Morning Report: Existing Home Sales fall

Posted on August 22, 2023 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning as the rise in the 10 year yield pauses. Bonds and MBS are flat.

Bond yields are at the highest levels since November 2007. Investors are nervous ahead of Jerome Powell’s speech in Jackson Hole this Friday. The fear is that the neutral interest rate – called r* – might need to be higher than it was pre-pandemic. In other words, we have had a seismic shift in interest rate levels, and the era of ZIRP (from 2008 to 2022) is over.

From BMO strategists: “What started as a simple supply concession for a slightly larger-than-anticipated August refunding auction series has snowballed” into traders revisiting the most important pillars supporting the lower-rate thesis — one of which was that the neutral policy rate wouldn’t be “sustainably higher in the post-pandemic world.” As the thinking goes now, the Fed’s policy rate target might need to be higher than where it was prior to 2020 even if inflation returns to 2%, policy makers could be forced to delay their first rate cut, or possibly both. The most current guess as to where r-star lies is 0.5% — after subtracting 2% inflation from the Fed’s long-run estimate of where interest rates will eventually settle, which was 2.5% as of June.”

S&P has downgraded 5 regional banks on the “higher for longer” outlook on rates and commercial real estate concerns. The companies affected were Keycorp, Comerica, Valley, Associated Banc, and UMB. “Amid higher for longer interest rates, we expect further asset quality deterioration,” it warned. “Banks with material exposures to commercial real estate, especially in office loans, could see some of the greatest strains on asset quality.”

Existing Home Sales fell 2.2% in July to a seasonally-adjusted annual rate of 4.07 million. This is down 16.6% compared to a year ago. “Two factors are driving current sales activity – inventory availability and mortgage rates,” said NAR Chief Economist Lawrence Yun. “Unfortunately, both have been unfavorable to buyers.”

The median home price rose 1.6% to $406,700. Inventory was down 14.6% YOY to 1.11 million units. The first-time homebuyer accounted for 30% of sales, up from 27%.

Filed under: Economy |

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20 Responses

  1. jnc4p's avatar
    jnc4p, on August 22, 2023 at 1:31 pm said:

    Worth nothing:

    https://www.racket.news/p/madness-american-satirist-cj-hopkins

    “The masks always send out a signal”

    Yes they do.

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  3. Brent Nyitray's avatar
    Brent Nyitray, on August 22, 2023 at 9:48 pm said:

    Not the Bee

    Note they changed the title from “Elections Are Bad For Democracy” Guess it was too much of a self-own.

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    • ScottC's avatar
      ScottC, on August 23, 2023 at 5:44 am said:

      The article is a great example of how the term “democracy” has been emptied of content, meaning literally nothing other than “something good”.

      There is nothing more democratic than offering each and every citizen an equal opportunity to lead.

      That’s complete nonsense. His plan may in fact be the greatest idea since sliced bread, but it is neither democratic nor does it give every citizen an “opportunity” to lead, much less an “equal” opportunity.

      It’s like saying that the owner of a losing Lotto ticket had been given the “opportunity” to be a millionaire.

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      • jnc4p's avatar
        jnc4p, on August 23, 2023 at 1:10 pm said:

        Yeah, random lottery isn’t the same thing as majority rule. However, he did get the historical citation correct:

        “To paraphrase William F. Buckley Jr., I’d rather be governed by the first 535 people in the phone book. That’s because the people most drawn to power are usually the least fit to wield it.”

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        • ScottC's avatar
          ScottC, on August 23, 2023 at 10:23 pm said:

          jnc:

          However, he did get the historical citation correct:

          Not really. The actual quote was that Buckley would rather be governed by the first 535 names in the phone book than by the faculty of Harvard. It was a condemnation of the ideology/capability of academics at Harvard, not of the democratic process.

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        • jnc4p's avatar
          jnc4p, on August 24, 2023 at 10:33 am said:

          Thank you for the correction. Makes all the difference in the citation.

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  4. jnc4p's avatar
    jnc4p, on August 23, 2023 at 1:14 pm said:

    I’m sure this will turn out well:

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