So how do we get the inflation under control?

Happy Market Update! 

Well, we are headed into one of America’s famous 3 day weekends. It’s the unofficial beginning of summer, and hey…pools open (although where I am it was VERY cold last night…like drysuit weather for a pool)! I hope you’ve already grabbed everything you need at Costco. Let me just apologize for the leadership in this country…BOTH sides…and why your Costco bill is still going up. We’ll get to some of that later…as you probably already know. But first…yes, a Jackson football watch alert!

2-0 this past weekend. If you are not familiar with stats, that’s 2 wins and 0 loses. If you’ve read the past few newsletters, you are thinking that I was the head coach. Thank you for that. It really makes my day. But no…I was not. 

I know, right?! The “other guy” and I got along. He asked how the previous week we won one and only lost the other by a point. I said…defense. Look, I can’t take credit for this. Bear Bryant was famous for saying “Offense wins games…defense wins championships”. Don’t know who Bear Bryant is?

Anyway, he asked me what I did differently, and you are damn right I told him…containment. I explained that I taught the kids to keep the runners inside by using them as cornerbacks. I mentioned Jackson understood being a free safety. This took him and the other coach by surprise. But not you…because you have learned about me over the years reading this. If you are new. Welcome. I love football…but not as much as my 5 year old…and that is saying a lot. Quickly, a free safety is someone who lines up about 10-15 yards off the ball on defense. The point here is that Jackson is far enough to keep the runner in front of him while the other 2 cornerbacks keep the runner either running inside where other defensive players are located…or running them out of bounds. This is standard stuff, mind you. So my former football players reading this, thanks for hanging in there. So yes, when the other team can’t just run down and score every time they have the ball…winning is an option! And boom! We won 2 games this weekend…and by more than a touchdown each. It was enough that at the end of the game, I called a timeout so the other team could get in more snaps…because the opposing coach does that for other teams. I love that! Well our coach looked at me like I was crazy. I said, hey…he would do it for us. He nodded and then I said, we are up by 10 with one play to go. Then he smiled. It helps to know the score…in real time. But in the end, this is for the kids and them having fun and getting energy out of them so parents can have a better Saturday. It’s not about the coaches winning or losing.

But some of you didn’t come here to hear about football…you want to know what’s up with housing and mortgages. Oh come on! You already know! Check out this chart from @GameofTrades_ on X. You don’t really feel like buying a home! How do we read this? Look at that huge drop over the past couple of years while prices and rates have moved up, exponentially (I love that word). This is brought to you by the University of Michigan and the Fed. The previous two times we were this low in buying conditions, we were in recessions. So how are we going to avoid a recession this time?

From the Wall Street Journal, since the beginning of the year, we are seeing existing home sales (so not new from builders) dropping. Now if you look to the right, it appears this was similar to beginning of last year too. So it could be normal…or it could be a sign that inventory was still low and rates have been moving up since the beginning of 2024. Time will tell us.

And prices seem to be showing us what low inventory can do. This chart from Apollo shows prices rebounding. It looks like rent is moving down..but wait. Always look to the left as my mentor, AJ Monte would say. They tend to move in the same direction…even if it takes a minute like back in 2010-2011. So I would suspect that rent may move down a bit more, but for how long with prices moving back up in the Case-Shiller (which we get next week for March).

As I mentioned above, the rates are a huge factor. Check out this chart…This is the largest spread between the average existing mortgage and the new mortgages in the past couple of years. Since 1998, there has never been a separation this large. Never. Not even close! If I was young and in my first job/career, I probably wouldn’t be interested in buying a home either. But as I’ve always said, and since I am older in years and career, homeownership is where the majority of us will have the funds needed after retirement. Pain is temporary, equity is forever! I think that’s the quote.

And yes, it’s hard to think about buying a home when other problems are creeping up in our life. Yep, back to credit card info. Don’t get sick of it…it ain’t going away. Look at that surge in delinquencies. Thanks to our friend @NOD008 on X for sending this one out. It’s not just the surge I’m looking at. Draw a dotted line from today back to the left, and it sure looks like we are higher than the low before the Great Recession. It also looks like this time is as steep as back in 07-10. Yikes. 

Another chart on credit cards…but this shows based on age of the consumer and the 90+ lates. So not just late…”seriously” late. 18-39 seems to be in the worse shape. How do you think Millennials and Gen Z are doing with this? I was seriously late on stuff decades ago. I was stressed out daily…I mean really bad. So do they get stressed like that? Or just look at our morons in DC who have more debt than we will ever be able to pay off and think, F it! The government doesn’t lead people here to do the right thing any more. Shame on everyone in DC.

10yr: So what’s happening with bond yields? Not much the past month or so. Yes today (the arrow), we are up a bit but down from 3 weeks ago. We call that sideways. What are you waiting on, Tim? The Fed. We are always waiting on the Fed. I think the bond market continues to tell us “higher for longer”. Inflation is not under control yet. In fact yesterday we got Fed minutes that said “Various participants (are) willing to tighten more if needed.” You red that right. Tighten means higher rates. So tell me again how rate cuts are a sure thing this year?

MBS: This is really good evidence of what sideways looks like. Need some help to stay above those moving average lines (the colorful lines). This is what indecision looks like. Will we get a cut? Will we get a hike? Or will we stay right here for a while? (I think option 3 is clear here.)

People love to ask me why I bring up other debt in a mortgage newsletter. Okay no one does…but you should! Anyways, it’s because it all impacts everything together. If people don’t pay bills, they won’t buy homes and your appreciation will shrink. We are all in this together even if we don’t think so. So how do we get the inflation under control? How do we get personal responsibility back on the table? Well, I’ll let you write a newsletter to me about that.

What doesn't kill you, makes you stronger. Tim