If Only They Could Sell Without Taking A Major Hit
A report from Mortgage News Daily. “On July 10th of this year, Vanguard Funding, LLC had their NY Mortgage Bankers license purportedly suspended - not good when your headquarters are in that state. This is on the NMLS Consumer Access page. If you go to the website, management has this message: ‘WE ARE CURRENTLY NOT ACCEPTING APPLICATIONS.’ All of this prompted one to send me, ‘Messages in bold are usually not a good thing. Vanguard definitely had some internal issues plaguing them, but it’s always a surprise to see a good sized fellow IMB apparently closing up shop.’”
“Being one, I know that capital markets folks are often accused of cyphering (putting a message into secret writing). We’re pretty good at deciphering as well. What does the Fed reducing its balance sheet mean for LOs and their borrowers?The NY Fed released a new two-week FedTrade schedule covering the July 28 to August 10 period, and it showed about $1.2 billion a day of Agency MBS purchases. If lenders originate $1.6 trillion total of residential mortgages in 2017, that is $6.4 billion a day - including jumbo, non-QM, and bond programs - non-agency stuff.”
“I bring this up because at some point it will end - and the Fed has done a fine job telling us that. Michael Ehrlich with ThomsonReuters kindly crunched a few numbers for me to determine that there is $5.5 trillion of Ginnie, Fannie, and Freddie (Agency MBS) out there. Of that, the Fed owns about 1/3 - $1.75 trillion - or more than a year’s production of all types of residential mortgages. Not only that, but remember that the Fed was a big buyer when 30-year rates were .75% lower than where they are now, so those bonds are underwater by several points.”
The Arizona Republic. “Oh, Canadians, why aren’t you buying more homes in metro Phoenix? Our neighbors north of the border are spending a record amount on U.S. houses, but their pace of purchases hasn’t picked up much in the Valley. Arizona housing analyst Mike Orr told me Canadians bought 44 Valley homes in June. That’s up from 36 in June 2016, but is ‘dismal’ compared with past years, he said.”
“Last summer, housing expert Tom Ruff of The Information Market did an analysis on Valley homes bought and sold by Canadians using north-of-the-border tax mailing addresses on property records. He concluding that for every Canadian buying a metro Phoenix home, another nine are selling. Diane Brennan, a Scottsdale real-estate agent and a native Canadian, told me any data showing a big increase in Canadians buying Arizona homes doesn’t make sense to her.”
“‘I had many international clients — mostly Canadian and Chinese — during 2010 and 2011 when Phoenix AZ had fire-sale pricing on housing. Much higher current prices coupled with a stronger U.S. dollar have brought my international buyers to a trickle,’ said an unnamed real-estate agent from Arizona, who responded to the Realtor survey.”
From Houma Today in Louisiana. “Houma-Thibodaux home prices barely rose over the past year, an increase far below the national average, new figures show. Locally, the tepid increase offers more evidence of the toll a three-year offshore oil bust has taken on Houma-Thibodaux’s economy. Prompted by a world crude glut, the local oil-based economy has lost an estimated 14,000 jobs during that time.”
“‘Since the oil industry took a downturn, we’ve had a lot more inventory,’ said Michael LaRussa, president of Coldwell Banker LaRussa Real Estate in Houma. ‘Thibodaux’s market is steady. Houma’s is slower because we have a lot of inventory,’ he said. ‘The median home prices have not dropped tremendously, maybe around $10,000, but it really depends on what’s selling.’”
“‘It’s really hit or miss,’ LaRussa said. ‘The average days on the market right now is 129 days. It just depends. I think some of the higher-end market homes are staying on the market. We have a lot of half-a-million-or-above houses still on the market.’”
“The CoreLogic numbers come one month after SmartAsset.com released a report saying Houma-Thibodaux was the 10th most stable housing market in the country over the past 25 years. It says local home prices have steadily increased since 1992 despite the oil bust and several hurricanes. ‘We’re not really seeing that,’ LaRussa said, ‘but I guess it really matters what you compare it to.’”
The Real Deal on Florida. “The Venezuelan investors who planned to build Wyn 26, a 16-unit condo project in Wynwood, have instead put the site on the market for $2.85 million amid slumping sales, The Real Deal has learned. Dave Colonna of FIP Realty Services, who has the listing, said the developers had received only a couple of reservations since launching sales last fall, and were unable to secure financing. The price for the 10,400-square-foot site at 50 and 58 Northwest 26th Street equates to $274 per square foot.”
“The project planned to have units sized from 1,057 square feet to 1,457 square feet, which is larger than the norm in Wynwood, Colonna said. They were to be priced from the mid-$500,000s to the mid-$800,000s, or between $520 per square foot to $560 per square foot. ‘We marketed it for sale as a condo and did not get much traction because of the size of the units and the price,’ Colonna said. ‘So they decided to sell it.’”
The Daily Gazette in New York. “My husband and I have spent the past seven months renovating a vacant house, and we’re finally moving into it this weekend. To say my thoughts have been dominated by this house — and all the work involved in making it habitable again — is an understatement. So it was a bit jarring to hear the president of the United States suggest that maybe houses don’t deserve all that much consideration, after all.”
