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Housing Market Tracker: Inventory finally rises

Weekly housing inventory is finally showing some signs of life. Active listings rose by 8,546 and new listing data also grew.

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Can we now say that the housing market‘s spring selling season is finally underway? Since 2020, the seasonal bottom for housing inventory has arrived several months later than normal, making it more complicated to track housing inventory data. Still, we have some promising signs that we might have finally hit the inventory bottom for 2023.

We didn’t see too much volatility in mortgage rates last week, but purchase apps declined in reaction to rates rising two weeks ago.

Here’s a quick rundown of the last week:

  • Active listings rose by 8,546, and new listing data showed some growth.
  • Purchase application data was down 10%, keeping the tradition of higher rates impacting this weekly date negatively intact.
  • Mortgage rates started the week off at 6.61% and ended at 6.66%, so a calm week on the rate front.

Weekly housing inventory

Looking at the Altos Research data from two weeks ago, the first thing that popped to my mind when active listings fell and new listing data fell was that we could have had an Easter Holiday impact at that time. If that is the case, then this week’s gain in active inventory and new listings needs to be taken with a grain of salt until we get next week’s data.

My bias is wanting to see active and new listings data grow, so I have to check myself when I see positive housing inventory data that might need more confirmation.

Since 2020, the seasonal inventory bump has happened later than usual — not until March or April. I went over the reasons for this in the Housing Wire Daily podcast in February. In addition to the fact that housing inventory since 2020 has been working at all-time lows, purchase application data growth late in the year has pushed out the seasonal bottom for the following year.

I hope the seasonal bottom was two weeks ago. It’s springtime and we have always had a traditional spring increase in housing inventory — it would not be a healthy sign if we didn’t get active listings to grow now.

  • Weekly inventory change (April 14-21): Inventory rose from 405,468 to 414,010
  • Same week last year (April 15-April 22): Inventory rose from 267,459 to 271,510
  • The bottom for 2022 was 240,194
  • The peak for 2023 so far is 472,680
  • For context, active listings for this week in 2015: 1,059,330

New listing data hasn’t recovered since last year’s big mortgage rate spike, and we have been trending at all-time lows in 2023. However, for this week, we saw good week-to-week growth and the new listing data for this calendar week isn’t too far off from what we saw in 2022. Again, I am a bit mindful here due to Easter. However, I will take what I can now.

New listings:

  • 2021: 69,025
  • 2022: 60,351
  • 2023: 59,926

For some historical perspective, back when housing inventory levels were normal, here are the weekly new listing numbers for 2015-2017:

  • 2015: 88,972
  • 2016: 95,131
  • 2017: 77,570

As you can see in the chart below, new listing data is highly seasonal, so we don’t have much time left before the seasonal decline in the data line.

image-26

The NAR data going back decades shows how difficult it’s been to get back to anything normal on the active listing side post-2020. In 2007, when sales were down big, total active listings peaked at over 4 million. Back then we had high inventory levels while the unemployment rate was still excellent. It shows what a massive credit bubble we were in back then, but none of that action has been happening for years.

Even though today sales are trending at 2007 levels, we are only at 980,000 total active listings per the last existing home sales report.

image-27

People often ask me why there is such a difference between the NAR data versus the Altos Research inventory data. This link explains the difference and is worth a read.

On the monthly supply for existing homes, I know stock traders and YouTube people are notorious for comparing everything to housing in 2008. Below is the monthly supply of existing homes from 1999-2014, where you can clearly see the growth in monthly supply from 2006-2011. The red line is where NAR believes a balanced market is, at six months of supply. I believe that number is four months. Either way, today the monthly supply of 2.6 months shows how far we are from 2008 housing economics.

image-28

Contrast the chart above — which is NAR monthly supply data from 1999-2014 — with the chart below, which is NAR monthly supply data from 2013-2023. As you can in the chart below, the monthly supply data shows we have no forced selling action in the housing market today, unlike the 2006-2011 period.

image-35

The 10-year yield and mortgage rates

Last week, mortgage rates didn’t move much, even though the jobless claims data is getting softer. Despite the chief economist at The Conference Board stating on CNBC last week that they believe the recession has already started, we didn’t see too much action on the 10-year yield and rates. I presented my six recession red flags model to The Conference Board last year. A lot of my focus on where bond yields and mortgage rates can go is based on where the labor market is heading, so, The Conference Board stating we are starting a recession now is a big deal.  

In my 2023 forecast, I said that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to 5.75% to 7.25% mortgage rates. If the economy gets weaker and we see a noticeable rise in jobless claims, the 10-year yield should go as low as 2.73%, translating to 5.25% mortgage rates.

As you can see in the chart below, we have stayed in the firm economic 10-year yield range 100% of the time. We can also see how hard it’s been for the 10-year yield to break below the 3.37%-3.42% area with any conviction.

image-36

The labor market, while getting somewhat softer recently, hasn’t broken this year yet, so even with all the drama we’ve seen in 2023, the bond market has held within its proper channel, meaning mortgage rates should stay in the range between 5.75%-7.25%.

I am watching jobless claims because the Fed will pivot its language on the economy once jobless claims get above 323,000 on the four-week moving average. However, we are still far from those levels, even though it has risen recently. Last week initial jobless claims increased by 11,000, and the four-week moving average rose to 239,750.

image-30

Purchase application data

Purchase application data has been a bright spot as far as housing market data. In 2022, home sales collapsed in a waterfall fashion. However, starting on Nov. 9, 2022, purchase application data began to improve and that improvement has created stabilization in the sales data in 2023.

image-31

Since Nov. 9, excluding some holiday weeks, we have had 15 positive and six negative purchase application prints. This year, we have had eight positive prints versus six negative prints. This index is very rate-sensitive. For the most part, when mortgage rates have risen this year, we have seen this index fall week to week, and that is what we saw last week as the index was down 10% week to week and down 36% year over year.

As the chart below shows, we have a shallow bar in this data line since the crash in 2022.

image-33

As I have often stressed when I talk about this data line, don’t think of this as the V-shaped recovery we saw during COVID-19, but just stabilization and growth from a low bar. Every year I usually weigh this index from the second week of January to the first week of May — traditionally, after May, volumes always fall.

Now, if the economy gets weaker later in the year and mortgage rates fall at that time, we all need to focus more on purchase application data. The last few years have seen positive purchase application numbers in fall and winter and we can make a case for that happening again if mortgage rates break below 6% this year.

The week ahead: Four housing reports to chew on

On Tuesday, we have the new home sales report, the lagging S&P CoreLogic Case-Shiller home price report, and the FHFA home price index. Of course, we all know the month-to-month pricing data has firmed up as the housing economic story of the second half of 2022 has changed this year. Keep things simple: demand has stabilized and active listings are still historically low.

For the builders, their stocks have been on fire, which has driven some short stock traders mad! However, I want to see what their active monthly supply data looks like now; the key for me is getting monthly supply below 6.5 months. While housing completions are still rising, which is good, we haven’t had growth in housing permits, which is key in getting housing out of the recession.

We also have the pending home sales report on Thursday, which has already had a big bounce from the lows. It gets harder to keep the bounce going if purchase apps don’t show more growth. We also have to remember almost 30% of homes are still bought with cash, so housing demand doesn’t need to be 100% driven by mortgage buyers.

As always, I will keep a close eye on jobless claims and each day can bring out some crazy news that can move the bond market. In time, as we get closer and closer to the debt ceiling, we will address the market concerns and what it could mean for the economy.

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Digital Currency And Gold As Speculative Warnings

Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite. Such isn’t surprising given the evolution…

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Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite. Such isn’t surprising given the evolution of the market into a “casino” following the pandemic, where retail traders have increased their speculative appetites.

“Such is unsurprising, given that retail investors often fall victim to the psychological behavior of the “fear of missing out.” The chart below shows the “dumb money index” versus the S&P 500. Once again, retail investors are very long equities relative to the institutional players ascribed to being the “smart money.””

