Will Higher Mortgage Rates Kill the Housing Market?

By Charlie Bilello

U.S. Mortgage Rates have risen for 9 consecutive weeks, hitting their highest levels since January 2014.

Source Data: Freddie Mac

That certainly seems like a sharp increase, but is 4.46% high?

Only when compared to recent history, which includes the all-time low in yields from November 2012 (3.31%). In a historical context, mortgage rates today are still quite low.

How low? Lower than 85% of monthly data points going back to 1971. The median 30-year Mortgage Rate over that time: 7.70%.

Continue reading Will Higher Mortgage Rates Kill the Housing Market?

The Fed’s Accidental Preoccupation with Housing

By Michael Ashton

I get asked frequently about Core PCE inflation. Because the Fed obsesses over Core PCE, as opposed to one of the many flavors of CPI (core, median, trimmed-mean, sticky-price), investors therefore obsess over it as well.

My usual response is that I don’t pay much attention to Core PCE, for several reasons. First, there are no market instruments that are remotely tied to PCE, so you can’t trade it (and, for the conspiracy-minded among you, that means there is no instrument whose market price can call shenanigans if the government figure is ‘massaged’). Second, while PCE is interesting and useful for some uses – it measures prices from a different perspective, mainly from the supplier-side of the equation so that, for example, it captures what Medicare pays for care as opposed to just what consumers pay – those aren’t my uses. Markets respond to inflation, and to perceptions of inflation, but what the government pays for healthcare isn’t something we perceive directly.

So, I care about PCE more than, say, PPI, but only just. The only reason I care about PCE is that the Fed cares about it.

Now,  PCE differs from CPI in a couple of key ways – apart from the philosophical way mentioned above, that one measures the price of things businesses sell and one measures the price of things people buy. But those key ways are mostly interesting to pointy-head economists who are interested in calculating the third decimal point. Me, I’m just trying to get “higher” or “lower” correct. (Ironically, those folks who are interested in the third decimal point are the same folks who miss the big figure in front). So they wail at the following chart (source: Bloomberg), and moan about how the Fed has been unable to get inflation higher because of this persistent shortfall of PCE compared to CPI. Try harder!

Continue reading The Fed’s Accidental Preoccupation with Housing

The Under-utilization of Housing Wealth In Retirement…

By Anthony B. Sanders

The Under-utilization of Housing Wealth In Retirement (Is Credit Too Tight and Shared Appreciation Mortgages As A Solution?)

There is an interesting event coming to Washington DC — the 2018 Housing Wealth in Retirement Symposium brought to you by The Funding Longevity Task Force at The American College of Financial Services and the Bipartisan Policy Center (BPC).

The goal? The goal for the Symposium is to facilitate collaboration among stakeholders – including regulatory agencies, NGOs, and the financial services community – to address the under-utilization of housing wealth in retirement.

The speaker list is excellent. The Urban Institute’s Laurie Goodman is the apparent headliner.

Here are my two cents (which has been devalued to less than a cent).

The American population is aging and many are entering retirement. But are they prepared?

First, The Federal government and its stakeholders have already tried to get more households to be stakeholders (that is, homeowners). And this happened.

Yes, the great leap forward in home ownership ultimately failed after almost reaching 70% before subsiding back to around 64%. That is, trying to get marginal households to switch from renting to owning. (By lowering credit standards and down payment requirements).


Continue reading The Under-utilization of Housing Wealth In Retirement…