“‘Don’t worry about your house,’ President Donald Trump said, in comments to the Wall Street Journal encouraging residents of upstate New York to move to places where job prospects are better.”
“Don’t worry about your house? Trust me, I’d love not to worry about my house. But it’s the biggest investment I’ve ever made in my life, and I don’t have that luxury. Nor do most Americans. In fact, sometimes people email to tell me that they would pick up and move — if only they could sell their homes without taking a major financial hit. Maybe it’s easy to walk away from a house if you’re a billionaire. Most people aren’t billionaires, though.”
“You don’t have to look too far to find evidence of hardship and decline, especially when you survey the Capital Region’s housing stock. Thousands of area residents have walked away from their homes, usually as a result of some sort of calamity, which is why vacant, deteriorating properties abound. The typical vacant house symbolizes failure and loss, and those who lose their homes, or are in danger of losing their homes, spend a great deal of time worrying about it.”
“I’m not in danger of losing my home, but if there’s one thing I’ve learned about home ownership, it’s that it’s a constant source of worry, even when things are going just fine. So don’t tell me not to worry about my house. Because that’s just not an option.”
Ben, What’s your opinion on the sustainability of the housing price keep going up?
I read another good opinion from Steve in the link below. Basically, he is saying the new homes built and the supply has been too low. So from supply and demand view, home price has no other trajectory bu UP UP UP!
I know it sounds crazy, but China housing price is probably 20x (Yes, 10x) crazier than we can believe in the last 15 years, again, all due to Supply and Demands.
Thanks!
https://www.bullionvault.com/gold-news/housing-072820172
Dr. Steve Sjuggerud Housing piece
Chart
We are well far past sustainability based on fundamentals (income, jobs, family creation, taxes, debt, etc.)
But in these times of cheap/easy money, ZIRP, massive government debt, massive government bailouts and the government guaranteeing any debt with some kind of real estate tied to it…
It could go on for many more years.
There’s no shortage of land nor housing and there never has been. If it’s so strong, take off the training wheels.
‘This is on the NMLS Consumer Access page. If you go to the website, management has this message: ‘WE ARE CURRENTLY NOT ACCEPTING APPLICATIONS.’ All of this prompted one to send me, ‘Messages in bold are usually not a good thing. Vanguard definitely had some internal issues plaguing them, but it’s always a surprise to see a good sized fellow IMB apparently closing up shop.’
This reminds me of this post:
June 8, 2017
A report from the Denver Post in Colorado. “Four ex-employees accuse Aurora-based American Financial Corp. in a lawsuit of firing them after trying to expose the company’s alleged mortgage fraud. The mortgage originator allegedly misled at least a half-dozen banks and finance companies with faked documents and consumer loan applications, according to the whistle-blower lawsuit. The action in Arapahoe County district court claims managers at the company knew of the alleged mortgage fraud the employees discovered and, in some cases, worked hard to try to cover it up.”
“The employees – Stacia and Chris Springer, Steffen Mehnert and Sandra Reynolds – say in the lawsuit that they were suspended and then fired after bringing their concerns to higher-ups in March 2017. Chris Springer, Mehnert and Reynolds were mortgage consultants, and Stacia Springer was a pre-qualification specialist. The company defended its track record in a statement issued to The Denver Post, saying it will defend itself ‘vigorously against this meritless lawsuit and the false allegations …’”
“The lawsuit describes conduct reminiscent of the type that helped bring about the real-estate collapse and ensuing financial crisis that began in 2004. Among the allegations the quartet make against American Financing include intentionally falsifying loan information, faking signatures, withholding negative financial information about an applicant and faking compliance with key deadlines – all of them critical to whether a bank will approve or buy an existing loan.”
“Some of the alleged fraud was brazen, including assertions that potential borrowers’ income tax returns were intentionally withheld to hide potentially adverse information, relying instead on their W-2 forms.”
“The 23-page lawsuit lays out a detailed timeline of how the employees each reported concerns of fraud to supervisors over several weeks, only to be told not to talk about it to others, or not to come to work at all. After their suspension, the lawsuit says company supervisors looked through the employees’ desks and computers, allegedly shredding paperwork that related to the suspected fraud.”
“The employees said they were fired in retaliation for talking to a lawyer about their predicament. The lawsuit says a complaint about the alleged mortgage fraud was filed with the Colorado Division of Regulatory Agencies, which oversees mortgage brokers through its division of real estate, but that nothing was done.”
http://thehousingbubbleblog.com/?p=10110
And not one mention of this was ever made again, to my knowledge.
I am sure it was settled “quietly” for an undisclosed sum.
Bank Regulators? Government Auditors? IRS investigations? Fraud investigations by the City DA?
Nah.
Hey - What a wise @ss…
+++
Comment by 2banana
2017-06-09 04:33:50
But, but, it’s Denver…
Everyone wants to live here.
Legal pot!
Mountains.
All of California wants to move here.
And they need massive amounts of fraud to keep the plates spinning.
All of California wants to move here.
I think these days most transplants here come from the midwest, and not California. It snows here, and that’s scary, or something.
“I bring this up because at some point it will end - and the Fed has done a fine job telling us that.”
