The recent surge in mortgage rate is occurring at a time that the Federal Reserve has stopped buying mortgages backed securities (MBS) and is now allowing its holdings of MBS to mature off its balance sheet at a pace of $35 billion per month. The Fed has not committed to sell/
— Diane Swonk (@DianeSwonk) October 19, 2022
…can have on amplifying the effects of rate hikes. We get more data on home building today. It is likely to be ugly, especially on the permit side, where plans for construction show up. Home sales & construction have collapsed. First-time buyers have been crowed out, all cash…
— Diane Swonk (@DianeSwonk) October 19, 2022
Worker shortages have kept builders from mass layoffs, thus far. It is not clear that will remain the case as demand and backlogs continued to plummet. Home values have also begun to reverse in what where the hottest pandemic markets, despite still low inventories in most areas.
— Diane Swonk (@DianeSwonk) October 19, 2022
People will be much less likely to tap into what saving they amassed when they couldn’t spend and due to fiscal stimulus as home values fall. That is the case even as most mortgages remain above water and out of foreclosure. This is not the subprime crisis but we are reversing..
— Diane Swonk (@DianeSwonk) October 19, 2022
The one caveat may be Hurricane Ian and the devastation it triggered in Florida and parts of the Southeastern Seaboard. The est are that there were $75 billion in insured damages; a lot of vehicles were hit. Problem is that many of those payouts will be litigated in courts.
— Diane Swonk (@DianeSwonk) October 19, 2022
The path ahead is difficult and what I was called the canary in the coal mine, housing, appears to be sending an ominous signal about where we are and where we are going. Hard.
— Diane Swonk (@DianeSwonk) October 19, 2022