The Daily Tearsheet

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are up small.

After the Supreme Court blocked Trump’s ability to impose tariffs without Congressional approval in February, the administration imposed new temporary tariffs under a different legal rubric. Those tariffs expire today, although it looks like the Admin will impose 10%-12% tariffs on everybody using the justification of cracking down on forced labor. Unfortunately, at least for those who want lower interest rates, this will probably withstand legal scrutiny.

The MBA released their latest mortgage forecast. They took down their estimate for 2026 origination from $2.17 trillion to $2.16 trillion. 2027 and 2028 estimates were unchanged. They still see mortgage rates at 6.5% through the forecast period.

The Chicago Fed National Activity Index improved in June, rising from -0.19 to -0.02. Consumption and sales growth were positive contributors while employment and production indicators were a drag. The CFNAI is sort of a meta-index of some 79 different economic indicators.

One of the most visible issues with housing affordability has been the paucity of starter homes. Realtor.com estimates that there are about 300,000 fewer starter homes on the market than there were pre-pandemic. Over the past 7 years, the typical starter home price has risen from $256,000 to $344,000. The Northeast has the biggest shortage of starter homes, while the South is in better shape.

As we heard from D.R. Horton, starter homes are where the action is for the builders. Typically an existing home trades at a discount to a new home given depreciation, etc. The median price of a new home is more or less the same as an existing home these days which is a rarity. Much of this represents product mix as builders deemphasize luxury and focus on smaller, more affordable homes. Historically, a new home has had a 20% premium.

One thing to keep in mind is that many of the big builders have mortgage origination arms which can offer a much lower mortgage rate than a typical banker. Builders have been “promotional” in order to sell inventory and promotion means price cuts. Builders are loath to cut sales prices because that feeds into the comps which will lower the value of the other homes in the same development. Instead, they offer free upgrades (better appliances etc) or they can offer a sub-market rate mortgage to sweeten the deal. First time homebuyers should take this into account as it can make a big difference in the monthly payment.

Homebuilder NVR reported earnings per share decreased 23% on a YOY basis. Revenues declined 16%. That said new orders increased. NVR has more exposure to luxury than most publicly-traded builders, so this area is struggling. The rate lock-in effect is probably playing a big part here, as move-up buyers are not only trading up for a more expensive home, they are swapping a 3.5% rate for one much higher.

The homebuilders have been trading in a range as we await lower interest rates:

Stocks are lower this morning after the Houthis attack shipping in the Red Sea. Bonds and MBS are down. Market bellwethers Tesla and Google are weighing on the market.

The European Central Bank decided to keep rates unchanged but signaled a September rate hike is a possibility.

The Houthis are claiming they attacked two Saudi tankers in the Red Sea, although this hasn’t been confirmed. The UK reported that a projectile hit one of the tankers, causing a fire but no casualties. Meanwhile the US continued to hit targets in Iran and Trump is threatening to hit Iranian power plants and bridges if Iran continues to attack shipping in the Strait of Hormuz.

The increase in oil prices has the Fed Funds futures bumping up their forecast for a rate hike next week. The futures are now predicting a 36% chance of a 25 basis point increase. The December futures now see 2 rate hikes as the most likely outcome this year.

Homebuilder Pulte reported second quarter earnings of $2.48 per share compared to $3.03 in the same quarter a year ago. Revenues fell 11% due to a 8% drop in unit volumes and a 3% decline in ASPs. “Overall, market conditions remain highly competitive as macroeconomic uncertainty, volatile interest rates and strained affordability weigh on housing demand, but there are early signs that conditions may be stabilizing in select geographies around the country. Within this operating environment, we continue to execute focused, tactical adjustments as we work to balance price and pace within each community in support of delivering high returns across the enterprise.”

Gross margins increased 60 basis points sequentially but fell 200 on a YOY basis. New orders increased 6% overall and 5% for the first time homebuyer. On the earnings conference call, the company said that we are seeing stabilization and improvement in many MSAs that had been struggling:

Yes, John, we highlighted some of it in the prepared remarks. In all of our 5 regions that we report on, we saw positive year-over-year growth in 4 of them, the West being the one that I think is probably still the softest. Specific to the 4 where we saw some stabilization and I think some positive signs, I would definitely call out some of the Midwest markets. We continue to see strength there. We’re also seeing some favorable trends out of the Southeast markets.