Similarly, scientists have done a fine job telling us how at some point our solar system will end, when the sun undergoes heat death.
‘Our neighbors north of the border are spending a record amount on U.S. houses, but their pace of purchases hasn’t picked up much in the Valley…Last summer, housing expert Tom Ruff…concluding that for every Canadian buying a metro Phoenix home, another nine are selling.’
This was a perfect example of NAR horse hockey. They took 2016 numbers, who knows how off they are, then ran a late July 2017 report talking up the Canadian frenzy. You know NAR, Canada is swirling the bowl right now.
‘The CoreLogic numbers come one month after SmartAsset.com released a report saying Houma-Thibodaux was the 10th most stable housing market in the country over the past 25 years. It says local home prices have steadily increased since 1992 despite the oil bust and several hurricanes. ‘We’re not really seeing that,’ LaRussa said’
This is why I don’t even open the emails from Corelogic.
The lonnie is at near record lows against the dollar.
A bad time for a Canadian to buy a US House.
However, a great time for a Canadian to sell a US House.
ECONOMICS
Jul 26, 2017
Loonie hits 2-year high as Fed holds rates
The Canadian dollar hit its strongest level in more than two years against the greenback on Wednesday after language from the Federal Reserve’s policy statement, which was seen as slightly more dovish than expected, sent the U.S. currency lower.
http://www.bnn.ca/loonie-softens-as-u-s-fed-expectations-counter-rising-oil-1.814081
July 19, 2017
A report from Bloomberg on Canada. “Canada’s hottest housing market is definitely cooling down. Total home sales in Greater Toronto dropped to 5,977 in June, the lowest level since 2010 and down 15.1 percent from the month prior, data from the Canadian Real Estate Association show. Average prices are down 14.2 percent since March — the fastest 3-month decline in the history of the data back to 1988 — while the ratio of sales to new listings sits at its lowest level since 2009. Prices and sales also fell in nearby regions such as Hamilton-Burlington and Kitchener-Waterloo, CREA data show.”
“Sales also fell 4 percent from the previous month in Vancouver, the country’s other hot real estate market, to 3,047 residential units. Greater Vancouver remains Canada’s most expensive market with an average price of C$1.04 million, down 3.2 percent from May. Sales fell most sharply in Regina, which was down 27.3 percent. ‘The Canadian housing market is chock full of unique stories, both positive and negative,’ Bank of Montreal economists Doug Porter and Robert Kavcic wrote in a research note. Ontario’s changes ‘have worked to alter market psychology — and that is a positive outcome given the speculative dynamics in place a few months ago.’”
From Global News. “Sales of existing homes fell by over 15 per cent in Toronto, the second straight double-digit decline, with resale activity now down by a whopping 42 per cent from its March peak, TD economist Diana Petramala wrote in a brief note to clients. The ratio of sales compared to new home listings fell below 40 per cent in Toronto, the statistics show. In March, by comparison, the ratio stood at 86 per cent, meaning homes were being snatched up pretty much as soon as the ‘for sale’ sign went up. ‘According to this metric, Toronto has now fully moved from sellers’ territory (ratio above 60 per cent) to buyers’ territory (ratio under 40 per cent),’ Petramala wrote.”
“‘The higher end of the Toronto market (call it $1.5 million plus, for argument’s sake) has gone stone cold, with prices now edging down and crickets echoing through open houses,’ BMO economist Robert Kavcic noted in a different email to clients.”
http://thehousingbubbleblog.com/?p=10148
Currently - $1 CAN = $0.80 US
SEP 2012 - $1 CAN = $1.02 US
Your move math wiz…
PS - You can see the loooooong decline of the Loonie here:
http://www.canadianforex.ca/forex-tools/my-fx-dashboard
You wrote
The loonie is at near record lows against the dollar.
Click on “All time” on your page and you’ll see that it was worth around 62 cents. So it’s quite a bit higher than the lowest level that it was at during this century.
I meant to write that it was worth around 62 cents in 2002.
I meant to write that it was worth around 62 cents in 2002.
The loonie has recovered a bit since May. Time will tell if it can stay the course.
Now do try to think. Think, think, think…
When did the Canadian craze start with Canadians buying US Houses as an investment?
Think! Think! Think!
It wasn’t 2002. Not even 2010. Maybe 2012.
And since 2012 it has been a long dive of the Loonie against the dollar.
So to repeat:
Bad to buy foreign real estate when your currency is low.
Good to sell foreign real estate when your currency is low.
Is the Loonie low or high against the dollar since 2012?
Now think, think, think before you reply…
I have no idea what year is the answer to your question. It doesn’t matter though. The loonie is not near its record low against the US dollar.
In fact, if Canadians are thinking about these issues:
Bad to buy foreign real estate when your currency is low.
Good to sell foreign real estate when your currency is low.
They are going to think long term. Canadians who own houses in the US, or are thinking of buying, are not kids. They can easily remember the history of the exchange rate over the past 20 years or longer.
Keep thinking.
Canada is in its own massive housing bubble.
Much of the funds that these Canadians used to buy American investment houses were equity loans from their Canadian homes.
Now when the housing bubble pops in Canada (and there is evidence that has now happened)…will they need funds and will need to sell their American investment properties.
