The Most Splendid Housing Bubbles in America, May Update: Mania at the Eve of Holy-Moly Mortgage Rates

Link: https://wolfstreet.com/2022/05/31/the-most-splendid-housing-bubbles-in-america-may-update-mania-at-the-eve-of-holy-moly-mortgage-rates/

Graphic:

Excerpt:

The home price data released today by the S&P CoreLogic Home Price Index represents the three-month average of closed home sales that were entered into public records in January, February, and March, reflecting deals that were agreed to a few weeks earlier, roughly in December, January, and February, funded with mortgages that were pre-approved before then, and had rate locks from when they were pre-approved.

These rate locks were based on interest rates in effect roughly from November into February, when the average 30-year fixed rate ranged from 3.2% to 4.2%, with the majority of the time being below 3.8% (green box in the chart). These are the rates that funded home purchases reflected in today’s home price index.

There have already been numerous indicators that the markets for existing home sales and new home sales have run into difficulties at the current holy-moly mortgage rates of over 5%, including sharply lower sales volume and rising inventories in existing homes and falling sales and record spiking inventories in new houses.

Author(s): Wolf Richter

Publication Date: 31 May 2022

Publication Site: Wolf Street

Applications for New Businesses Have a Double-WTF Moment

Graphic:

Excerpt:

I don’t remember anything that has ever drawn so much fraud to itself, like an industrial magnet attracting ferrous scrap metal, as the federal government programs to support the unemployed and struggling businesses.

When it comes to this twin-spike in business applications, the forgivable Payroll Protection Program (PPP) loans and Economic Injury Disaster loans come to mind immediately – especially since the spike into July, and then the renewed spike this year, are timed with the two PPP generations.

Businesses that applied for the PPP loans had to submit documentation of wages paid over specified periods. The first-generation PPP program ended on August 8, 2020. The second-generation PPP program started this year and remains open.

The dates were structured so that it would be impossible by honest people to create a business entity after the announcement, pay wages for long enough to qualify for a PPP loan, and then apply for a PPP loan. Applicants had to submit historical wage documentation to the lenders whose job it was to check all this out.

Author(s): Wolf Richter

Publication Date: 16 April 2021

Publication Site: Wolf Street