The often volatile housing starts numbers took another dive this report, down 18.7% in November according to the Census Bureau New Residential Construction report for November 2016.
Housing starts 1959-Present
Year-Over-Year Detail Since 1994
New Residential Construction Details
- Permits down 4.7% from October
- Permits down 6.6% from year ago
- Starts down 18.7% from October
- Starts down 6.9% from year ago
- Completions up 15.4% in October
- Completions up 25% from year ago
Mortgage Rates Soar
Mortgage rates have risen 104 basis points (1.04 percentage points) since July 8.
As I have pointed out, this is bound to affect the housing market sooner or later. Sooner means now.
Each quarter-point hike will affect mortgage rates correspondingly until the long end of the curve refuses to rise further. At that point, we will be in recession.
Still think three hikes are coming in 2017?
Mike “Mish” Shedlock
“Still think three hikes are coming in 2017?”
Our “private for profit, socialize the losses” Federal Reserve Chairwoman, Rothschild/Rockefeller/BIS employee of the year (2016), has just told us to expect 3 rate hikes in 2017.
Are you calling her a LIAR ? Or worse, MIS-informed ?
Whatever happens, have no fear, she and all her 1/10th of 1% Masters will no doubt make all the right investment decisions, at just the right time, so they have another stellar year.
But just in case they don’t, there’s always more QE to pump back in their pockets.
Sleekster, you seem a *bit* jaded… (Not that you shouldn’t be…)
I can only imagine that most people do not comprehend how much they have been, and are being ripped off by this “system”, or prefer to keep their sanity and pretend all is ok.
But it isn’t.
And it’s right out in the open for all to see.
Just like back in the day with Al Capone and friends.
PUKE TIME
But but but, homebuilder confidence just spiked to 11 year highs!
http://www.marketwatch.com/story/home-builder-sentiment-soars-as-developers-bank-on-a-trump-bump-2016-12-15
As Elmer Fudd would say: “Sumting is a widdle skewey here”
Yeah…I wonder how much the difference will be between local growing (and shrinking) markets. Mish has a great post showing the massive differences between them somewhere.
I’m a CPA who works in the homebuilding/construction business and yes, I can attest that confidence is high, but given the rate of growth in the local market, it might not be unfounded *here*.
The TBTF banks – which OWN The Federal Reserve (literally) want a steeper yield curve for profitability reasons.
They are being given a steeper yield curve by their servant, The Federal Reserve.
So yes, EXPECT three 25 bps tightening in 2017 – OR – a recession.
Whichever occurs first.
Too late. Treasury yield curve has been flattening this month
2s … 10s … at beginning of month 1.14 …2.45 … now 1.29 …2.60
5s … 30s … at beginning of month 1.90 …3.10 … now 2.10 …3.16
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Well, it has stopped steepening. “Flattening” would imply a reduction in slope, which has not happened yet.
5s 30s flattening
OK – a tiny bit.
It is not too late to enter the most clueless comment of the year contest,
A submission from Federal Advisory Council (september)
“New buyers are poised to enter the market, as rent prices continue to increase and
negative credit events from the start of the crisis move off borrowers’ credit reports.”
https://www.federalreserve.gov/aboutthefed/fac-20160907.pdf
It was the Russians.
I’m with Xer.
Freddie Mac –
“This week’s mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA’s Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017.”
http://freddiemac.mwnewsroom.com/press-releases/mortgage-rates-move-higher-otcqb-fmcc-1290330
So the FED waits until Trump wins to start aggressively raising rates. Must just be a coincidence. It’s not like they want him to fail like everyone else who works inside the beltway.
It was the Russians.
I’m with Xim.
OMG… Obama’s on TV and the DOW is going up. Must be that he is reminding everybody that he will be gone in a month.
He is Russian.
Spasibo, comrade! I needed that. :-))
🙂 , and that also.
Yes, I still expect 3 hikes in 2017. Stop asking, because by asking you imply that the Fed acts rationally when everything else you write points out that central banks never act rationally.