Remember - margin works both ways.
++++++
The Loonie approached par with the Greenback in the not too distant past, so the Loonie was relatively strong at that point.
Buy at when Loonie is near par.
Subsequently, the Greenback regains its relative strength so one Greenback is worth 1.25 Loonies.
Sell when Loonie is weak.
All else equal, then the change in the exchange rate added 25% to your gross return once you repatriate your gains into your Canadian dollar denominated account.
Seems like the Fed is determined to be among the last holdouts in restoring interest rates to normalcy.
Zillow now predicts dc area flat
was +2% then for 2 days was negative 2.3%
You built/renovated a house in one of the HIGHEST tax rate states (both income and property) and one of the most UNFRIENDLY business states in the union.
The socialists democrats in state power will tax you to oblivion before one public union in their heavily indebt local/state pension funds takes one penny of a cut.
Did you do ANY research before you made the “biggest investment I’ve ever made…”
Declining real estate values? Insanely high taxes? No jobs? A huge free sh*t army looking for more place to “redistribute” wealth? Loss of population? Vacant and foreclosed houses all around you?
And whom do you blame? A president who just b*tch slapped you with the truth…
+++++
The Daily Gazette in New York. “My husband and I have spent the past seven months renovating a vacant house, and we’re finally moving into it this weekend. To say my thoughts have been dominated by this house — and all the work involved in making it habitable again — is an understatement. So it was a bit jarring to hear the president of the United States suggest that maybe houses don’t deserve all that much consideration, after all.”
“‘Don’t worry about your house,’ President Donald Trump said, in comments to the Wall Street Journal encouraging residents of upstate New York to move to places where job prospects are better.”
“Don’t worry about your house? Trust me, I’d love not to worry about my house. But it’s the biggest investment I’ve ever made in my life, and I don’t have that luxury. Nor do most Americans. In fact, sometimes people email to tell me that they would pick up and move — if only they could sell their homes without taking a major financial hit. Maybe it’s easy to walk away from a house if you’re a billionaire. Most people aren’t billionaires, though.”
There were several truisms that emerged after the bust, but a recurring one was “we should never look at a house as an investment.” Boy, that’s gone out the window. I rarely walk by a TV and there isn’t some fix and flip show on. Unless you can pay pennies on the dollar they are just money pits. There was a poster talking about someone he knew taking the “free money” in a refi and buying a second vacation shack. Another truism lost is that second houses are basically speculating. Why not stay in a hotel or resort? Why rake leaves all weekend? Yet 2014 or 2015 (I can’t recall) was the highest US second house sales year on record.
If you hear people say free money, put your hand on your wallet.
Boy, that’s gone out the window.
The foamers have now taught everyone to buy the dips.
The foamers have now taught everyone to buy the dips ??
That works until it doesn’t….I hear war drums….
And she thinks the president can somehow fix what’s wrong with NY. He has no control over state and local taxes or regulation, which are the factors that have gutted upstate.
So he can’t make America great again, just certain parts of it. I wonder if “taxes and regulations” will be wheeled out as the explanation for the lack of new manufacturing job in the other parts of the Rust Belt.
Poor Mikey,
All that is wrong is Trump’s fault. And the Russians.
Eight years of obama and near total democrat control of NYS doesn’t matter. It is just a mystery why the economy is so bad in update NYS.
If NYS wants to miss out on the Trump American manufacturing renaissance - that is their decision.
The consequences is that NYS (along with most other hard core progressive states like Illinois, Connecticut, California, Rhode Island, etc.) will continue to lose businesses, jobs and populations. And will continue to loss electoral college votes and congressional seats.
And then wonder why they have no power.
All that is wrong is Trump’s fault. And the Russians.
That’s an odd statement to make. We’ll quite you on that in the future.
2-fruit your such a good Trump Soldier. Will get to that manufacturing renaissance “imeadiatly” after the wall, Obamacare repeal and the immigration ban.
‘Vail Ask a Realtor column: Is it a buyer’s market or a seller’s market?’
‘Dear Joan: Is this the worst time to buy property in the Vail Valley? It is my understanding that prices have been shooting up and it is a seller’s market. It seems everyone is talking about it, including Realtors I know. I have been renting for years when my family and I came to the valley. I can afford to buy something now but do not want to be a fool and buy at the top of the market. Sure wish I had done something sooner. Do you recommend I wait a little longer? -Timing Quandary’
‘Dear Timing Quandary: Before I talk about the numbers, I want you to know that I am always about buying something now, no matter the market, if you can afford it. That way, you can start enjoying the wonderful experience of becoming a homeowner in this one-of-a-kind location immediately.’
‘No one is promised tomorrow, so we must work on feeling our joy every day. Home ownership has the ability to give you joy, even when you are not here, much like thinking about someone special in your life when you are apart.’
‘Now that you have my philosophy, let’s talk numbers. If you use the standard of how many months of inventory we have as a means to tell if we have a buyer’s or seller’s market, then I think you get a better picture if you break up the market by price range. Six months of inventory (homes for sale) is considered a neutral market (not a buyer’s or seller’s market). Fewer than six months of inventory is considered a seller’s market and more than six months of inventory is considered a buyer’s market.’
