How The Fed, The Clinton Administration and Congress Nearly Killed-off The US Housing Market

By Anthony B. Sanders

And Why It Is Struggling To Recover

Radio show host Tom Sullivan (my favorite financial/business-oriented radio show program), asked me in an interview to talk about the US housing market. Oh, where to begin (on a short radio interview)? Well, here goes!

We’ve enjoyed years of “recovery” since the Great Financial Crisis by literally papering over our problems with newly-printed money, instead of addressing their root causes.

For example, The Federal Reserve dropped their benchmark target rate to 25 basis points in December 2008 just after President Obama was elected to his first term as President, and began their asset purchases (QE) in September 2008. The Fed raised their target rate only once during Obama’s eight years as President (December 2015) and only stated shrinking its balance sheet in earnest in 2018 (while Trump was President).

Continue reading How The Fed, The Clinton Administration and Congress Nearly Killed-off The US Housing Market

Mortgage Rates Explain Housing Weakness

By Tom McClellan

30-year Mortgage Rate versus 30-year T-Bond yield

Housing sector stocks have been among the worst performers in 2018, and analysts are pointing to lots of different reasons including the newly imposed U.S. tariffs on Canadian softwood lumber.  But an easier explanation arises when we look at interest rates.

Mortgage rates are not yet empirically “high”.  I bought my first house with a 13% mortgage, so rates that start with the number 4 still seem pretty low, at least to me and my ge-ge-generation.  The key insight contained in this week’s chart is that mortgage rates are high compared to 30-year T-Bond rates.  Both rates have been rising in 2018, and the 30-year mortgage rate has been more than a full percentage point above the 30-year T-Bond yield for most of 2018.

Continue reading Mortgage Rates Explain Housing Weakness

Housing Doldrums Continue

By Anthony B. Sanders

1 Unit Housing Starts Down 1.82% MoM (-2.6% YoY), But 5+ Unit Starts Up 6.19% MoM In October

Yes, the housing market nationally remains in the doldrums.

1-unit detached housing starts in October declined 1.82% (and -2.6% YoY). But 5+ multifamily starts rebounded 6.19% MoM.


Rising costs and interest rates combined with the relative disappearance of subprime borrowers has led to a slowing in both single-unit and multifamily starts.

Continue reading Housing Doldrums Continue

The Mist! US Housing Starts Plunge Under Rising Interest Rates

By Anthony B. Sanders

Hurricanes Florence and Jerome

There is little doubt that Federal Reserve policies have resulted in mispriced risk and massive distortions in the economy. Fed Chairs Bernanke and Yellen were masters of distortion (keeping rates too low for too long) while Fed Chair Powell (Hurricane Jerome) is raising rates rapidly in the face of little-to-no inflation. Throw in Hurricane Florence and we have “The Mist” where fear changes everything.

Housing starts for September were released yesterday and, as expected, the numbers were down across the board (except for the West where it is seemingly always sunny).


1-unit starts (aka, single family detached) are still below 2000 levels thanks, in part, to The Federal Reserve dropping their target rate like a hammer to 1%. We got a massive construction response. That blew up, so The Fed dropped their target rate like a hammer … again from which Hurricane Jerome is only recently begun raising.

Continue reading The Mist! US Housing Starts Plunge Under Rising Interest Rates

June Existing Home Sales Decline For 3rd Straight Month

By Anthony B. Sanders

1st Time Since 2013 As Median Price Hits All-time High With Low Inventory (Simply Unaffordable!)

According to the National Association of Realtors, existing home sales for June declined for the third straight month.


What is unusual is that it is April, May and June. The year 2013 saw six straight months of declining home sales, but that was August 2013 through February 2014 (post peak season).  June is typically the peak in a year for existing homes sales and median price.

Continue reading June Existing Home Sales Decline For 3rd Straight Month

A Fresh Look at Lumber and Housing Stocks

By Tom McClellan

Lumber leads housing stocks
May 24, 2018

For a few years now, I have been employing lumber prices as a leading indicator for what the homebuilding sector of the stock market would do, and it has worked pretty well.  But lately the correlation is broken, with housing stock prices falling even as lumber said they were supposed to continue trending higher.  So it’s time to reevaluate the hypothesis about lumber giving a leading indication.

In the past, I have found that a lag time of just over a year worked to show how the HGX’s movements tended to match the earlier ones in lumber.  That is the correlation which has broken down recently.  So I decided to see if perhaps the lag time had changed, or perhaps something else is going on.

Playing around with different lag times, I came up with this week’s chart shown above.  It features a lag time of only 55 trading days, which is about 2-1/2 months.  For most of the period shown in this chart, this relationship seems to work, although the alignments of the highs and lows in each plot are not perfect.  Sometimes it seems like a longer lag time would work better, sometimes a shorter one.  55 trading days seems to get the best overall fit.

That is, up until February 2018, when the relationship breaks down.  That was the point for the HGX plot that is equivalent to when lumber futures prices went up above $450, and that seems to be what “broke” the correlation.

Continue reading A Fresh Look at Lumber and Housing Stocks

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…