<Lets see what the consumers have left.>
I keep daily tracking (yesterday's was UGLY) the W&S reports from the Treasury, and if anything wages are weakening, not firming.
Message 19454428
This indicator managed to stay flat (loosely defined, actually was down 0.4%) in Sept., but that's gone and more. So XMAS money isn't coming from wages despite what Snow hypes, and that's just the facts. Where's the beef?
On the refi front the mortgage rates have sort of stayed within 10 BP of 5.9%. The refi index has been running thusly. Not enough for serious XMAS money when wages are actually falling:
9-12: 2884
9-19: 2439
9-26: 2507
10-3: 3005 (when mortgages dipped briefly to 5.67%)
10-10: 2340
10-17: 2204
10-24: 2312
So it looks like we are settling into that low 2000 area at 5.9% rates. Will 6.0% take us to the 2000 line?
The indicator I use to determine how much heroin is being provided to inflate housing prices (the bloated collateral to base equity extraction on) is the mortgage loan app index. That's the one that's stayed pretty goosed up until the last three weeks. But now it too is rolling over. I feel if this index gets down below 350 and stays for a quarter, then the bloom will quickly start to come off the housing bubble. Since you need huge credit induced demand, underlying prices (collateral) will soften, and new construction activity will abate. Obviously, the 400 plus numbers from April-Sept has put a lot of activity into the pipeline, that's showing up in the reported numbers. But housing is getting to be very old news and is quite long in the tooth (*), and will start retreating going forward, unless they can get rates down in a so called economic upturn environment (**). That will be big, and should be closely watched. I'll update these tomorrow. I feel the analytical methodology is solid with this approach.
9-5: 409
9-12: 432
9-19: 402
9-26: 398
10-3: 441 (the brief 5.67% rate reprieve)
10-10: 359
10-17: 386
10-24: 364
A month old chart on these indexes:
see link to Oct.8 northerntrust.com
(*) see Contrary Investor's 10/21 issue, page 11's revealing chart of the most extended upcycle in a half a century. The cyclicality of housing is an eye opener too. People apparently think that's been abolished? that's the problem with prolonged low interest rate environments: moral hazard.
(**) what happens tomorrow when the UK raises rates to cool their runaway housing bubble? Australia and others will soon follow. The Fed may be the most irresponsible central bank in the world, but they aren't the only one.
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