‘In the $1 million-plus price range, there have been 405 sales in the past 12 months and 74 units are currently under contract. Considering there are 547 residential properties priced at more than $1 million on the market right now, that would be more than one year of inventory available and so it is considered a buyer’s market at more than $1 million.’
“so we must work on feeling our joy every day…”
Like spending every available dollar you own to pay a mortgage debt that you can’t afford.
No savings
No vacations
No car that is newer than 10 years/150,000 miles old
No going out to dinner
No kids
Lots if Ramen noodles…
But…….joy!
Suzanne told me so.
so she’s whining about spending a whole (gasp) 7 months renovating? 7 MONTHS! Mon Dieu, le’ horror. C’est terrible.
try 10 effing years. and still going. thanks to a lazy hoarding in-law who saved EVERY SHRED OF ANYTHING EVER MAILED, PRINTED, MANUFACTURED, FLYER, BROCHURE, etc over the last 30 years! I stopped counting at 3000 dumpster-bound boxes.
hell, 7 months in many populated metro areas barely gets the permits approved. and don’t get me started on all the wasted time spent on the no-show/late caucasion red-nosed drunken pot-belly lifted F-3fiddy duallie-driving “contactors”, roving like termites w/clipboards. then the illegals arrive & do the actual work.
(yes, I know my renovation situation is not typical but 7 months is just so . . . lightweight.)
ok, lady. seriously?
HomeDepotHarvey…… leave renos and retrofits to those who know WTF they doing.
Ha! You hired them!
2banana’s Rule with Contractors: No Deposits. You get paid as the work is completed per the standards of the contract.
And FYI. It is much cheap, easier and QUICKER if you, as the homeowner, goes and gets the permits. Plus you will know they were actually approved (many contractors just fake it).
+++++
and don’t get me started on all the wasted time spent on the no-show/late caucasion red-nosed drunken pot-belly lifted F-3fiddy duallie-driving “contactors”, roving like termites w/clipboards. then the illegals arrive & do the actual work.
actually, didn’t hire any of the clipboard kings.
except the pool tile guy. 10 years ago. did great job.
speaking of pool, looks like its afternoon & time for this “HomeDepotHarvey” (Lowes actually) to hit the water instead of the strip clubs where the “Coors Contractors” huddle to compare bellies & tats with the pregnant exotic dancers.
loser buys next round. winner drives home to the trailer park taking out neighbors fence while fumbling for a smoke. git r done
Now that is some funny shyte. I’m belly laughing.
‘What does the Fed reducing its balance sheet mean for LOs and their borrowers?The NY Fed released a new two-week FedTrade schedule covering the July 28 to August 10 period, and it showed about $1.2 billion a day of Agency MBS purchases. If lenders originate $1.6 trillion total of residential mortgages in 2017, that is $6.4 billion a day - including jumbo, non-QM, and bond programs - non-agency stuff.’
‘I bring this up because at some point it will end - and the Fed has done a fine job telling us that. Michael Ehrlich with ThomsonReuters kindly crunched a few numbers for me to determine that there is $5.5 trillion of Ginnie, Fannie, and Freddie (Agency MBS) out there. Of that, the Fed owns about 1/3 - $1.75 trillion - or more than a year’s production of all types of residential mortgages. Not only that, but remember that the Fed was a big buyer when 30-year rates were .75% lower than where they are now, so those bonds are underwater by several points.’
‘Greenspan Sees No Stock Excess, Warns of Bond Market Bubble’
“By any measure, real long-term interest rates are much too low and therefore unsustainable,” the former Federal Reserve chairman, 91, said in an interview. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.”
Kinda reminds me of this quote:
“How did you go bankrupt?”
“Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises
+++++
“When they move higher they are likely to move reasonably fast…”
For whatever reason, the normal pattern is to hold rates too low for too long, then kill the economy by raising them too quickly once panic sets in over the realization that they are far behind the curve.
I don’t think the raising the rates is actually what “kills” the economy. That would imply the fundamentals matter. But the reality seems to be about expectations and game playing, and raising the rates just implies the game might change so you get a stampede.
So, a major part of any market is the depth of the buying pool.
And we are all wondering what will happen when the Fed starts to burn off their balance sheet (will there be enough demand outside the Fed to absorb this debt without rates going up very far? Or will long-term rates have to rise enough to pull money from riskier places?).
One clue is in the Treasury Auction results…here is one for the most recent 10-year auction:
https://www.treasurydirect.gov/instit/annceresult/press/preanre/2017/R_20170712_1.pdf
The way I read this, for the month, there was ~$49B of demand, and about $20B of supply…so presumably, there was $30B of excess demand.
There are similar results for other terms…$71B of demand for 7-year terms, and $28B “accepted”, $87.5B of demand for 5-year, and $34B of supply.
This seems to indicate that there is excess demand, and so the unwinding of the Fed balance sheet should be absorbed over time…if they are burning off $10-20B per month…
HOWEVER, I think that is a naive view of the world….a fair amount of the excess demand might simply roll from one month to the next…the total excess demand may fall FAR short of the $2.5T they need at current rates…it will be interesting to see.
