Lab Grown Space Rocks? – the current market for rare earths is relatively small, $12-16B which is about the size of gin and the market for permanent magnets is $34B or roughly the size of the global orange juice market. It is almost completely run by China, however, and those components are an important part of many products from electric cars and scooters to air-conditioners. The US used to be a leader in this industry but outsourced it to China in the 80’s due to environmental impact. Recently scientists have discovered how to manufacture Tetrataenite (space rock) in the lab from relatively inexpensive materials which could disrupt the permanent magnet market in 5-8 years.
Mortgage Rates increased again this week as the price of Mortgage Backed Securities (MBS) declined and are back to their downward trend. Rates are up approximately 3.75% from this time last year.
Jobs – 261,000 jobs were created in October, the smallest increase in the last 6 months. The unemployment rate increased from 3.5% to 3.7% with 328,000 job losses. The labor force participation rate is at 62.2%. The U6 all-in unemployment rate, which adds back individuals that ‘want a job’ but haven’t actively looked in the last month, is at 6.8%. Next month’s Job’s Report is anticipated to be weaker as companies such as Stripe, Paypal, Amazon, and Lift are all paused on hiring.
Home Values – declined 0.5% in September but remain up 11.4% on a year over year basis (down from 13.5% on the previous report). This number is expected to vacillate and settle on a year over year increase in the 4% rate which is still very meaningful and in line with historical trends.
Rents declined 0.7% month-over-month but remain up 5.7% year-over-year. Last year was the fastest year of rent growth on record (18%) and this year is expected to be the second fastest.
Fed – as expected the Fed hiked their Fed Funds Rate – the overnight lending rate that banks charge other banks – to 4.75% pushing Prime up to 7.75%. This puts most HELOCs in the 8-9% range. At first the Bond market responded favorably to this hike as the comments made it seem they would be slowing their pace with the anticipated slowdown in inflation. Afterword Fed Chair Jerome Powell said it would be premature to consider pausing and that he would rather risk overdoing it and cut rates in the future. The bond market responded very negatively to these comments.
Mortgage Applications to purchase homes declined 1% last week and are down 41% year over year. Refinances are down 85% year over year.