We particularly like what’s going on in the coastal Carolinas markets in Greenville. And then look, I’ve got to highlight Florida again. Florida was up 19% year-over-year and a continuation of a theme that we’ve talked about for the last couple of calls, we’ve got great operating teams there and good assets, and we’re seeing nice performance there. I’m also encouraged by what we’re starting to see in Texas. I’m not ready to declare victory there, but the fact that we saw positive year-over-year orders, I think, is a good sign.

Stocks are lower this morning as oil prices climb. Bonds and MBS are down.

D.R. Horton reported better-than-expected earnings. Revenues were more or less flat on a YOY basis, but margins compressed which drove down earnings by 12%. David Auld, Executive Chairman said: “Our teams are managing each community with discipline, balancing pace, price, incentives and inventory levels to maximize returns. Affordability constraints and cautious consumer sentiment continue to impact new home demand, and we expect sales incentives to remain elevated during the fourth quarter, with incentive levels dependent on demand, mortgage rates and other market conditions.

D.R. Horton focuses primarily on entry-level homes so they are the best read on the state of the first time homebuyer. The first time homebuyer accounted for 64% of sales and their typical buyer was 40, with a 90% LTV and 721 FICO with an income of around $95,000. Given their average selling price was $362k a new D.R. Horton home compares favorably to the NAR existing home sale price of $441k.

Gross margins fell as higher lot costs were offset by lower building materials costs.

Mortgage REIT Annaly reported earnings of $1.06 per share and a 2% increase in book value per share. They also hiked their dividend. Fundings were up 38% YOY and the portfolio. They increased the multiple on the MSR book to 5.97x.

It looks like they have slowed their investment in NQM and are allocating more resources to agency MBS.

As the ROAD legislation takes effect, institutional investors are paring down their portfolio of rental properties. Since Jan 1, a net 3,180 homes have been sold by the big institutional investors. The total number of homes to be sold is 589,000. To put that into perspective, existing home sales is running at a 4.1 million unit clip, so this represents under 2 month’s worth of sales. The 3,180 units sold during the first half of the year is about 0.16% of sales.

The institutional investor ban was always a “feel-good” measure that allows politicians to pretend they are doing something to help affordability. The idea that institutional investors are crowding out other buyers was always nonsense. There wasn’t any resistance to the ban because most of these institutional investors bought their portfolios over a decade ago and have been net sellers anyway. The easy money has been made.

Mortgage applications increased 1.9% last week as purchases increased 6% and refis fell 2%. “Mortgage rates reached another high point last week, with the 30-year conforming rate now at 6.69%, its highest level since last August,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “However, purchase volume increased modestly for the week. Growing home inventory in many markets is supporting more purchase activity. Incoming data showed that inflation dropped in June, but with oil prices spiking again, that improvement seems unlikely to continue in July data, and mortgage rates are likely to remain higher as a result.”

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are down as tensions continue in the Persian Gulf, driving oil prices higher.

Iranian-allied Houthi rebels in Yemen are threatening to prevent Saudi Arabia from exporting oil through the Red Sea. Saudi Arabia has diverted production to the Red Sea in response to Iran’s activity in the Strait of Hormuz. We’ll see if they are able to prevent the transit of millions of barrels of oil per day through the Red Sea. I suppose if they do manage to block the southern Strait, Saudi Arabia can just sent the oil through the Suez Canal.

The Index of Leading Economic Indicators declined in June, according to the Conference Board. Financial indicators (yield spread, stock market returns) drove the index higher, while consumer expectations were a drag. Declining building permits also contributed to the decrease.

“In June, the Leading Economic Index (LEI) for the US declined and partially reversed gains registered in May and April,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “While some components of the LEI were little changed, the largest positive contribution from the yield spread, followed by marginal positive input from the remaining financial components, were not enough to offset weak consumer expectations and a drop in building permits across most of its categories. Despite the recent decline, the LEI’s six- and twelve-month growth rates, while negative, were stable. Consumer spending is weakening, but strong business investment related to AI is expected to support economic activity while inflation continues to improve. The Conference Board raised its forecast from 1.8% to 1.9% y/y GDP growth for 2026.”

Mortgage REIT AGNC reported better-than-expected earnings as MBS spreads narrowed. During the quarter, MBS spreads to Treasuries narrowed by 17 basis points. US Treasury yields rose during the quarter, but mortgage rates more or less stayed the same.

AGNC’s earnings demonstrate that tightening MBS spreads have been a support for the mortgage market despite higher Treasury rates. What is driving the narrowing? Declining bond market volatility. After spiking early in the quarter due to the situation in Iran, bond market volatility (measured by the ICE / BAML MOVE Index) has fallen back to pre-war levels.

Stocks are higher this morning despite higher rates and oil prices. Bonds and MBS are down.

The week ahead is relatively data-light with only new home sales and leading indicators on the agenda. We are in the quiet period ahead of the Fed’s July meeting, so there won’t be any Fed speakers either.

Earnings season has begun and next week we will hear from agency mortgage REITs AGNC Investment and Annaly, homebuilders D.R. Horton, PulteGroup, NVR and Taylor Morrison, Western Alliance, and market bellwethers Google and Tesla.

Consumer sentiment moved sharply higher in July, according to the University of Michigan Consumer Sentiment Survey. The index rose 10% to reach the highest level since February. Declining gasoline costs were a big reason for the move.

“This month’s rise in sentiment was pervasive across the population, seen across groups by age, income, wealth, and political party. Particularly strong increases were seen among consumers without a bachelor’s degree. However, with prices remaining frustratingly high, consumers are hardly ebullient about the economy; sentiment is down 12% from a year ago. Thus, sentiment’s upward momentum may prove difficult to sustain if recent declines in gas prices continue to reverse course. Interviews for this release spanned June 23 to July 13, with more than 70% completed before the resumption of US strikes against Iran on July 7 and the subsequent increase in gas prices.”

Near-term inflationary expectations declined but remain elevated. Longer-term inflationary expectations were flat.

Industrial production rose 0.1% last month, while manufacturing production was flat. Capacity Utilization fell.

Federal Reserve Vice Chairman Philip Jefferson spoke at Stanford on Friday. He made some interesting points regarding AI and its potential effects on interest rates. The most surprising was his view that AI would increase r-star (or the long-term rate of interest). You would think AI would drive up productivity, thus lowering inflationary pressures and allowing r-star to fall. Productivity increases allow the speed limit of the economy to increase (basically increases non-inflationary potential output) so therefore it should be bearish for inflation and also allow lower rates.

A related consideration is the potential effect of AI on the longer-run neutral rate of interest. Often called r*, this is the real interest rate consistent with the economy operating at its full potential once all shocks have dissipated. If AI leads to permanently higher levels of productivity growth, it may increase firms’ desire to invest and, hence, their demand for funding. Higher productivity growth may also discourage household savings by increasing expected future income. Under these circumstances, to reconcile the increase in investment with reduced savings, r* would likely rise. However, predicting changes in the neutral rate is challenging, given the historically noisy relationship between productivity growth and real interest rates. Furthermore, potential AI-induced increases in inequality could have mitigating effects on r*. High-income households tend to save at higher rates than low-income households. Thus, a rise in income inequality could lead to an increase in the supply of savings, putting downward pressure on the neutral rate.⁶

On monetary policy, he warned about inflation and the potential for higher rates going forward:

At our last meeting, in June, the FOMC decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. This policy stance should continue to support the labor market while allowing inflation to resume its decline toward our 2 percent target as the effects of past tariffs and energy prices pass through completely. That said, in a scenario where actual inflation does not start to cool down soon, I believe that it could be appropriate to reconsider our current policy stance to ensure we fulfill our commitment to deliver price stability.

Stocks are lower this morning as the chip sell-off continues. Bonds and MBS are up.

Housing starts rose 19% MOM and 3.5% YOY to a seasonally adjusted annual average of 1.43 million units. Building permits fell 3% MOM and rose 2.3% YOY to a rate of 1.37 million units.

Homebuilder sentiment remains depressed as affordability concerns persist according to the NAHB Homebuilder Sentiment Index. Sentiment has remained at a low level for 40 consecutive months, the longest streak since 2012. Builders are cutting prices to move the merchandise as is evident in the falling gross margins for the big publicly traded builders. Last month 37% of builders reported price cuts of around 6%.

“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”

“With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” said NAHB Chief Economist Robert Dietz. “Looking ahead, the newly enacted housing law is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local level.”

Dallas Fed President Laurie Logan called for “modestly higher” interest rates to bring down inflation. “I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s dual mandate goals,” Logan said in prepared remarks for a speech in Houston. “Every month of above-target inflation has compounded the strain on Americans’ budgets. … One month of relief is not enough. It is time to finish the job of restoring price stability,” she said. “In monetary policy as in hockey, you have to skate where the puck is going. Unfortunately, inflation does not appear to be headed sustainably back all the way to 2 percent.”

Pending home sales fell 5.4% last month. All regions fell on the MOM basis, but the Northeast and Midwest rose annually. Affordability issues continue to weigh on the housing market.

“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” said NAR Chief Economist Dr. Lawrence Yun. “However, job gains can help support housing demand.”

“It is worth emphasizing that it is closing activity, not contract signings, that generates economic impact. Pending contracts are only suggestive of upcoming closed deals and do not align perfectly, due to fallout rates and contract contingencies.”

Homebuyer affordability slipped again, as high mortgage rates negatively impact buyers. The National Association of Realtors measures affordability by calculating the income required to afford the median home. In this case, the median home price is $446k and the income required to afford it is $109,500.

Affordability has improved on a YOY basis, but the monthly numbers have been declining as the war in Iran pushes up bond yields and mortgage rates.

Stocks are lower this morning as chip stocks sell off. Bonds and MBS are up.

Inflation at the wholesale level fell 0.3% MOM and rose 5.5% YOY. The Producer Price Index excluding food and energy rose 0.2% MOM and 4.7% YOY. These numbers were below Street expectations. Goods inflation fell 1.4% MOM and rose 7.9% YOY. Services inflation rose 0.2% MOM and 4.6% YOY.

The ceasefire-driven decline in energy prices accounted for the monthly drop in the index. Given that hostilities are back on the table, the Fed is unlikely to be dissuaded from its tightening bias. The July Fed Funds futures backed off July hike bets slightly, which are now around 10%.

In terms of housing, construction rose 3.5% YOY. Lumber and plywood were up 6.1% and 8.2% respectively.

Retail Sales increased 0.2% MOM and 6.7% YOY, according to the Census Bureau. If you strip out vehicles and gas, they rose 0.4% MOM and 5.7% YOY. These numbers are not adjusted for inflation, so it means that retail sales were up about 3% YOY in real terms.

In other economic news, initial jobless claims slipped to 208k last week and the Philly Fed index spiked higher.

Economic activity increased at a “slight to moderate” pace in most districts over the past 6 weeks, according to the Fed’s Beige Book. Consumer spending edged up, while employment conditions deteriorated slightly. Skilled labor is still hard to find for many employers.

Price increased moderately during the period, although growth rates were similar to or slower than the previous period. The report noted that customers were becoming more sensitive to price hikes and many were unable to pass on input price increases fully to their customers.

Mortgage credit availability decreased in June, according to the MBA. Lenders saw less activity in government loans, while non-QM continued to increase. “Mortgage credit availability decreased in June to its lowest level since December 2025,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “A contraction in government loan programs accounted for a significant share of the June decrease, as lenders pulled back on FHA and VA streamline refinance loan programs, particularly those for high LTV and low credit score borrowers. The jumbo index increased slightly, supported by new non-QM programs, which is consistent with other market data showing a larger non-QM share of originations.”

Stocks are flattish this morning as earnings continue to come in. Bonds and MBS are down.

Fed Chairman Kevin Warsh participated in Day 1 of the Fed’s semiannual Humphrey-Hawkins testimony. Here are his prepared remarks.