My guess is that the first several months of burn-off will happen with almost no move in long-term rates, but after that, we’ll see some movement…just don’t know if we’ll see 50bps of movement, or 250bps…
I’m curious if folks have opinions out there…
Another way to think about the question is to think about what happens to interest rates with increasing deficits…if we increase the deficit by $100B, all else equal, what is the impact on long-term rates?
This effectively forces more debt onto the market…I’m sure someone has done regression analyses on this to figure out the dynamic…
Ask the Googles and you shall receive…
https://www.stlouisfed.org/publications/central-banker/summer-2004/budget-deficits-and-interest-rates-what-is-the-link
“According to Laubach’s estimates, when the projected deficit to GDP ratio increases by one percentage point, long-term interest rates increase by roughly 25 basis points. A more recent working paper, by Eric Engen and R. Glenn Hubbard, found that when government debt increased by 1 percent of GDP, interest rates would increase by about two basis points.”
I think underlying this is an expectation of permanence with respect to increasing deficits…while the increase of bond supply that the Fed will create will not be permanent…only until it’s balance sheet shrinks…so, there is an argument that the truth in the case of the Fed unwinding, the effect on long-term rates will be between these two numbers (per %).
So, if the Fed is going to burn off $360B per year (their stated max), that will result in additional debt representing 2% of GDP.
So, the guess as to the total increase in long-term rates would be between 4 basis points, and 50 basis points…all-else equal, of course, which will not be the case.
All the numbers are good estimates but the real X factor will likely be the perception of the markets to the FEDs move.
I’m curious if folks have opinions out there… ??
It also matters what happens with the ECB and a few other central banks.
The money velocity chart has (at last!) been updated and (big surprise?)the trend is still down …
https://fred.stlouisfed.org/series/M2V
“If Only They Could Sell Without Taking A Major Hit”
Conclusion?
You paid too much for a rapidly depreciating asset.
Plan B?
Get what you can get for your house today because it’s going to be less tomorrow for decades to come.
It used to be, if you were lucky….
The value of a house kept pace with inflation.
Assuming maintenance, taxes and insurance were all properly paid.
It used to be, if you were lucky….
The value of a house kept pace with inflation.
That, unfortunately, was a long time ago. Today, everyone expects above average appreciation, year after year, and even accepts that it’s “normal”
Expect in one hand and shhit in the other and see which one fills up quicker.
Well, we are Americans…everyone is “above average”.
showed about $1.2 billion a day of Agency MBS purchases. If lenders originate $1.6 trillion total of residential mortgages in 2017, that is $6.4 billion a day -
but yellen says she sellin ?
And then the recession hits…
On top of car manufacturers with record inventories and collapsing sales…
++++++
US Construction Spending Just Collapsed
Zerohedge - Aug 1, 2017
Headline growth in US construction spending collapsed in July to just 1.6% YoY - the weakest since 2011.
As Reuters reports, U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002. The Commerce Department said on Tuesday that construction spending tumbled 1.3 percent to $1.21 trillion - the lowest level since September 2016 - drastically missing economists’ estimates of a 0.4% increase.
Public construction spending has hovered in negative territory for the most part of the past year and requires a strong infrastructure spending for its revival. The latest data suggest state and local investment was weaker-than-previously estimated and imply a further modest downward revision to 2Q GDP.
In June, investment in public construction projects plunged 5.4 percent, the biggest drop since March 2002. The decline pushed public construction spending to its lowest level since February 2014. Outlays on state and local government construction projects fell 5.1 percent in June, also the largest fall since March 2002.
Looking at taxpayer-funded spending on America’s highways, schools and water systems, the White House’s infrastructure plan appears long overdue. Government projects’ share of total construction outlays was less than 22 percent in June, the smallest since 2006.
Given that the average car costs $36,000 I’m surprised they sell as many as they do.
Leasing. They have a big fat nothing. And they are turning them in left and right.
And then the recession hits…On top of car manufacturers with record inventories and collapsing sales…. ??
Huh !! America is not going to be great again ??
For eight years obama blamed Bush for every problem. And the democrats and fake legacy press nodded with enthusiasm.
Trump is office less than six months.
He doesn’t have a supermajority in the house (like obama did). He doesn’t have a filibuster proof senate (like obama did) and he doesn’t have a fawning media that made excuses for eight years and that refused to even look at the massive corruption in front of them (like obama did)…
But yuuuuge progress is being made. Give it some time. You can’t undo eight years of massive corruption, massive debt and ignoring the rule of law overnight. But it will happen.
And that is what really keeps progressives/liberals up at night.
For eight years obama blamed Bush for every problem.
That has to be false. He rarely mentioned Bush at all. That’s a real indication of Obama’s greatness. His harshest critics have to make up lies when they want to criticize him.
http://progressive.org/dispatches/obama-brags-really-good-killing-people/
That is completely untrue, Mike, and you know it.
Obama blamed as much as he could on Bush for his entire first term and into the second one even.
At about the 6 year mark I think even the media couldn’t take it any longer and it was quietly dropped.
How bout it….. how bout them falling housing prices.
