-
Policy
Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM POLICY: -
EM Policy
EM Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM EM POLICY: -
G10 Markets
G10 Markets
Real-time insight on key fixed income and fx markets.
Launch MNI PodcastsFixed IncomeFI Markets AnalysisCentral Bank PreviewsFI PiFixed Income Technical AnalysisUS$ Credit Supply PipelineGilt Week AheadGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance CalendarsEZ/UK Bond Auction CalendarEZ/UK T-bill Auction CalendarUS Treasury Auction CalendarPolitical RiskMNI Political Risk AnalysisMNI Political Risk - US Daily BriefMNI Political Risk - The week AheadElection Previews -
Emerging Markets
Emerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
-
Commodities
-
Credit
Credit
Real time insight of credit markets
-
Data
-
Global Macro
Global Macro
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
Global MacroDM Central Bank PreviewsDM Central Bank ReviewsEM Central Bank PreviewsEM Central Bank ReviewsBalance Sheet AnalysisData AnalysisEurozone DataUK DataUS DataAPAC DataInflation InsightEmployment InsightGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance Calendars EZ/UK Bond Auction Calendar EZ/UK T-bill Auction Calendar US Treasury Auction Calendar Global Macro Weekly -
About Us
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI BRIEF: Beijing To Protect Firms From U.S. Bill - MOFCOM
MNI BRIEF: SNB Cuts Policy Rate By 50 BP To 0.5%
MNI EUROPEAN MARKETS ANALYSIS: ECB Expected To Cut Rates Later
MNI INTERVIEW: Most Of Housing Effectively In Recession-Fannie
Most of the U.S. housing market is effectively in recession as existing home sales languish at their lowest levels since the global financial crisis and the recent spike in long-term Treasury yields puts additional pressure on new home sales, Fannie Mae chief economist Doug Duncan told MNI.
New construction has been one portion of the market where activity remains brisk, but demand has fallen after 10-year Treasury yields surged to 16-year highs.
“It has definitely slowed the sales pace on the new home side. The existing home side was so low that I don’t see it getting much lower,” said Duncan in an interview. “That is totally not normal. That part of the market is clearly in recession.”
U.S. mortgage costs have nearly tripled to around 8% since the Federal Reserve signaled it would be raising interest rates aggressively to combat inflation. That means millions of homeowners who locked in ultralow mortgage rates are unlikely to move any time soon, he said.
Existing home sales account for about 85% of the total U.S. housing market and are now at their weakest levels since 2010, when the economy was still smarting from the aftermath of the housing crisis that led to a global financial crash in 2008.
“I wouldn’t call us back to normal in any way, because it’s not normal that you see 3% mortgage rates for a couple of years creating an unusual lifetime opportunity which has distorted some behaviors that were already under way,” said Duncan.
Not only are baby boomers retiring in the homes they already owned, many Gen-Xers also bought homes when they were making crucial decisions – like where to send their kids to school – that makes them unlikely to move.
“That locked in a whole bunch of additional existing homes, keeping them off the supply side of the market. You’ve got therefore a supply issue much more than is normal on the back of the builders,” he said. “You can see that in the new home sales numbers – the share of first time buyers much higher than normal.”
FED OUTLOOK
Duncan said he thinks the Fed is done raising interest rates but there’s still a chance that high inflation might force it to deliver additional increases.
In addition, he thinks the Fed will keep rates higher for a lot longer than markets are anticipating.
“The Fed is done raising rates but their bias is upward in the event that inflation doesn’t cool to their satisfaction. And we don’t have them cutting rates until the second half of 2024,” he said. “When they ease, they may ease at a slower pace than markets anticipate as well.”
Duncan sees the economy experiencing a mild recession in the first half of 2024, and expects housing activity to start picking up gradually again in the latter half of the year.
He thinks mortgage rates will hover around 4.5%-6% during the next housing cycle, potentially a bit higher.
“Is the rise in rates recently partly an expectation of sustained stronger growth, in which case those rates might run a little higher? Or is it a function of the outsized level of government debt that has to be absorbed, which also could put an upward bias?”
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.