Morning Report: We are starting to see competitive behavior from home sellers

Vital Statistics:

S&P futures4,491-5.2
Oil (WTI)96.440.29
10 year government bond yield 2.76%
30 year fixed rate mortgage 5.06%

Stocks are flattish as we round out a data-light week. Bonds and MBS are down again.

The assets held by the Federal Reserve hit $8.9 trillion, which should be a high-water mark since the Fed is expected to start reducing its balance sheet relatively soon. Here is a chart of the assets held by the Fed since before the financial crisis of 2008.

It is important to note that there is no historical analog to draw on here. Central banks are a relative newcomer, historically. Woodrow Wilson brought the Federal Reserve into existence in 1913, so these entities haven’t been around all that often. For most of their existence they were the lender of last resort and helped manage the currency. Buying up assets to support the economy is new and it will be interesting to see whether global central banks can stick the landing.

With all of the Fed’s tightening, will the central bank cause a recession? It depends on the timeline. This year? Probably not. The employment market is still red-hot – WalMart is paying new truck drivers $110k to start – and that provides a strong buffer against a slowdown. Second, most of Corporate America took advantage of the ultra-low interest rate environment to refinance their corporate debt and lock in ultra-low rates for the foreseeable future.

That said, watch the slope of the yield curve; particularly the spread between the 10 year bond and the 2 year. Ordinarily it costs more to borrow for 10 years than 2 years, which is a positively-sloping yield curve. When it costs more to borrow for 2 years instead of 10 years, we get an “inverted” yield curve, and that has historically been a pretty strong indicator of a recession in the next 12 – 18 months. The yield curve inverted briefly about a week ago and has bounced back. This will be something to watch going forward.

What are rising rates doing to home prices? Theoretically, if the cost of borrowing rises, then this should be a negative for home prices. We are starting to see some evidence of competitive behavior amongst sellers, according to data from Redfin. “Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” said Redfin Chief Economist Daryl Fairweather. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door. That’s because higher mortgage rates are eating into homebuyers’ budgets. As the cooldown continues to set in, it is important that sellers price their home carefully. Homes that sit on the market for several days have a scarlet letter that makes them more difficult to sell. Buyers should be wary of bidding significantly over asking on newly listed homes, and to take a closer look at the homes that have been on the market for more than a week.”

18 Responses

  1. This is an impressive amount of triggering:


    • And I don’t think they quite realize the extent to which they are being trolled:


    • The left honestly thinks the right is the aggressor in the culture war.


    • “ The thing that strikes me about these Republican bills is that they’re staking ground on some things that are not necessarily popular with the majority of voters. That would seem to suggest to me that there’s political risk in doing them”

      These folks truly believe that their Twitter friends represent the whole of the population. Which is just obviously not the case. Either things positions are popular or “meh” to the vast majority of people. For most people who are going to show up and vote they know labeling a bill that doesn’t talk about homosexuality at all the “don’t say gay bill” is propaganda. But they keep on doing it.

      “ And so if you can create the next culture-war kernel by passing a really brutal piece of legislation”

      I do not believe Ezra hasn’t read the legislation so he’s not acting in good faith here. Except of course he exists to throw out red meat to his audience so I guess he’s doing what they want, which is kind of acting in good faith I guess.

      “ and these are brutal pieces of legislation that will hurt a lot of very just ordinary kids who need some help”

      How? How in the fuck will prohibiting a 3rd grade teacher from discussing their masturbation theories damage these kids?

      “There’s a good case to make that Republicans can be successful at this precisely because they have this very sophisticated media apparatus”

      And the Democrats own the media and Hollywood. This whining about sophisticated Republican media apparatuses is just delusional.

      “ And for as much attention as the C.R.T. stuff got in the Virginia gubernatorial race, later analysis suggests that it wasn’t the C.R.T. stuff that drove Glenn Youngkin’s victory. It was traditional kind of midterm backlash to the party in power”

      These are our political expert class. Matt Taibbi did actual on the ground reporting, available for any of these lazy ideologues to read; it was not a midterm backlash against the party in power. It was how the progressives we’re screwing up the schools in ways that negatively impacted Indian and Asian communities that helped propel Youngkin to power.

      “ I went back to some old Times pieces talking about the Southern Baptist Convention’s boycott of Disney, because Disney started offering same-sex health care benefits in 1995.”

      I don’t feel this is qualitatively the same thing. They want it to be but same-sex health benefits and “we want to propagandize your children, create gender dysphoria, and deconstruct traditional sex roles starting in pre-K” is not the same thing.

      And the objectors stretch far beyond the southern Baptists.

      “ You all seem to agree on this fundamental point that there’s a great deal of danger for the G.O.P. in pushing these culture-war issues.”

      In the present environment this is 100% concern trolling.

      “ And this, “OK, groomer” stuff, this is the mainstreaming of QAnon. I think it’s important to be very clear about this.”

      This is wishful thinking. Ezra also complains about how Republicans are mainstreaming the most toxic parts of their coalition. But I’m not sure this is an example of that and even if it were … the left is doing it as well. One of the reasons this stuff takes hold is because the Democrats are embracing some pretty toxic stuff from a mainstream voter perspective.

      “Because what is always fascinating to me is that you have Democrats that have policies that enjoy broad support.”

      But do they, though? If that were true wouldn’t they get passed and lead to re-election pretty consistently?

      “ It’s very clear that the idea Democrats had going into 2021 was if they just delivered economic growth, and they delivered policies, and they kept their heads down and did hard work, then that would produce a public that was inclined to re-elect Democrats.”

      This is just political fan-fiction. That these same people would lampoon mercilessly if said about the GOP.

      “ Democrats need to stop thinking of politics as some sort of mechanistic system in which, like, Good Input A gets you Good Result B.”

      I’m assuming these people are paid money for these incisive insights. That money is wasted.


  2. Hey Brent is this accurate and if so what do you make of it?


    • They had a massive bubble in the 80s, and have had nothing but deflation since.

      I would add that if you look at the chart, there never was a sell-off. After the bubble burst and the government realized it had a problem on its hands, it instituted a draconian land transfer tax, which was meant to discourage sales.

      I would also add that fear of the Japanese situation loomed large in the minds of the Fed post 2008. Helicopter money was offered as the solution. That was the road the US took. And we are about to battle inflation. We’ll see in retrospect which end result is more comfortable.


      • The thread has some interesting points about the national control of zoning in Japan, and what’s probably the most relevant thing, which is Japan’s population has been pretty much flat while the US grew during the same period.


  3. Round two! Lol!

    Fucking Ruskies are under the bed again!


    • “U.S. intelligence officials think …”

      Which U.S. intelligence officials? How many of them? Which agencies? Who disagrees them? Why in the fuck should we trust them? What evidence is there for this?

      I mean our intelligence agencies have always been corrupt and unreliable but if anything they are worse now but we should listen to them on this, with no evidence or logic.


  4. This screams “We’re still relevant, pay attention to us!”


  5. Matt Gallagher is always worth reading:

    Edit: Great quote

    “With the war racket pouring in come the goons, and with the goons come the weirdos. A Canadian in Lviv touches base: He’d like to teach a class on social justice and “collaborative conflict resolution.” Important matters, certainly, but perhaps not the time and place.”

    The Rolling Stone article referenced. It’s interesting to read about the same set of events from multiple perspectives:


  6. Is Musk really this hip?


  7. “Intel Officials Think Putin Has A New Excuse To Meddle In Upcoming US Elections”

    I think it is the Intel Officials themselves who are looking for an excuse to meddle in the upcoming election.


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