Q3, Loans Perform, Home Values Still Up

GDP, LNG and Meta’s Q3 – initial Q3 GDP looks strong at 2.6% but economist Scott Horsley explains that much of the GDP gains are due to an increase in international trade fueled by oil & natural gas. When those numbers are stripped out the GDP increase is modest. During Q3 Meta reported lackluster quarterly earnings and it caused their shares to drop another 24% down to $100. One year ago it was at $400. Add revenue is increasingly challenging to generate and Meta is going all in on a Metaverse that has yet to pay dividends. In Europe they are currently paying you to take liquified Natural Gas. When Russia cut the supply line there was a scramble to bring in natural gas, but the infrastructure is set up to receive it through pipelines not via ships in a liquified form. Now that ships have come in they need to offload the supply and are paying folks to take the excess as storage capacity peaked.

Mortgage Rates – improved this week as the price of Mortgage Backed Securities (MBS) increased nicely closing the week outside of their persistent negative pattern. Mortgage rates are up approximately 3.5% from this time last year.

Inflation – the Personal Consumption Expenditures Index (PCE) increased by 0.3% in September and remained at a year over year increase of 6.2% The core rate, which strips out the more volatile food and energy elements, increased by 0.5% in September and is up 5.1% year over year. This is the Fed’s favorite measure of inflation and their target/goal is to see the core PCE at 2%.

Loan Performancethe Core Logic Loan Performance Insights Report showed that only 2.8% of mortgages are 30 days or more delinquent which is near historic lows. Only 0.3% of homes are in Foreclosure proceedings and keep in mind that over 1/3rd of homes are owned outright.

Home Values the Case Shiller Home Price Index declined by 1% in August but remain up 13% from this time last year. Most of the decline comes from major cities such as San Francisco (-4.3%), Seattle (-3.9%), San Diego (-2.8%) , LA (-2.3%) , and Denver (-2.3%). If you remove these overheated cities most markets are relatively flat.

GDP – the initial look showed Q3 GDP at an increase of 2.6% following two negative quarters. Remember that the early look is generally inaccurate.

Mortgage Application volume is down 69% year over year. Purchase applications declined by 2% last month and are down 42% year over year while refinance volume is down 86% year over year.

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