A report from CBS News. “The average mortgage rate jumped to 4.42% for the week ended March 24, according to Freddie Mac. That’s a more than a one percentage-point jump since January 2022. Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a research note: ‘The writing is on the wall, in big, sharp, clear letters.’”
From Mortgage News Daily. “While weeks in 2022 have been terrible for mortgage rates, we’ve always been able to say ‘at least it wasn’t as bad as that one week in 2013.’ We can’t really say that anymore. Sharply higher rates out of the gate on Monday, a few hopeful days mid-week, then another terrible day on Friday. With the Fed Funds Rate currently in the 0.25-0.50 bracket, it would require EIGHT rate hikes in the standard 0.25% amount to hit the year-end target. There are only 6 Fed meetings remaining! So at least 2 of those meetings will require a 0.50% hike. It’s been more than 20 years since we’ve seen a 0.50% hike. Now markets are expecting 2 of them in relatively short order. There’s even been talk of a 0.75% hike.”
From London South East. “Bonds are selling off once again and there’s now a flurry of euro zone government bonds whose yields are springing out, day after day, of negative territory. At Deutsche Bank, strategist Jim Reid believes that it’s now likely that the amount of total negative yielding debt will become negligible again by the end of the year, provided that the ECB hikes twice. ‘This will then end, for all extents and purposes, a strange 7-8 year experiment,’ he said. ‘I remember discussing negative yields in economics at school 30 plus years ago and the teacher saying we can mostly skip this part of the syllabus as it will never happen!,’ he added.”
From Fox Business. “National Association of Home Builders CEO Jerry Howard warned consumers Friday the housing market is currently ‘staring into the face of a perfect storm’ and argued that is a ‘bad sign’ for the American economy. ‘Builders are saying things are going to ‘dry up.’ You’ve got a combination of the costs…regulatory compliance and now at the other end of the pipeline, interest rates are going up,’ said Howard. The housing expert made these comments after pending home sales declined for the fourth consecutive month in February. Howard said he’s ‘very worried’ that the market could ‘really slow down.’”
The Miami Herald in Florida. “Despite reports of an influx of out-of-towners, Miami-Dade County lost population since the summer of 2020, according to new U.S. Census data. Between July 1, 2020, and July 1, 2021, Miami-Dade saw a decline of nearly 30,000 people, to fall to a population of 2.66 million, according to the census figures released Thursday. It’s the second consecutive year of declining population for Miami-Dade. The county’s population peaked in 2019 at more than 2.7 million.”
The Los Angeles Times in California. “Los Angeles and San Francisco saw sizable declines in population during the first year of the COVID-19 pandemic, new census data show. In terms of total numbers, Los Angeles County lost about 160,000 residents — more than any other county in the nation, the data show. But L.A. County has about 10 million people, so the per capita loss was slightly more than 1% compared with 6.7% in San Francisco and 6.9% in New York. The Bay Area, where skyrocketing housing costs have long been a major problem, was hit particularly hard. San Francisco lost about 54,000 residents and Santa Clara County — home to Silicon Valley — 45,000 people.”
“‘All those factors are operating together now in ways that we’ve never seen before,’ said Hans Johnson, a demographer with the Public Policy Institute of California. ‘We’ve had periods with large domestic out-migration, but not at the same time that we saw this big decline in foreign immigration and a slowdown in natural increase. So when you add all those things together, that adds up to population losses both for the state and for Los Angeles that are very, very unusual demographically.’”
“‘I started seeing the homeless population increasing and nothing being done about it,’ said former Southern California resident Alfredo Malatesta, who immigrated to L.A. from Peru as a child. ‘It was starting to remind me of where I left many years before. You feel like everyone is out to screw you in a way in a city like Los Angeles. And for the amount I pay to live here, the taxes, the infrastructure falling apart … everything is just like constantly like you’re getting screwed.’”
From Canadian Mortgage Trends. “With bond markets forecasting the Bank of Canada’s policy rate to reach 2.50% by next year, Capital Economics economist Stephen Brown asked, ‘can the housing market withstand a return to pre-pandemic mortgage rates, even though prices have risen by more than 50% in the interim? The answer is a firm ‘no,’ he answered. If the overnight lending rate, which influences prime rate and, in turn, variable mortgage rates, reached 2%, Brown said house price increases should slow to ‘little more than zero’ next year, while a higher policy rate would trigger a decline in house prices.”
“‘We shouldn’t assume that the Bank wants to avoid house price declines at any cost,’ he added. ‘House prices are a key driver of shelter inflation, so moderate declines would help to get consumer price inflation under control without seriously jeopardizing the economy.’ But with prices currently so high versus traditional valuation metrics, Brown said the risk is that an initial decline could trigger a ‘downward spiral’ of lower house prices and lower house price expectations.”
From One Roof. “Two years ago, house prices in New Zealand were roughly 43 per cent less than they are now. When OneRoof asked economists what it would take to see prices plummet to pre-Covid levels, they said while that could technically happen the scenario is highly unlikely and would indicate a huge global problem. ‘You don’t really want to think of a scenario where house prices would fall 43 per cent because that would be catastrophic and so there’s likely to be bigger fish to fry than buying a cheap house potentially,’ says Mike Jones, senior economist with the ASB. ‘If you look at globally the sorts of things that have caused really devastating asset market corrections it’s been things like deep and prolonged global recessions/depressions.’”
From Bloomberg. “New Zealand mortgage rates are set to rise above 5% for the first time in seven years, damping economic growth and exerting further downward pressure on a cooling housing market. New Zealand households are already being squeezed by the fastest rise in living costs in more than 30 years. The jump in mortgage rates will further reduce spending power just as falling house prices make consumers feel less wealthy, increasing the risk of the economy stalling.”
“‘The New Zealand economy has been famously described as the housing market with an economy attached, it has massive implications for how households behave,’ said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. ‘There’s a wealth impact on consumers’ willingness to spend.’”
From Forbes. “Struggling Chinese real estate developer Guangzhou R&F expects to report a loss of ‘not less than’ eight billion yuan, or $1.2 billion, for the year ending 2021 amid slack demand and excess supplies that have battered the property industry in the world’s No. 2 economy. ‘The expected net loss is mainly attributable to decrease in sales revenue attributable to lower contracted sales and recognition of properties sold, decline in gross profit margins, as well as the increase in impairment provision for inventory due to lower selling prices of the projects and lower contribution of other income recorded by the group for the year,’ R&F said.”