Boulder, CO Housing Prices Crater 6% YOY
https://www.zillow.com/boulder-co/home-values/
https://www.bloomberg.com/news/articles/2017-08-01/u-s-is-said-to-weigh-747s-once-set-for-russia-as-air-force-one
https://www.cnbc.com/2017/08/01/new-air-force-one-planes-were-once-set-to-become-part-of-russian-airline.html
Whaddaya know…the government is potentially doing something scrappy and creative to try to save money. Shocking.
It’s almost like something changed in January…
Well, to be accurate it was November 8th last year. Embrace it 2-fruit because you Own it.
You should take a civics class.
Nothing changed until January, 20th, 2017.
That’s your take on it. The market said its “the Trump agenda” as of 11/2008. Too the moon Alice. Because. We are going To make America Great Again. We are going to dig up more coal than any president in history. You bought it and 8 months later you still own it. We are just a event away From the entire thing coming unbuttoned. Am I stopping my feet ? No. I am laughing.
What you’re trying to do is redefine what this election was about. Keeping that blood stained, power mad Schreek out of office is something I will proudly own the rest of my life. I said right after the election, anything else we got would be gravy. Well on the border we are pretty happy with the 50-70% drop in illegal immigration.
Just this past week CIA regime change was ended in Syria. This was another Clinton deal that only cost around 500,000 innocent lives, 11 millions scattered to the wind. I’ll own the end of that too.
Less important but very significant was these so called “global elite” got a big meddle fanger. Heck I was so proud of that I posted it on this blog.
What you’re trying to do is redefine what this election was about.
Everyone has his or her own idea of what it was about. It wasn’t about any one thing.
‘Everyone has his or her own idea of what it was about. It wasn’t about any one thing.’
Your point is?
It’s not reasonable to tell scdave that he’s “trying to do is redefine what this election was about”. He’s allowed to have his own opinion regarding what it was about.
As am I, and I clearly stated what the election was about for millions of people. Maybe you can explain all the Democrats who voted for Trump or why you ignored my reply about Obama bragging about being “pretty good at killing people.” Then you’d be on the way to understanding why you lost the election.
Giving the finger to D.C. When you elect a disfunctional, 71 year old pathological lier it does not improve our situation Ben. We did Not need to elect Clinton. All this election of Trump did was divide us further. And, if the polls are correct, the minority in the country supports him. Remembering how many years I was a registered republican, I don’t even recognize the party anymore.
Maybe you can explain all the Democrats who voted for Trump or why you ignored my reply about Obama bragging about being “pretty good at killing people.”
It has nothing to do with my point. That’s why I ignored it. It’s also not likely that more than few percent of the voters voted for Trump for that reason.
‘Remembering how many years I was a registered republican’
I wasn’t nor a Democrat. I’m a libertarian. This election was Clinton versus Bush, then Clinton versus Trump. I’ve said before, if it had been Bush versus Sanders I would have voted for Sanders - for the meddle fanger. Not that I would have expected to win. Do you know this is the first time I’ve voted for a presidential candidate who won? Sure I could have wrote in another Ron Paul vote, what good would that have done?
Divide us even further: who is doing that? Does it matter? Schreek isn’t dragging us into war in Syria, picking nut job “activist” judges for the supreme court. Gravy!
But if you guys want to tread water for the globalists for the next 4 years hoping you can wait this out, you own it.
‘That’s why I ignored it.’
Lame.
for the meddle fanger ??
The other side has a middle finger also Ben. A guy like Trump will never get us as a country to a middle consensus. He is a unlikeable time bomb. Thank god he is surrounded now by military people although in some whay that is not necessarily a good thing. More war. I think the Trump election, the anger and spite that he encouraged is the lowest point of our demacracy in my lifetime.
And electing Clinton would have been better how? This was Clinton versus Trump, not Trump versus some indefinable perfect status quo. That’s what I mean by redefining the election.
Don’t make me raise my pimp hand, scdave.
Everyone has his or her own idea of what it was about. It wasn’t about any one thing.
Keep telling yourself that, and you may even believe it. But it’s crystal clear what the election was about to tens of millions: a middle finger to the corrupt, crony capitalist status quo. Trump ran as a populist and nationalist on an explicit platform of “draining the swamp.” He’s been a disappointment in some respects, and I wish he’d dial back the buffoonery and send Jarvanka packing, but the country owes him an enormous debt of gratitude for keeping HillaryJeb out of the White House. There’s also the added bonus of seeing the precious snowflakes dissolve into hysterics on Election Night - that was just priceless - and their Trump Derangement Syndrome ever since.
http://mindfulwebworks.com/radical/hillary-jeb-2016-smiles.png
. But it’s crystal clear what the election was about to tens of millions: a middle finger to the corrupt, crony capitalist status quo. Trump ran as a populist and nationalist on an explicit platform of “draining the swamp.”
This doesn’t make sense. The vast majority of Trump voters voted for Romney, McCain, Bush and so forth. Most people who say that they voted to drain a swamp can’t tell you what that means. Even those who can don’t agree.
This is also telling:
…the country owes him an enormous debt of gratitude for keeping HillaryJeb out of the White House. There’s also the added bonus of seeing the precious snowflakes dissolve into hysterics on Election Night - that was just priceless - and their Trump Derangement Syndrome ever since.
