Mortgage Purchase Applications Rise 7.6 Percent YoY (Good) But Remain 66 Percent Below 2005 Peak (Not So Good) Despite Fed “Magic”

Things are getting better in the residential mortgage market at least compared to last year, one of the worst ever.

Mortgage applications increased 4.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 27, 2015.

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The unadjusted Purchase Index was 7.6 percent higher than the same week one year ago.

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The seasonally adjusted Purchase Index increased 5.71 percent from one week earlier, but remains 66 percent below the peak years of 2005.

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The Refinance Index increased 4 percent from the previous week. Things have not been the same since the mortgage rate surge in May 2013.

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“There was a broad based increase in mortgage applications last week relative to the week prior. The increase in purchase volume was led by a nearly 6 percent increase in both conventional and government markets, perhaps signaling that households are finally ready to begin the home-buying season,” said Lynn Fisher, MBA’s Vice President of Research and Economics.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent from 3.90 percent, with points decreasing to 0.36 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

So, despite Magic Janet and The Federal Reserve, mortgage purchase applications remain stalled.

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Chumps: QE Will Lower Living Standards Long Term

An interesting article appeared in the Financial Times arguing that Central Bank quantitative easing will lower living standards long term.

“…the prospect of improvement in economic growth is largely a monetary illusion. No one needs to explain how policy makers have made painfully little progress on the structural reforms necessary to increase global productive capacity and stimulate employment and demand. Lacking the political will necessary to address the issues, central bankers have been left to paper over the global malaise with reams of fiat currency.”

Makes sense. Look at the consumer purchasing power of the US dollar since 1913.

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The Federal Reserve balance sheet expansion has masked the declining homeownership rate in the US.

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US wage growth never quite recovered following the financial crisis.

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As labor productivity decreases.

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Yes, it appears that Central Banks QE (aka, money printing) is simply covering up underlying systemic problems in the US economy.

Fed Chair Janet Yellen and ECB President Mario Draghi discussing “the little people.”

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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.

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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.

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

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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.

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

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

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

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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.

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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).

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Here is my version of the RealtyTrac chart:

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

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

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

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

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‘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.

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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.

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

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

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

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Is Trade Dying? Plunging Baltic Dry Index And Keep Commodity Prices Collapsing (Global Slowdown Continues)

Most of us know that the global economy is softer than the media and acknowledges. Even the powerhouse US economy is softer than The Federal Reserve is letting on.

We know that inflation (as measured by the YoY change in the Consumer Price Index) is negative. And the YoY change in Real Personal Consumption Expenditures (PCE) is falling as well. NOT a good sign.

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Then we have plunging core commodities such as West Texas Intermediate Crude oil falling like a rock along with raw material and food prices. While falling prices could be a sign of excess supply, the fact the shipping costs (as measured by the Baltic Dry Index) has fallen as well.

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Here is a longer-term perspective where the Baltic Dry (shipping cost) index is at all-time lows AND commodity prices are falling.

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As if this wasn’t bad enough news for you, it is happening as global Central Banks have gone wild … on the downside.

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Then there is this story from Reuters: “Global oil glut set to grow as China slows crude imports.”

How slow is the global economy? Burger King Japan has just introduced a cologne that smells like …. a Whopper.

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The global economy is slowing down and the US has declining core PCE growth. Perhaps we need some new models.

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