Top of the morning, popular markets. Phil Rosen here, writing to you from a wet and glistening New York.
Growing up, when I heard adults talk about “refinancing”, it seemed terribly boring. But since covering Wall Street, I’ve learned that there is real drama in the real estate markets.
Today I’m breaking down what’s going on with US mortgages and why you should care.
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1. Mortgage demand is at its lowest level in 22 years. This means that the last time Americans were this discouraged by the housing marketGeorge W. Bush was starting his first term and a gallon of gasoline cost about $1.50.
According to the Mortgage Bankers Association, demand for mortgages fell 6.3% last week as high prices strangled US residential real estate. Which does three consecutive weeks of declineand suggests more downside to come.
“Buying activity has declined for both conventional and government loans as the weakening economic outlook, high inflation and persistent affordability challenges are impacting buyer demand,” the MBA economic forecaster said.
There is a lot at stake here. For one thing, mortgage rates have roughly doubled this year, from around 3% in January to nearly 6% this month.
But the prices aren’t going down, at least not yet. Despite the drop in sales, last month marked another all-time high for median house prices.
The MBA refinance index, meanwhile, has fallen 4% over the past week and 80% in the last year.
And runaway inflation hasn’t helped. High prices and soaring rates are weighing on buyer sentiment. In turn, home builders are more pessimistic about the market than at any time since the start of the pandemic.
Moody’s chief economist Mark Zandi even warned the housing market is about to enter a “deep freeze”, because first-time home buyers cannot afford to buy.
The conclusion of all this is that the housing market has certainly calmed down, but not enough for buyers to deal with higher mortgage rates on top of prices that still seem to be climbing.
In other news:
2. US equity futures traded mixed early Thursday. Meanwhile, oil fell 4% and European stocks fell as investors brace for the European Central Bank’s meeting later in the day, with the bank set to raise interest rates for the first time in more than a decade. Here are the latest market moves.
3. On the role: Philip Morris Inc., Blackstone, and more, all reports. Also, look for the U.S. Department of Labor’s weekly Unemployment Insurance Claims Report.
4. The manager of the best-performing large-cap mutual fund of 2022 explained how he succeeded in a bear market through dividend investing. The portfolio expert talked about the philosophy and strategy he uses to secure earnings. These are his eight favorite stock market opportunities right now.
5. The Fed will focus on controlling inflation as strength in the labor market still points to lower recession risk, Bank of America analysts said Wednesday. In a note to clients, BofA said strong jobs data suggests the economy has stable underlying momentum, reducing downside risk. Here’s what you want to know.
6. Russia resumes fuel flows through the Nord Stream 1 gas pipeline. The pipeline was shut down for a 10-day maintenance program and it was feared that operations would not resume. But the return of flows has temporarily allayed fears of an immediate energy crisis in Europe.
7. Veteran investor Jeremy Grantham predicted weak earnings would weigh on stocks. Moreover, the market historian and co-founder of GMO said that the fall in asset prices could be prolonged – and added that the S&P 500 could plunge another 25%.
8. Morningstar’s chief market strategist said these stocks offer safe and stable gains during the bear market. Defensive stocks have been neglected in recent months, but Dave Sekera said now is the time to invest in the asset class to secure profits. See his 9 picks.
9. Crypto billionaire Sam Bankman-Fried said the crypto market may have bottomed out. He explained why the next phase of digital assets will be about consumer-friendly apps and institutional money — and the developments he’s most excited about.
10. Tesla shares rose after the electric vehicle giant reported earnings after the bell on Wednesday. Second-quarter profits beat Wall Street estimates, despite the closure of a factory in China. Tesla said it sold 75% of its bitcoin holdings, after spending $1.5 billion on cryptocurrency in 2021. See how the stock is moving this morning.