“The difference between “smart” and “dumb money” investors shows that, more often than not, the “dumb money” invests near market tops and sells near market bottoms.”

Net Smart Dumb Money vs Market

That enthusiasm has increased sharply since last November as stocks surged in hopes that the Federal Reserve would cut interest rates. As noted by Sentiment Trader:

“Over the past 18 weeks, the straight-up rally has moved us to an interesting juncture in the Sentiment Cycle. For the past few weeks, the S&P 500 has demonstrated a high positive correlation to the ‘Enthusiasm’ part of the cycle and a highly negative correlation to the ‘Panic’ phase.”

Investor Enthusiasm

That frenzy to chase the markets, driven by the psychological bias of the “fear of missing out,” has permeated the entirety of the market. As noted in This Is Nuts:”

“Since then, the entire market has surged higher following last week’s earnings report from Nvidia (NVDA). The reason I say “this is nuts” is the assumption that all companies were going to grow earnings and revenue at Nvidia’s rate. There is little doubt about Nvidia’s earnings and revenue growth rates. However, to maintain that growth pace indefinitely, particularly at 32x price-to-sales, means others like AMD and Intel must lose market share.”

Nvidia Price To Sales

Of course, it is not just a speculative frenzy in the markets for stocks, specifically anything related to “artificial intelligence,” but that exuberance has spilled over into gold and cryptocurrencies.

Birds Of A Feather

There are a couple of ways to measure exuberance in the assets. While sentiment measures examine the broad market, technical indicators can reflect exuberance on individual asset levels. However, before we get to our charts, we need a brief explanation of statistics, specifically, standard deviation.

As I discussed in “Revisiting Bob Farrell’s 10 Investing Rules”:

“Like a rubber band that has been stretched too far – it must be relaxed in order to be stretched again. This is exactly the same for stock prices that are anchored to their moving averages. Trends that get overextended in one direction, or another, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average.”

The idea of “stretching the rubber band” can be measured in several ways, but I will limit our discussion this week to Standard Deviation and measuring deviation with “Bollinger Bands.”

“Standard Deviation” is defined as:

“A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of the variance.”

In plain English, this means that the further away from the average that an event occurs, the more unlikely it becomes. As shown below, out of 1000 occurrences, only three will fall outside the area of 3 standard deviations. 95.4% of the time, events will occur within two standard deviations.

Standard Deviation Chart

A second measure of “exuberance” is “relative strength.”

“In technical analysis, the relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can read from 0 to 100.

Traditional interpretation and usage of the RSI are that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.” – Investopedia

With those two measures, let’s look at Nvidia (NVDA), the poster child of speculative momentum trading in the markets. Nvidia trades more than 3 standard deviations above its moving average, and its RSI is 81. The last time this occurred was in July of 2023 when Nvidia consolidated and corrected prices through November.

NVDA chart vs Bollinger Bands

Interestingly, gold also trades well into 3 standard deviation territory with an RSI reading of 75. Given that gold is supposed to be a “safe haven” or “risk off” asset, it is instead getting swept up in the current market exuberance.

Gold vs Bollinger Bands

The same is seen with digital currencies. Given the recent approval of spot, Bitcoin exchange-traded funds (ETFs), the panic bid to buy Bitcoin has pushed the price well into 3 standard deviation territory with an RSI of 73.

Bitcoin vs Bollinger Bands

In other words, the stock market frenzy to “buy anything that is going up” has spread from just a handful of stocks related to artificial intelligence to gold and digital currencies.

It’s All Relative

We can see the correlation between stock market exuberance and gold and digital currency, which has risen since 2015 but accelerated following the post-pandemic, stimulus-fueled market frenzy. Since the market, gold and cryptocurrencies, or Bitcoin for our purposes, have disparate prices, we have rebased the performance to 100 in 2015.

