Morning Report: Big jump in home prices

Vital Statistics:

  Last Change
S&P futures 4,396 -36.2
Oil (WTI) 75.78 0.29
10 year government bond yield   1.54%
30 year fixed rate mortgage   3.18%

Stocks are lower this morning as investors fret about energy costs. Bonds and MBS are down.


Loans in forbearance fell under 3% last week, according to the MBA. They estimate that 1.5 million borrowers are still in forbearance. Fannie and Freddie loans decreased by 3%, while Ginnies rose.


Home prices rose 19.2% YOY in July, according to the FHFA House Price Index. “Record appreciation rates for the U.S. continued in July,” said Dr. Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics. “Although the monthly pace of increase slowed in most Census Divisions in July, four areas experienced year over year growth rates in excess of 20 percent and all saw annual gains in excess of 15 percent.”

With 19% appreciation, we could be looking at new conforming limits for 1 unit properties in the mid 600k next year.


Separately, the Case-Shiller Index rose close to 20%. Get a load of these numbers: Phoenix up 32%. San Diego up 28%. S&P thinks that this could simply be a case of current transactions “borrowing” from future transactions, which would imply a pricing slowdown going forward.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. July’s data are consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.”


I wonder how much the Evergrande situation in China (and its bursting real estate bubble) will have fallout for the big West Coast cities like Vancouver and San Francisco. When you have this sort of financial crisis, you never sell what you want to, you sell what you can.


Lael Brainard discussed the economy and the Fed’s thinking. I have to say this statement puzzled me: “Many forecasters have downgraded consumer spending in the second half of the year, as Delta has limited the acceleration in services spending that had been anticipated to help offset the drag on activity from fiscal support shifting from being a tailwind to a headwind.” Congress is working on a $3.5 trillion spending package. I know a trillion doesn’t mean what it used to, but characterizing that as a “headwind” seems odd.

That said, I can see where this is going. I expect the chattering classes will soon exhume the term “austerity” which is about the most loaded economic term out there. “Austerity” officially means a decline in stimulus, however it is often conflated with contractionary fiscal policy. If the US runs a $1 trillion deficit and the deficit narrows to $900 billion in the following year, that is officially “austerity.” That doesn’t mean the government is tightening. It doesn’t mean the government is trying to slow the economy. Deficit spending is still highly stimulative to the economy and is still a “tailwind.” Austerity is Newspeak for “the government isn’t spending enough on my priorities.”

12 Responses

    • ” Democrats say McConnell is cynically using this issue to force Democrats up in 2022, such as Sens. Maggie Hassan (N.H.) and Mark Kelly (Ariz.), to vote for a debt-limit increase. ”

      oh boo hoo.


      • Yep. I think PL is going through the five stages of grief about this.

        And NoVA, I love this:

        “Schumer may also look to fund federal agencies for a shorter period of time, say two to three weeks, in order to line up a government shutdown with the debt limit-deadline. This would create a massive financial cliff in the middle of October. It’s a creative idea, we guess, but it seems exceedingly unlikely to move Republicans to vote for the debt limit. Senate Republicans apparently would vote for this, GOP insiders suggest, because it will spark chaos and that has the chance of interrupting the Democratic agenda.”

        If there’s a way to make a bad political situation worse, the Democrats will find a way to do it.


        • I’m fascinated by the repeated demand that Manchin and Sinema give them a top-line number. I wouldn’t, why give away your floor? Manchin said he wanted a pause till next year so he has no incentive to provide a number and all the incentive in the world to keep shooting down proposals until they give him one he likes. Why would he leave money on the table?

          I’m assuming that eventually Manchin and Sinema with find a number that works for them, meanwhile let the progressive caucus negotiate with itself.


        • the analysis over there never moves beyond “our cause is just, so we should get what we want. also, if we can increase turnout by x, total victory”

          Democrats have the WH, House, and Senate, but are about to oversee a government shut down. and that’s somehow McConnell’s fault. and sure, I have heard of the filibuster. and knowing that, a competent team would have cleared this issue months ago.


        • Especially since this exactly what was done in 2011. They learned nothing.

          Also, how can you not respect a House Appropriations chair who is 60+ and has purple hair.


        • jnc:

          Also, how can you not respect a House Appropriations chair who is 60+ and has purple hair.



  1. so my wife and son both tested negative.
    go figure.


  2. Wondering if the Dems are trying to shitcan the BBB recon bill by having to use it’s reconcilliation framework for a debt ceiling hike?

    Or are they creating some blame-space so that they can then negotiate the BBB bill with Republicans so that the progs don’t revolt or that there will be enough R’s that vote for it.

    I for one hope we default and it becomes VERY difficult and politically toxic to borrow more money. Unfortunately that’s not going to happen.


  3. This just gets better & better:

    “Furious Pelosi dresses down centrists amid debt standoff

    House moderates are threatening to vote against a standalone vote to raise the debt ceiling, the latest revolt the speaker is trying to quell.”


  4. looks like a CR deal. we’ll see. still time for it to fall apart.
    clean CR, no debt ceiling, good through early Dec.


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: