Morning Report: Tappable equity hits a record

Vital Statistics:

S&P futures4,078-41.25
Oil (WTI)117.95-0.64
10 year government bond yield 3.00%
30 year fixed rate mortgage 5.50%

Stocks are lower this morning after another profit warning from bellwether retailer Target. Bonds and MBS are down.

Target made a profit warning this morning saying that it will need to discount some inventory in order to move it.

“We’ve had some additional time after earnings to really evaluate the overall operating environment,” said Target Chief Executive Brian Cornell in an interview. That includes watching consumer behavior as they face high rates of inflation, he said, and seeing many other retailers talk about high inventory levels during their earnings presentations. “We have to be decisive and get out in front of this to make sure this doesn’t linger through the back half of the year,” he said.

Consumption is 70% of the economy, so warnings from retailers are a red flag. The Atlanta Fed’s GDP Now model has Q2 GDP coming in at 1.3%, which is pretty lousy given that GDP contracted in the first quarter.

That said, we are starting to see some moderation in inflationary indicators. Shipping rates are down 33% from their peaks in fall of 2021. Fertilizer prices are beginning to drop as well.

Tappable equity (in other words, home equity above 20%) rose $1.2 trillion in the first quarter of 2022 as home price appreciation accelerated. This is a record gain. Total tappable equity sits at $11 trillion, or about $207,000 per mortgaged property. This is more than 2x the amount of tappable equity at the peak of the US residential real estate bubble of the mid ’00s.

This increase in tappable equity creates opportunities for cash-out refinances. That said, the vast majority of this equity is held by high-credit borrowers with very low rates. They don’t have much high-rate credit card debt to refinance and would probably prefer to take out a HELOC if they want to take out any equity.

23 Responses

  1. The left is already trying to lower expectations for viewership of the 1/6 hearings.


    • I almost think the Republican response here should be “rather than being focused on inflation, crime and critical shortages, the Democrats instead want to continue to re-litigate the 2020 election.”)


    • I predict abysmal ratings. The general audience was growing tired of 9/11 stuff a year-and-half-out. There was no repercussions at all for the general public from January 6th. Most folks would appreciate wall-to-wall inflation coverage.

      I predict more people will hear about the content from Ben Shapiro and Tucker Carlson than will actually watch.

      So I’m understanding these aren’t just hearings, but it’s being produced like a documentary with pre-shot footage … like a TV special. A sort of “The Secret of Donald Trump’s Vault”.

      Even if I was politically sympathetic with the Democrats I would be sick of January 6th. Like I grew rapidly sick of the Starr report and the Clinton impeachment.

      I the left is increasing tone-deaf, unable to metabolize any opinion that isn’t the consensus of blue Checkmark Twitter.


    • “It’s much more likely that the audience for this hearing is going to get a cohesive, well-structured, understandable narrative,” he said.

      This sounds totally legitimate.


  2. “This increase in tappable equity creates opportunities for cash-out refinances. That said, the vast majority of this equity is held by high-credit borrowers with very low rates. They don’t have much high-rate credit card debt to refinance and would probably prefer to take out a HELOC if they want to take out any equity. ”

    This would be me. I have a HELOC on my house (which is paid off) and the bank just sent an offer to tap it for Prime – 1.25% (yes, Prime minus 1.25%) which I found interesting. But I have nothing I want to spend the money on currently.


  3. I’m confused as to why the idiot J6 Committee is going for TV hearings during the summer? If they want people to watch they’d air after Labor Day?

    Do they think the hearings will actually hurt them but their base is demanding it so they’re scheduling it when it’s least likely to be seen?

    In 2016, during the primaries, HRC would schedule the debates on weird dates and often against popular programing to reduce viewership to minimize the legitimacy of her opponents. That strategy didn’t seem to work, is this the same effort?


    • BlueAnon will watch the hearings. Everyone else will be watching the Stanley Cup


    • Some people have to think it’s Very Important. Otherwise you wouldn’t have the unprecedented three-network wall-to-wall coverage. I imagine there’s some differing opinions as to the wisdom of making this a Major Event.


  4. Ezra Klein interviews Thomas Piketty who gives the long form of A101’s arguments from the Plum Line.


    • I got about a third of the way through his book. When he started with his estimate of GDP growth in the 1500s through 1700s, I started rolling my eyes. I finally couldn’t stand it any more.


      • Same here. No interest in what Piketty has to say.


        • The Bureau of Economic Analysis can’t measure what GDP was 3 months ago, and this jabroni is going to measure what it was 3 centuries ago?

          And not only that, calculate how much went to capital and how much went to labor?



  5. Great thread demonstrating the individuality and unique thinking of WaPo employees.


  6. Interesting story which shows just how seriously Biden’s DOJ, and specifically Merick Garland, take leftist violence and terrorism.

    Colinford Mattis and Urooj Rahman were arrested in the “mostly peaceful” protests following George Floyd’s murder. The two lawyers handed out Molotov cocktails to the crowd, and Rahman tossed one into a police car before fleeing the scene in Mattis’s van. They reached a plea deal with federal prosecutors in October 2020 that wiped out six of the seven charges against them. Those prosecutors, nonetheless, sought a maximum 10-year sentence and argued that the incident qualified for a so-called terrorism enhancement that would turbocharge sentencing—a determination with which the U.S. Probation Office concurred.

    Ginning herself up to distribute explosives to the crowd, Rahman gave a video interview in which she declared, “This shit won’t ever stop until we fuckin’ take it all down,” adding that “the only way [the police] hear us is through violence.”

    Then, Garland and the U.S. attorney for New York’s Eastern District, Breon Peace, who’s handling the prosecution, took office, and you won’t believe what happened next!

    In mid-May, the same career DOJ prosecutors who argued for that 10-year sentence were back in court withdrawing their plea deal and entering a new one that allowed the defendants to cop to the lesser charge of conspiracy. It tosses out the terrorism enhancement entirely.

    The new charge carries a five-year maximum sentence, but the prosecutors are urging the judge to go below that, asking for just 18 to 24 months on account of the “history and personal characteristics of the defendants” and the “aberrational nature of the defendants’ conduct.”

    I do wish Mark was around to comment on this. Recall that he thought that Bill Barr should be impeached for overruling the on-line prosecutor’s plainly excessive sentencing recommendation of 8 years for Roger Stone, convicted of perjury and witness tampering. I wonder if Mark holds the same opinion of Garland now.

    40 months for perjury in a case that didn’t even have an underlying crime, vs 2 years for passing out and tossing Molotov cocktails at police cars….perhaps the DOJ is ironically named.


    • Every aspect of the government has been weaponized for a while, R’s need to take note and wield it as well.


      • I don’t think they can. The administrative state is run by leftists. It doesn’t matter what party the head of the agency is – it is used as a weapon for the D party only.


        • The right people could. But they won’t. The effort required to do it is immense. And they have to be ready to be at war at every level all the time. And you’d have to be aces at staffing. Just a hugely high bar to be successful.

          The left just has to show up and Tweet something.


  7. Frisco Chronicle not taking the DA recall well.


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