Forbes recently reported that over 50% of Bitcoin trades are fake which is significant as nearly $262B worth of bitcoin is traded daily. The most prevalent scam is called ‘wash trading’ which has been banned on regulated market exchanges in the US since 1936. This ban was enacted in the wake of the Wall Street crash of 1929. Wash trading is a strategy in which the buyer and the seller are on the same side of the trade. Why would you do this? To inflate the popularity/value of an asset. Imagine self-publishing a book, creating 100,000 amazon accounts to buy separate copies of your own book to make it a best seller – boom – new audience! That money you used to buy books goes back into your pocket making the trade a ‘wash.’ Regulation is tough as the government is still working on setting up classification guidelines and the exchanges that execute these types of trades are financially motivated to keep them going as they can charge a ‘gas fee’ and the sites are ranked based on volume.
Mortgage Rates increased again this week as the price of Mortgage Backed Securities (MBS) deteriorated in response to Fed comments on inflation. Rates are up approximately 3.375% from this time last year.
Yield Curve Inversion –the 30 Yr treasury bond yield (3.6%) is now lower than the 7 Yr (3.87%), 2 Yr (4.2%) and the 1 Yr (4.1%). In the chart above you can see areas in red indicate time periods when the 2 Yr yield paid more than the 10 Yr yield. Historically these time periods were followed by economic recessions (grey areas).
Jobs – the number of people filing for unemployment for the first time remained relatively flat week over week.
Single Family Rents – increased by 12.6% year over year in July, down from the previous month’s reading of 13.2%. This means that if July 2021 market rents for a single family home was $2,700 it is now increased to $3,040. Miami saw the largest gain at over 30% year over year increase.
Existing Home Sales – which measures closings on existing homes, declined by 0.4% in August and are down 20% year over year. There is currently 3.2 months of supply available (if sales were to continue at current pace and no more listing were creating inventory would be exhausted after 3.2 months) which is still considered tight as 6 months is considered a balanced market. Additionally only about 40% of inventory is under contract which is higher than a normal market of 25% meaning inventory is tighter than it appears. Average days on market are still low at 16 and First Time home buyers are making up 29% of sales. Foreclosures accounted for 1% of transactions.
Price Reductions have been generating a lot of attention as they are up nearly 3X from the beginning of this year. In 2019 20% of homes were seeing a price reduction. Remember that there is always a percentage of homes that reduce prices and now we are back to a normal territory.
Mortgage Applications – to purchase homes increased by 1% last week and are down 30% year over year. Refinances increased by 10.4% but remain down 83% year over year.
Inflation – we are now at the worse inflationary situation the US has seen in 42 years. Our median age is 38 which means that half of our population has not experienced inflation like this before and ultimately anyone under the age of 55 has not experienced this type of inflationary pressure as kids don’t feel it as much.