They did the absolute minimum to appear to be able to say they are dong something. With official inflation nearing 8%, this is nowhere near enough. SO far equity markets agree this is effectively nothing
Can you elaborate? I don't understand.
It is hard to define exactly what a "Eurodollar" is, but for now assume that a Eurodollar is a bank deposit in a jurisdiction not subject to the Fed's authority. ("Eurodollar" has nothing to do with Euro the currency. People are surprised that "dollars" exist outside the authority of the Fed.)
A Eurodollar future is a contract to borrow a "Eurodollar" for typically 3 months some time in the future. The price of the future is quoted as (100 - interest rate). For example, the Sep 2023 contract (called GEU3) is currently priced at 97.225, meaning that people are agreeing to lend money for 3 months in Sep 2023 at a 2.775% interest rate. Now to my point: the Eurodollar futures curve is currently inverted starting in Sep 2023. For example, the price of the GEU4 future (Sep 2024) is 97.50, implying a 2.50% interest rate, or a rate cut in GP's parlance relatively to Sep 2023.
Why would you pay attention to Eurodollar futures? For one thing, the notional value of all futures is about $12T. (This market used to be larger than the Treasury bond market until Congress fixed the problem.) Like all markets, it may be right or wrong, but if you strongly believe that rates will not be cut between 2023 and 2024, there is a ton of money to be made in that market. The curve started getting nervous, with small inversions of 1-4 basis points, in December 2021, and the inversion has grown larger since. The inversion peak-to-through was ~30bp yesterday and is ~40bp after the Fed's announcement today.
[1] https://www.financialresearch.gov/working-papers/files/OFRwp...
[2] https://www.newyorkfed.org/medialibrary/media/research/staff...
I remember hearing about that. How did they pull that off?
Unfortunately, most people were/are too drunk on (maybe temporary) housing and stock market gains to care.
Cheap money, free money and rampant speculation could all have easily been cut off a year ago and we would have had a much “softer landing”. Now we’re in a much more precarious position and may end up fighting stagflation possibly causing years long general economic malaise.
…but hey, Zillow said my house is worth $XXX!!!
The vast majority of people in the US have no idea what the fed is. Why would you trust their judgement?
The exotic mortgage products (e.g. reverse ARMs) have essentially disappeared, people's homes are well capitalized, lending standards are much higher than they were, there's very low levels of home equity debt, overall debt payments as a percent of household income are at very low levels.
The people waiting for a housing crash are going to wait a long time. This one chart sums it up well:
https://fred.stlouisfed.org/series/MDSP
Mortgage debt service payments as a percent of disposable income are near all-time lows and at roughly 1/2 the number of the GFC peak. Since the vast majority of home loans are fixed -- what's the mechanism for rate hikes to cause a housing crash?
Plus while reverse amortization might be less common, ARMs generally are still very popular and you'll see a hike in overall debt service associated with rising interest rates.
I don't know what's gonna happen with the housing market and I don't think it'll crash either but I think part of the reason is because private equity has bought a huge amount of housing - BlackRock bought what, 10-15% of the houses sold in 2020?
And metrics like credit card delinquencies are at historic lows: https://fred.stlouisfed.org/series/DRCCLACBS
ARMs actually aren't very popular - fewer than 15% of new mortgages are ARM.
> BlackRock bought what, 10-15% of the houses sold in 2020?
People vastly overestimate how large players like Blackrock are. There are something like 80 million single-family homes in the US. Of these, Blackrock owns 80 thousand. If they bought every one of those homes in 2020 (they didn't) - it would represent more like 1% of homes sold that year. And of course there are millions of condos not figured into my denominator. They're huge, but way under 1% of purchases.
I can actually answer for you - roughly 820,000 single family homes were sold in 2020.
So if BlackRock bought 80,000 homes then, that'd be about 10%.
[1] - https://www.housingwire.com/articles/new-home-sales-historic...
[2] - https://cdn.nar.realtor/sites/default/files/documents/ehs-01...
Is this official somewhere? I've seen it in headlines and heard it in soundbytes but did they disclose it in their 10k or something?
https://www.vox.com/22524829/wall-street-housing-market-blac...
The claim is that investors are buying nearly 20 percent of housing. Your refutal is that they only own 1%.
Both can be, and are, true.
"A record 18.2 percent of all home purchases were made by investors during the third quarter of 2021, according to a new report by Redfin. That was up from 16.1 percent during the second quarter of 2021 and up 11.2 percent from the third quarter of 2020."
https://www.washingtonpost.com/business/2021/12/01/buyer-dem...
If you change the statement from: "Blackrock bought 10%+ of the homes in the US in 2020"
To: "Various 'investors' (including personal trusts and other tax / estate shielding entities often used for people buying their primary residence) bought 10%+ of the homes if you restrict the data to 40 large cities" then it's mostly true? But that's a different thing than was claimed..
The Redfin data that WaPo is relying on accounts for 494k homes sold in Q3 2021, of which 90k were bought by their definition of investor. But they're missing another ~1 million homes that were sold in the US during that time period outside of the cities that clearly had the most investor interest...
I think the main problem is that before 2020, nobody really cared who bought what.
Starting right at the beginning of 2020, inventory vanished, and is still vanished to this day. In most major markets, investors are snapping up everything which compounds the problem. Now people are pissed. And they're doing it in the hottest, most contested markets to boot.
I live in a pretty dumpy city, and blackrock has purchased more than 20% of everything on the market in the last 2 years. Homes have almost doubled in values.
Do you understand why people are pissed at that? Pointing out they own 1% nationally does nothing to help us.
I'm sure there's a ton of investor interest (which in my opinion, is "downstream" of the problem, e.g. the millions-of-homes shortage is making it an attractive investment which is bringing the investor money). But again, Blackrock is a very small player in this - I can guarantee you that wealthy boomers with one or two rental properties are a much larger ownership class of investment properties than any faceless PE firm.
Blackrock owns a few tens of thousands of homes in specific cities (https://lease.invitationhomes.com/search?_ga=2.31151100.2135...), and sure, they're causing more competition and higher prices there -- but it's a nationwide problem not so easily reduced to "private equity caused".
Or at least, so I've been lead to believe. All I know for sure is I can't by a third of the sq. ft my older sibling could 8 years ago.
Whatever the reasons, home prices are ridiculously inflated right now. They’ll need to go down for first time home buyers to have a chance, so at some point there will be pressure for home prices to drop. For what it’s worth I’m in a rural part of the country and it’s not just a city problem.
If fed accelerates rate increases, we are very likely to see a recession. Which will automatically reduce demand for goods and services and thus inflation.
But reducing inflation by causing mass unemployment will lead to other problems.