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🏠  HOUSING  🏡

Waning Investor Demand

• Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market - Will Parker for WSJ 11/22/22

• Our November 10 CIC Info Bytes highlighted the fact that a significant majority of new home sales come with covenants attached.  Combine this with accommodating monetary policy (“easy money”) available to obtain loans at rock-bottom interest rates available for a majority of the past decade (ended by 2022’s FOMC’s mega rate-hikes prompted by four-decade high inflation) and the result is the “investor mania” that has scooped up homes in associations across the United States.

• You are no doubt familiar with the reaction to the aforementioned chain of events: common interest communities desperate to implement leasing restrictions.  Will these pleas retreat in lock step with less investor activity?  Only time will tell.

As Rates Rise, More People Choose to Rent Single-Family Homes

• Increasingly, U.S. consumers faced with inflation and the high price of homes are pressing the pause button on home buying. The rate on an average 30-year fixed mortgage is now 6.61%, more than double what it was in October 2021, according to housing-finance agency Freddie Mac. As a result, single-family home rentals, or SFRs, are now a hot area in the real-estate market. - Lori Ioannou for WSJ 11/27/22

• As Mortgage Rates Rise, More People Choose to Rent Single-Family Homes

Conforming Loan Limits Will Exceed $1 Million

• Fannie Mac and Freddie Mac are government sponsored enterprises (GSEs) that support the US housing market by providing guaranteed “conforming loans” for most of the mortgages in the United States.  Conforming loan limits are increasing to $726,200 for most areas and up to $1,089,300 for certain high-cost markets (cities).  This should make it easier for more people to secure home loans

• WSJ: U.S. Government to Backstop Mortgages Above $1 Million in High-Cost Areas

• CNN: Mortgage giants raise loan limits to a record level for 2023 

Impending Doom for Home Prices?

Read it!: "Collapse" in home prices is coming, experts say - Matt Phillips | Axios | 11/28/22 

💰 FISCAL RESPONSIBILITY 💰

Profound Financial & Economic Shift

• Top economist Mohamed El-Erian says we’re not just headed for another recession, but a ‘profound economic and financial shift’ - Alena Botros for Yahoo Finance 11/23/22

• “The world isn’t just teetering on the brink of another recession … It is in the midst of a profound economic and financial shift.” - Mohamed El-Erian

The first transformational trend, El-Erian says, is the shift from insufficient demand to insufficient supply. The second is the end of boundless liquidity from central banks. And the third is the growing fragility of financial markets.

These help to explain “many of the unusual economic developments of the last few years,” he wrote, and looking forward he sees even more uncertainty as economic shocks “grow more frequent and more violent.” Analysts aren’t waking up to this yet, he added.

50/50 Recession Risk

• As some have since telegraphed in public, US Federal Reserve officials concluded in private earlier this month that they should soon moderate the pace of interest-rate increases, likely leaning toward a 50 basis-point hike in December. And while some economic observers have predicted a recession with near certainty for months, Fed staff told officials during a Nov. 1-2 gathering that their assessment of the risk is about 50-50. - David E. Rovella for Bloomberg Evening Briefing 11/23/22

Stagflation Risk - Bloomberg 5 Things to Start Your Day 11/28/22

• Stagflation is the key risk for the global economy in 2023, according to investors who said hopes of a rally in markets are premature following this year’s brutal selloff. Almost half of the 388 respondents to the latest MLIV Pulse survey said a scenario where growth continues to slow while inflation remains elevated will dominate globally next year. The second most likely outcome is deflationary recession, while an economic recovery with high inflation is seen as least probable…

• From Joe Wiesenthal: Everyone is still talking about rate hikes. But what people are thinking about, more and more, is rate cuts. This is evidenced by the steepest inversion of the 2-10 spread in decades. The more inverted the curve, the more it implies that in the future the Fed will be lowering rates below where they are in the short term. In other words, as Bloomberg's Michael Mackenzie notes, traders are making a big bet on a forthcoming recession. 

This could get treacherous. While "pivot" talk has picked up, inflation is still extremely high. There are reasons to hope or believe that inflation has peaked, but not a ton of hard evidence yet. The fear, of course, is that economic activity starts turning lower before price gains really start to moderate, putting the Fed in a bind.

It Pays to Procrastinate…

• Want to learn more about I-Bonds?  Read: It Pays to Procrastinate: The New 6.89% I bonds Will Beat the Old 9.62% Bonds in Just 4 Years. 

- Brian J. O’Connor for Yahoo Finance 11/28/22