted Purchase Index increased 5.23 percent from one week earlier. And is now UP 2.7 percent from the same week in 2014.


The seasonally adjusted Purchase Index increased 5 percent from one week earlier to its highest level since January 2015. Purchase applications remain in Mordor.


The Refinance Index increased 12 percent from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.90 percent, its lowest level since February 2015, from 3.99 percent, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Welcome to the Mordor Mortgage Market!

mordor_by_edli-d2yrha5 Continue reading

US Inflation Rises …. To Zero

Everyone is watching The Federal Reserve like a hawk for tell-tale signs of a rate increase.

As Janet Yellen has already said, The Fed is watching inflation.

Today’s inflation report found that the CPI rose 0.0 percent year over year.


This does not look like a trend that is likely to stimulate a rate increase.


New Home Sales Rise 7.8 Percent In February (Rises 153 Percent In Frozen Northeast, Down 6 Percent in Sunny West)

So much for the cold weather meme.

New home sales rose 7.8 percent in February and … 153 percent in the frozen Northeast.


Well, I guess it wasn’t THAT cold. And new homes sales declined 6 percent in the sunny West.

Once again, a bit of an anomaly rears its ugly head. Mortgage purchase applications remain at 1995 levels while income remains lower than in 2007. On the other hand, the employment to population ratio is growing.


At least new home sales are back to 1991 levels, a far cry from the heady days of 2005.