The Warshing Machine Vs. Bessent's Bond Bumps: Let's dive in!
....but let's start off with the basic bits: MBA applications were down .4% for the week as rates reported in at 2BPS down for the week, but what a roller coaster they had getting there.
Jobless claims came in down 6K for the week, just below the consensus and insured unemployment at 1.2%.
Builders were the bigger source of drama: Builders aren't building because buyers aren't buying, but bigguns are buying builders (Beazer!). Beazer announced their acceptance by Dream Finders Homes, so atop of Berkshire's large purchase it's evident that the biggest players think now is a good time to buy builders.
NAHB reported that HMI was up to 35, at least a point in the positive direction and current sales conditions were up 2 points. The bad news is that Housing Starts were down 12.4% for the month, and 13% for the year. SFRs were only down 9.9%, with Multifamily taking the bigger hit at a 15.6% drop. Permits were up 5%, lining up with NAHB's increased optimism.
Resale didn't do as well, with Pending Home Sales coming in down 2.3% for July. That's across all regions, even the northeast! That lines up with Redfin showing listings up 1.3% for the week but sales down 1.4% for the week.
Zillow ran some interesting math: The average person now takes 8.5 years to save up the basic 20% down payment. The typical renter is now paying about $2K per month, and needs about $78K household income to comfortably afford that. The typical homeowner, in contrast, now needs $100K to afford it.
Now, Bessent Vs Warsh. The Fed minutes showed that Warsh would like to reduce the Fed meetings from 8 meetings to 6. We had 3 dissenters, again, but more commentary about a need to increase rates if inflation stays high.
Inflation? Likely to continue. Oil is still at $90/barrel, 10 ships a day versus 130 pre-Iran-situationship, and no talks in sight. Warsh still commented that the bond yields were letting the market correct things versus a need for Fed intervention and hikes.
Bessent bumped bonds: Bonds were up to a 19 year high on Monday ,and so Bessent directed the Treasury to buy more up until November. The bond market reacted immediately, but that also takes out one more of Warsh's cards to argue against cutting rates.