Dow crawled up 8, decliners over advancers 5-2 & NAZ was off 55. The MLP index added 1 to the 216s & the REIT index dropped 6+ to 350. Junk bond funds slid lower after a recent recovery & Treasuries were heavily sold, raising the yield on the 10 year Treasury 9 basis points to 4.09%. Oil was fractionally higher to the 83s & gold sank 17 to 1638.
AMJ (Alerian MLP index tracking fund)
New US home construction slumped in Sep, adding to evidence that rapidly rising mortgage rates are continuing to cool demand & the once red-hot housing market. Housing starts slid 8.1% last month to an annual rate of 1.44M units, according to new Commerce Dept data. That is below the forecast for a pace of 1.47M units. Applications to build – which measures future construction – rose to an annual rate of 1.6M units, led by multifamily properties. Permits for construction of single-family housing starts, which account for the biggest share of homebuilding, tumbled 3.1% in Sep to a rate of 872K units, the lowest since Jun 2020. The index has fallen to ½ of what it was just 6 months ago, when it stood at 76. It peaked at a 35-year high of 90 in Nov 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash & eager for more space during the pandemic – started flocking to the suburbs. "High mortgage rates… have significantly weakened demand, particularly for first-time and first-generation prospective home buyers," said NAHB Chair Jerry Konter. "This situation is unhealthy and unsustainable. Policymakers must address this worsening housing affordability crisis."
Housing starts tumble as rising mortgages cool demand
Rising costs have chipped away at most Americans’ standard of living. As inflation pressures continue, 2/3 of working adults said they are worse off financially than they were a year ago, according to a recent report by Salary Finance. To make ends meet, many are dipping into their cash reserves or going into debt. Nearly ¾ (72%) of consumers have less in savings than last year, a jump from 55% who said the same in Feb, the report found. And 29% said they have wiped out their savings entirely. The report is based on a survey of 500 adults in Aug. The consumer price index, which measures the average change in prices for consumer goods & services, rose more than expected again in Sep, still hovering near the highest levels since the early 1980s. The rising cost of living is bad news for workers, whose average hourly earnings declined 0.1% for the month on an inflation-adjusted basis & are off 3% from a year ago, leaving more Americans living paycheck to paycheck. Now, 32% of adults said they regularly run out of money between pay periods.
66% of American workers are worse off financially than a year ago due to inflation, report finds
Mortgage demand, which has suffered 4 straight months of declines, fell last week to the lowest level since 1997, as interest rates continued to rise. Homebuyers' demand for mortgages dropped 4% for the week & was 38% lower than the same week one year ago, according to the Mortgage Bankers Association (MBA). Applications to refinance a home loan fell 7% compared with the previous week, in seasonally adjusted terms. Demand was 86% lower than the same week one year ago. The number of borrowers who can benefit from refinancing is at a record low. Interest rates were so low during the first 2 years of the Covid pandemic that the vast majority of borrowers with higher rates already refinanced. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K or less) increased to 6.94% from 6.81%, with points decreasing to 0.95 from 0.97 (including the origination fee) for loans with a 20% down payment. That is the highest rate since 2002 on the MBA's index. “The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market,” Joel Kan, an MBA economist, said. “Residential housing activity ranging from new housing starts to home sales have been on downward trends coinciding with the rise in rates.” As potential homebuyers struggle to afford a house, given higher interest rates & still high home prices, more are now turning to adjustable-rate loans, which offer lower rates. The ARM share last week rose to 12.8% of all applications, which was the highest share since 2008.
Mortgage demand drops to a 25-year low, as interest rates climb
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