Note that there’s no mention of any actual issue, like health care or immigration. So things are the opposite of what you think. The PTB has you obsessed with some mythical swamp and the hole in Hillary’s tongue. That serves to distract people so they can run the country without the little people getting in the way.
‘Note that there’s no mention of any actual issue, like health care or immigration. So things are the opposite of what you think. The PTB has you obsessed with some mythical swamp and the hole in Hillary’s tongue. That serves to distract people so they can run the country without the little people getting in the way.’
You’ve become what you hate Mike.
Hoping for a Constitutional Convention. The Founders drafted Article 5 to rein in Government when it was no longer functioning and serving the people effectively. There’s a big movement to make it happen. Interesting reading.
Aside from that we should audit the Fed. The results would bring all parties together for once.
The vast majority of Trump voters voted for Romney, McCain, Bush and so forth.
As I’ve said a time or two, any members of the 99% who voted for McCain, Romney, or Bush were voting for neocons, corporate statists, and Wall Street stooges. By 2016, it appeared that millions of former sheeple had finally, belatedly, started to become awake and aware, to the horror of the Establishment.
Note that there’s no mention of any actual issue, like health care or immigration.
Hey dill weed, a vote for Trump was first and foremost a vote against the oligarchy’s open-borders, unrestricted immigration policies. That’s implicit: only someone a few IQ points short of moron would fail to grasp what Trump supporters were voting for, and against. Health care is a separate topic for a separate post.
No, only after I pointed out that you didn’t mention an issue did you mention an issue.
There were around 60 million people who voted for Trump. I don’t know how you figured out why they voted for him. There have to be many different reasons. As I stated, the vast majority voted for Romney, McCain, and Bush. You yourself would probably characterize at least one of those three as an open borders guy. So did those GOP voters change their minds and suddenly decide that they were against open borders last year?
Stop being purposely obtuse, Mike. It is clear why Trump was elected, and the evidence is from multiple exit polls and other surveys. The top reasons:
Stopping illegal immigration.
Defending our country’s borders.
Protecting American jobs.
Preventing terrorism.
Mikey,
I can’t explain why the stoopids voted for McCain, Romney, or Bush. All three were appalling candidates. But I’m delighted that among the 95% of the electorate I’d written off as hopelessly stupid, millions appeared to become awake and aware in 2016. Can I explain it? No. I thought once stupid, always stupid. But I’m happy to be proved wrong.
Mike points out that somewhere in the 1/4 to 1/3 of the voters vote R every time no matter what. I don’t disagree. But it’s stupid to point to them as the root of the problem when everybody knew they were going to vote R. That’s what they do. But they can’t win elections by themselves.
The question is: What happened to those Obama voters that didn’t come out for Hillary? Seems like the angry Ds would rather complain about the R base that never changes than look in the mirror and answer that question.
Dollar at a 15 month low as Yellen’s incessant jawboning about mythical rate hikes and balance sheet reductions is no longer sufficient to counteract the Fed’s debasement of the currency.
http://www.scmp.com/business/banking-finance/article/2105033/dollar-tumbles-15-month-low-due-washington-politics-and
Monterey, CA Housing Prices CRATER 15% YOY
http://www.movoto.com/monterey-ca/market-trends/
http://business.financialpost.com/personal-finance/mortgages-real-estate/uninsured-mortgages-are-greatest-risk-for-canadian-financial-institutions-dbrs-report-says/wcm/4c169bd0-473a-46e0-966e-dec0f678aaa5
What makes them think that an Canadian insurance company would be any safer than AIG in the United States?
A guy like Trump will never get us as a country to a middle consensus. - scdave
I have no interest in having middle consensus with the likes of you and MMike. I want to defeat the politicians/policies that you support - not compromise.
I consider your type to be my, my family and my country’s enemy. You may not have evil intent (which I question) but evil is the result.
Testify.
There can be no consensus with people I despise, who want to forcibly take the fruits of my labor and sacrifice and distribute it to the social parasites who comprise their votes-for-entitlements base.
I would’ve preferred a more unifying figure, who would’ve pointed out that the 99% are being screwed over relentlessly by our globalist overlords and their Fed accomplices. And who would’ve called out the neocons for serving as unregistered foreign agents for the state of Israel instead of putting America’s national interests first. Or that the corporate cartels are imposing a new feudalism on We the People. But the choice was Trump or Hillary, and given my visceral loathing for Hillary and everything she stands for, that made Trump, aka the middle finger to the Republicrat duopoly and their billionaire oligarch pimps, the only option.
A guy like Trump will never get us as a country to a middle consensus. - scdave
What this means is that he won’t accomplish much.
I have no interest in having middle consensus with the likes of you and MMike. I want to defeat the politicians/policies that you support - not compromise.
What this means is that you want the government to move even more out of step with public opinion than it already is.
So, Mike, if public opinion is that everybody deserves free cable TV, does that mean that it’s the obligation of the government to give it to them?
Oh dear….
http://www.scmp.com/property/hong-kong-china/article/2105165/hong-kongs-new-private-flat-transactions-july-see-steep
The PTB has you obsessed with some mythical swamp and the hole in Hillary’s tongue. That serves to distract people so they can run the country without the little people getting in the way.’
Do you actually believe your own BS, Mikey?