UMich Buying Conditions For Housing PLUNGES To 63 Due To Outrageous Home Price Growth & Lessons From The Yellen Pivot

Confounded Interest ^ | 12/09/2021 | Anthony B. Sanders

[Browns Ultra Fan]

Just look at this chart of the University of Michigan Buying Conditions For Houses index. It was positive (meaning above 100) until shortly after COVID struck and The Federal Reserve rode to the rescue. National home price growth was already at 4.57% YoY in March 2020, then ballooned to 19.51% YoY at the last reading.

We will soon find out if The Federal Reserve will announce a rate hike or taper news. They are likely to confirm tapering, particularly if they believe that tapering won’t roil markets. After all, then Fed Chair Janet Yellen and the FOMC decided to let the Fed’s balance sheet taper (white line) while, at the same time, increasing the Fed’s target rate (yellow line). The S&P 500 index rose 9.5% over the taper/rate increase period of 12/29/2017 to 8/30/2019.

But since Stimulypto (2/28/2020 to 11/30/2021), the Fed’s balance sheet doubled+ from $4,158,637 to $8,681,771. And The Fed Funds Target Rate (UB) immediately fell from 1.75% in February 2020 to 0.25% in March 2020 … and has stayed there ever since. The S&P 500 index rose 54.6% over this Stimulypto period.

But The Fed’s upcoming decision on December 15, 2021 may be a Yellen-pivot (taper balance sheet, but raise The Fed Funds Target rate). But, then again, maybe not. The Fed is getting really bad about forward guidance and choose instead to surprise us. Hence, this is why an a-political rule is preferred (such as the Taylor Rule).

Unfortunately, the Taylor Rule infers a Fed Funds Target rate of 15.50% (using CPI YoY running at 6.20% YoY. If The Fed raises their target rate by 25-50 basis points at the December 15th meeting, color me surprised.

So, the Powell Pivot may just be the Yellen Pivot after all.

[Browns Ultra Fan]

Notice that The Fed only raises rates one under Obama and haven't raised rates under Commie Joe. But raised the target rate 8 times after Trump was elected.

[Lockbox]

Thanks for posting this interesting website.

[UB355]

White line, Yellow line, what are you talking about?

[griswold3]

Lumber futures surged to limit 45 to (1024.36 ). From low of 531 just 14 days ago
1700 earlier this year June 14 hit 1000 then went lower to Nov low 531
Meaning a Nov 15 lumber car at $58,000 to Today $113,000/car

[catnipman]

“But raised the target rate 8 times after Trump was elected.”

good for savers and good for keeping inflation under control, but theoretically bad for bonds, stocks, and dividend-yielding stocks, but stock market soared under Trump due to economic fundamentals anyway ...

[catnipman]

massive inflation in lumber prices plus massive inflation of all other materials going into housing construction, including appliances, is why existing housing prices have gone through the roof because existing house prices follow along with prices of new housing ...

but we ain’t seen nutting yet: just wait until trillions in printed money going into purchasing of construction materials ostensibly for “infrastructure” compete in the private sector for said same materials ...

[griswold3]

Forgot about this little nugget
11/29/21
“The U.S. Commerce Department moved forward with an administrative review to double the tariffs on Canadian lumber shipments into the U.S. from 9% to 17.9”
Let’s Go, Brandon.