The members of our Committee have no tolerance for persistently elevated inflation. And we share a resolute commitment to restoring price stability. This was the focus of our June meeting, at which we decided to hold the target range for the federal funds rate at 3-1/2 to 3-3/4 percent.

Naturally, our work at the Fed demands a proper reading on economic conditions. As you see in our Monetary Policy Report, economic activity is expanding at a solid pace, showing resilience in the face of recent developments. Household consumption growth is moderate. Manufacturing output has moved up steadily this year. The housing sector, however, gives a different picture and continues to lag.

Because core inflation is a good guide to future inflation, I am concerned that, if this upward trend continues, it will be hard to push inflation back toward the Committee’s 2 percent goal with monetary policy at its current setting. As I said in a May 22 speech, I am cognizant of the mistake we made in 2021 by not responding sooner to the high inflation we observed, and I am determined to avoid repeating it.²

But the desire to avoid past mistakes is often the author of new ones. I argued in remarks on July 6 that one of the most important jobs of a policymaker is to clearly assess current economic conditions and not just rely on past experience to guide judgments of where policy should be headed.³ As I will explain, there are some crucial differences now compared with 2021, and there is still a credible case for inflation to begin to fall back to our 2 percent goal with policy at its current setting. But I am concerned about the equally plausible case that data in the coming weeks will show that inflation will remain at its elevated level or even trend higher, requiring tighter monetary policy in the near term.

I am committed to returning inflation to the FOMC’s 2 percent goal but also determined to avoid overtightening policy and risking a recession. Tomorrow’s inflation data will be one of several data releases I’ll be looking at to determine the appropriate path of policy.

I would note the following language: “still a credible case” that we won’t have to hike rates and “equally plausible” case that we will have to raise rates. The body language points to rate hikes in the future unless something drastically changes.

After yesterday’s CPI print, the Fed Funds futures for the July meeting took down their bets for a rate hike. Prior to the number, we were looking at a 40%-50% chance for a rate hike in a couple of weeks. Now it is under 20%. The December futures still see a 82% chance we get a hike this year and a 40% chance we get at least 2.

Yesterday’s low CPI number was driven by falling energy prices, which are reversing a little after the cease fire deal in the Persian Gulf fell apart. Will we see a spike in oil back to $100+? My guess is that additional production coming on line will help prevent that. Energy companies have had enough time to adjust output to rising prices and are almost certainly reacting.

Small business optimism improved in June, according to the NFIB Small Business Optimism Index. The improvement was driven primarily by improved expectations for sales and the economy. Pricing pressures increased however as a net 38% reported raising prices.

“Current economic conditions present small business owners with both
encouraging developments and ongoing challenges. Lower oil prices
provide welcome relief for almost all businesses, especially those that rely
on transportation, deliveries, and other oil-related activities, while also
leaving consumers with more discretionary income. For many owners,
easing fuel prices help offset some of the other cost pressures (insurance,
supplies/inventories, payroll) that continue to stress profits.”

While inflation was mentioned as the #1 problem facing small business (taxes are #2), the comments from companies continued to point to difficulties recruiting employees.

Mortgage applications fell 2.7% last week as purchases fell 7% and refis rose 4%. “Mortgage applications declined as the 30-year fixed rate increased to 6.65% , the highest level since August 2025. Purchase applications were down over the week and dipped below last year’s pace in the week following the July 4th holiday,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “Despite higher mortgage rates, refinance applications increased, led by FHA and VA refinance applications rising 9 and 10%, respectively.”

Stocks are lower as earnings season kicks off. Bonds and MBS are down as oil rises.

The Iranian blockade is back in the Strait of Hormuz. This won’t be positive for oil prices or inflation, however as they say in the commodities markets the cure for high prices is high prices. New production sources have been coming on line.

The consumer price index fell 0.4% MOM and rose 3.5% YOY. A big decline in energy prices during June (down 5.7%) drove the monthly drop. Excluding food and energy, the core rate was flat and rose 2.6% on a YOY basis. These numbers were well below expectations. Oil is down markedly over the past month.

Kevin Warsh heads to the Hill for his first Humphrey-Hawkins testimony in front of Congress. I don’t see the prepared remarks out anywhere. It will be interesting to hear questions about Warsh’s proposed task forces and Congress’s view of them.