More likely the Fed and CBs are acting perfectly rationally. However, if you listen to what they say they are trying to achieve it appears they are acting irrationally, since what they actually do has little to no chance of gaining those aims. One can only conclude that they are simply lying about their aims and are trying to achieve something else. So the real question is: what would be the most likely reason to do what they are doing? You can really frighten yourself when you consider that.
I first realised this in the 1980s when Greenspan said (twice in fact and to different audiences): “If I seem unduly clear to you, you must have misunderstood what I said”
I can remember when 7 to 8% mortgages were the norm. At one time I paid 11% Volker raised rates and they topped at 14% if I remember correctly.
The problem is housing in many areas is so expensive people can no longer afford homes without low interest rates. My first home was 51k. My wife’s was 35k.
Something will have to give either homes deflate in price or we will lower interest rates so those overpriced areas of the country are not all place on the USDA home buying programs. I imagine state like CA, OR, WA, NY, and NJ will have huge problems. Section 8 to them all!!!
In my area multi family and single family first starter homes are booming and nothing else. no they do not come with granite and high end finishes but for 100 to 120k they are still affordable for working people.
Large spec homes are dead period and many home in the 250+ range sit for years now.
How many millions of empty McMansions are still out there from the 00s? If builders are ever allowed to build the right mix of products for the market, the right products will sell just fine.
In high pressure areas, the scheme over the past few years has been low, low rates allowing the top 10-15%, with a heavy skew towards the top 0.1 of course, to buy up unused inventory.
Then use their influence to pretty much relegate new construction to tiny units in far off, less desirable areas, often saddled with limited parking and mandatory subsidized units to bring in enough slum dwellers to make sure the new places will never be very attractive. Just enough to keep the deplorables-to-be from literally living in the street, while ensuring all their income goes towards rent for the top .1/1/10-15.
Trump winning was a bit of a wakeup call, so you can pretty much guarantee the next stage will be moving the deplorables from renters to owners of their slummy shacks. The thinking being, that once they have reached the much ballyhooed status of “owners,” they’ll be less willing and able to see through the scam, instead cheering like windup bunnies for policies that keep pumping asset prices ever higher. So that they too, can pretend they are getting “wealthier” off their “smart investment.” And will be more content spending their entire existence as destitute serfs paying on their million dollar mortgage for living in a $30K shoebox, while the 1%ers collect their mortgage money and live in ever greater splendor.
This exact kind of scheme has worked splendidly for legions of “home owners” before. Making them pliant serfs for their overlords, by making them go into massive debt to pay an order of magnitude above free market prices for shoddily built shacks. Ensuring 90% of the “value” of their “investment”, is derived from nothing more than the overlords promising to harass and shake down the next generation of young people, even worse than they once did them. So that they, like happy house niggers before them, feel oh-so privileged, compared to their field brethren. Hence more than willing to stand up for and rationalize “the system”.
Just as the inflation spike forced the FED to raise rates in the 1980’s, defaulting debts will do the same during the next crisis.
Old Guy: “The problem is housing in many areas is so expensive people can no longer afford homes without low interest rates.”
Bingo. The city my family and I fled from for rural living has more of these than I could count. The worst part? Not only is the mortgage going to go up for anyone buying, but this particular city just approved several rate hikes for both water/sewer and electricity and gas services. The home we had is still in our hands and I worry we won’t be able to unload it before the whole catastrophe is revealed. This place was, prior to 2015, exceptionally inexpensive to own and maintain. Now, it’ll be double by mid-2017.
Now, take my example and let’s multiply that by how many other places?
As in the UK small house builders have been wiped out and the industry is dominated by the large house builders who have restricted supply, and in an era of low interest rates, have seen house prices spike upwards and with it their profit margins. This is now ending. Within weeks of the uptick in interest rates, the chain of credit which maintained this cartel is shattering. Next in line will be autos. Though not a cartel it is highly dependent on cheap loans. The key question is this: What happens when the capitalists realise they cannot exit the era of low interest rates with their economy intact? That oh shit moment will rock the markets to its foundations. In the end TRUMP could end up spelling The Recession Undid My Presidency.