-
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 INTERVIEW: US Home Prices Will Drop Double Digits-Calabria
U.S. home prices are on track for a double digit fall as the drop-off in construction and sales will likely help push the economy into recession, former head of the Federal Housing Finance Agency Mark Calabria told MNI.
“Things can get pretty bad. I think we’re going to see pretty significant price declines, certainly in real terms in the double digits,” he said in an interview. “It’s kind of unprecedented to go through a big contraction in the housing market and to go through a fairly tough interest rate environment and not see a pullback.”
Calabria, also former chief economist for the U.S. Vice President, said how bad things get for housing also depends on the resilience of a job market that has held up but could fray under restrictive monetary policy. “It’s hard to see jobs numbers continuing the way they have,” he said.
“We are probably in the second, third inning of a housing correction. We’ve seen volumes in sales and construction fall off a cliff but prices really truly haven’t adjusted yet,” said Calabria, now at the CATO Institute. “The wild card will be the labor market, if we start to see construction job losses in a big way.”
Housing prices have fallen for seven straight months but remain up 2.5% from a year ago, according to the S&P CoreLogic Case-Shiller Home Price index.
BANK TROUBLES TO LINGER
Financial turmoil triggered by the collapse of regional lenders like Silicon Valley Bank and Signature Bank is likely not over, Calabria said, although risks of a systemwide breakdown remain modest.
“Given that community banks really are the biggest exposure to commercial real estate and multifamily, I have to believe you could have a significant number of community banks fail. That said, it’s not inherently systemic,” said Calabria. As FHFA chief he laid groundwork for a removal of Fannie Mae and Freddie Mac from government conservatorship.
Even the biggest banks aren't immune from potential risks, he said, evidenced by the recent downfall of Credit Suisse.
“The banks are still pretty highly leveraged. Risk-based capital numbers are higher but capital looks higher mostly because banks have shifted into low-risk weight assets, not because they have a lot more capital,” Calabria said.
“I don’t want to say this means we're going to have some systemic failure, but I think there are more vulnerabilities in the banking system than we recognize.”
NO FED PIVOT
Fed Chair Jerome Powell seems intent on raising interest rates a bit further to attack high inflation, Calabria said. Financial turbulence will discourage how much further policymakers go rather than forcing a shift to rate cuts, he said.
After a year that saw the fed funds rate jump from effectively zero to 4.75-5%, Calabria thinks the Fed will hold rates at the peak for much longer than markets are pricing in. Fed funds futures are now pointing to as many as four rate cuts starting in June.
“In any other environment with the kind of problems you had in Silicon Valley and otherwise, in a normal environment the Fed would be cutting rates already,” he said.
“The fact that they’re not doing that now and are not giving indication that they’re doing it – and even the more dovish members seem to be on board with kind of staying the course for now. I don’t see a lot of evidence that Powell is going to change direction any time soon.”
Powell is very much focused on a legacy that he knows is tied with the inflation rate at the end of his term, Calabria said.
“We’re not at a point yet in my mind where problems in the banking system or the financial system are sufficient to make the Fed change direction. It may make them slow but I don’t see how it makes them change direction yet,” he said.
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.