Gold was supposed to be an inflation hedge. Yet, in 2022, gold prices fell as the market declined and inflation surged to 9%. However, as inflation has fallen and the stock market surged, so has gold. Notably, since 2015, gold and the market have moved in a more correlated pattern, which has reduced the hedging effect of gold in portfolios. In other words, during the subsequent market decline, gold will likely track stocks lower, failing to provide its “wealth preservation” status for investors.

SP500 vs Gold

The same goes for cryptocurrencies. Bitcoin is substantially more volatile than gold and tends to ebb and flow with the overall market. As sentiment surges in the S&P 500, Bitcoin and other cryptocurrencies follow suit as speculative appetites increase. Unfortunately, for individuals once again piling into Bitcoin to chase rising prices, if, or when, the market corrects, the decline in cryptocurrencies will likely substantially outpace the decline in market-based equities. This is particularly the case as Wall Street can now short the spot-Bitcoin ETFs, creating additional selling pressure on Bitcoin.

SP500 vs Bitcoin

Just for added measure, here is Bitcoin versus gold.

Gold vs Bitcoin

Not A Recommendation

There are many narratives surrounding the markets, digital currency, and gold. However, in today’s market, more than in previous years, all assets are getting swept up into the investor-feeding frenzy.

Sure, this time could be different. I am only making an observation and not an investment recommendation.

However, from a portfolio management perspective, it will likely pay to remain attentive to the correlated risk between asset classes. If some event causes a reversal in bullish exuberance, cash and bonds may be the only place to hide.

The post Digital Currency And Gold As Speculative Warnings appeared first on RIA.

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Aging at AACR Annual Meeting 2024

BUFFALO, NY- March 11, 2024 – Impact Journals publishes scholarly journals in the biomedical sciences with a focus on all areas of cancer and aging…

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BUFFALO, NY- March 11, 2024 – Impact Journals publishes scholarly journals in the biomedical sciences with a focus on all areas of cancer and aging research. Aging is one of the most prominent journals published by Impact Journals

Credit: Impact Journals

BUFFALO, NY- March 11, 2024 – Impact Journals publishes scholarly journals in the biomedical sciences with a focus on all areas of cancer and aging research. Aging is one of the most prominent journals published by Impact Journals

Impact Journals will be participating as an exhibitor at the American Association for Cancer Research (AACR) Annual Meeting 2024 from April 5-10 at the San Diego Convention Center in San Diego, California. This year, the AACR meeting theme is “Inspiring Science • Fueling Progress • Revolutionizing Care.”

Visit booth #4159 at the AACR Annual Meeting 2024 to connect with members of the Aging team.

About Aging-US:

Aging publishes research papers in all fields of aging research including but not limited, aging from yeast to mammals, cellular senescence, age-related diseases such as cancer and Alzheimer’s diseases and their prevention and treatment, anti-aging strategies and drug development and especially the role of signal transduction pathways such as mTOR in aging and potential approaches to modulate these signaling pathways to extend lifespan. The journal aims to promote treatment of age-related diseases by slowing down aging, validation of anti-aging drugs by treating age-related diseases, prevention of cancer by inhibiting aging. Cancer and COVID-19 are age-related diseases.

Aging is indexed and archived by PubMed/Medline (abbreviated as “Aging (Albany NY)”), PubMed CentralWeb of Science: Science Citation Index Expanded (abbreviated as “Aging‐US” and listed in the Cell Biology and Geriatrics & Gerontology categories), Scopus (abbreviated as “Aging” and listed in the Cell Biology and Aging categories), Biological Abstracts, BIOSIS Previews, EMBASE, META (Chan Zuckerberg Initiative) (2018-2022), and Dimensions (Digital Science).

Please visit our website at www.Aging-US.com​​ and connect with us:

  • Aging X
  • Aging Facebook
  • Aging Instagram
  • Aging YouTube
  • Aging LinkedIn
  • Aging SoundCloud
  • Aging Pinterest
  • Aging Reddit

Click here to subscribe to Aging publication updates.

For media inquiries, please contact media@impactjournals.com.


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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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