JP Morgan reported better than expected earnings this morning on trading profits. EPS rose 30% QOQ and 46% YOY to $7.70 per share ($6.14 excluding special items). Revenues increased 15% QOQ and 28% YOY.

Mortgage origination volume rose to $17.2 billion (up 27% YOY). Production revenue fell 3% YOY and servicing revenue declined 9%, however.

On the economy, CEO Jamie Dimon said: “The U.S. economy has demonstrated notable resiliency this year, with stronger business investment and hiring. This strength is being supported by several tailwinds, including AI-driven capital investment, fiscal stimulus and the benefits of more efficient regulation. However, several risks are shifting below the surface like tectonic plates, including geopolitical tensions and wars, sticky inflation, large global fiscal deficits and elevated asset prices. We cannot predict how these forces will ultimately play out. They may remain manageable, but they could also cause meaningful disruptions when they shift or collide. We carefully monitor these risks and prepare the Firm for a wide range of scenarios to ensure that we can serve our customers and clients consistently in all environments.”

Fed Governor Waller gave a speech about monetary policy at a crossroads. In it, he telegraphed rate hikes ahead:

But the desire to avoid past mistakes is often the author of new ones. I argued in remarks on July 6 that one of the most important jobs of a policymaker is to clearly assess current economic conditions and not just rely on past experience to guide judgments of where policy should be headed.³ As I will explain, there are some crucial differences now compared with 2021, and there is still a credible case for inflation to begin to fall back to our 2 percent goal with policy at its current setting. But I am concerned about the equally plausible case that data in the coming weeks will show that inflation will remain at its elevated level or even trend higher, requiring tighter monetary policy in the near term.

Waller went on to discuss the fact that the dual mandate requires the Fed to pay attention to the headline number, not the core number but chasing oil prices can be an issue. If energy prices work their way downward, this should be good news for returning inflation to its 2% goal.

Stocks are lower this morning on no real news. Bonds and MBS are down.

We have a pretty busy week ahead with Kevin Warsh’s first Humphrey-Hawkins testimony, the consumer price index, the producer price index, housing starts and retail sales. We will have plenty of Fed speakers as well. Earnings season kicks off Tuesday with all the big banks reporting.

The US and Iran exchanged fire over the weekend, which is pushing up bond yields and oil prices. The US hit staging areas Iran uses to attack commercial vessels transiting the Strait of Hormuz. Iran attacked facilities in Bahrain and Kuwait.

The Fed has established task forces to address monetary policy. These task forces will address communication, the Fed’s balance sheet, data, productivity & jobs, and inflation frameworks.

“The Federal Reserve’s commitment to price stability and maximum employment is unwavering. As is our resolve to pursue our mandate with rigor,” said Chairman Kevin Warsh. “The U.S. economy has changed significantly over the last generation, and never more so than right now. Each task force will carefully consider whether policymakers’ means and methods, analytical tools and policy approaches can be improved upon. I am honored that the best minds from a range of disciplines have agreed to work with us to sharpen our performance as an institution. The goal is straightforward: to ensure the Fed is best positioned to achieve our objectives in this consequential time.”

One of the big issues facing the Fed is that many of its tools are survey-based and response rates have been falling. The lower the response rate, the lower the signal-to-noise ratio.

Kevin Warsh’s Humphrey-Hawkins testimony will be interested especially concerning Fed guidance and spoon-feeding the markets. While Jerome Powell, Ben Bernanke and Janet Yellen were very forthcoming about policy intentions, I suspect Warsh might return to the days of Alan Greenspan, who’s inscrutable answers were his method of deflecting the questions away.

I suspect housing affordability will be a big issue and the Fed’s role in it. Unfortunately, we are at the closing the barn door after the horse has left stage on housing affordability, and there isn’t much the Fed can do about it. The lesson from 2021 is that making housing affordable via buying MBS and driving down rates just makes house prices higher and works against affordability.

The ROAD to Housing Act, which became law in June officially went into effect over the weekend. Trump did not sign the bill because he wanted Voter ID in place and there aren’t enough votes to pass it.