Top of the morning, markets people. Phil Rosen here, writing to you from a humid and glistening New York.
Growing up, when I heard adults talk about "refinancing," it sounded awfully boring. But since covering Wall Street, I've learned that there's real drama in housing markets.
Today I'm breaking down what's going on with US mortgages, and why you should care.
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1. Mortgage demand is at a 22-year low. That means the last time Americans were this discouraged by the housing market, George W. Bush was starting his first term and a gallon of gas was about $1.50.
According to the Mortgage Bankers Association, mortgage demand slipped 6.3% last week as high prices throttled US residential real estate. That makes three consecutive weeks of declines, and suggests more downside ahead.
"Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand," the MBA's economic forecaster said.
There's a lot at play here. For one, mortgage rates have roughly doubled this year, from about 3% in January to close to 6% this month.
But prices aren't coming down — at least not yet. Despite declining sales, last month marked another all-time high for median home prices.
The MBA's refinancing index, meanwhile, plummeted 4% over the last week and 80% over the last year.
And soaring inflation hasn't helped. High prices and surging rates are weighing on buyer sentiment. In turn, homebuilders are more pessimistic about the market than at any point since the start of the pandemic.
Moody's chief economist Mark Zandi even warned the housing market is about to enter a "deep freeze," as first-time homebuyers can't afford to buy in.
The takeaway from all of this is that the housing market has certainly cooled, but not quite enough for buyers to be able to cope with higher mortgage rates on top of prices that appear to still be climbing.
In other news:
2. US stock futures traded mixed early Thursday. Meanwhile, oil tumbled by 4% and European stocks fell as investors brace for the European Central Bank's meeting later today, with the bank set to hike interest rates for the first time in over a decade. Here are the latest market moves.
3. On the docket: Philip Morris Inc., Blackstone, and more, all reporting. Plus, look out for the unemployment insurance weekly claims report from the US department of Labor.
4. The manager of the top-performing large-cap mutual fund of 2022 shared how he's found success in a bear market through dividend investing. The portfolio expert talked about the philosophy and strategy he uses to secure gains. These are his eight favorite stock market opportunities right now.
5. The Fed will focus on taming hot inflation as the strong labor market still points to a lower recession risk, Bank of America analysts said Wednesday. In a note to clients, BofA said solid employment data suggests the economy has steady underlying momentum, which reduces the risk of a downturn. Here's what you want to know.
6. Russia resumes flows of fuel through Nord Stream 1 pipeline. The pipeline closed for a 10-day maintenance program and concerns had grown that operations would not resume. But the return of flows has temporarily eased fears of an immediate energy crisis in Europe.
7. Veteran investor Jeremy Grantham forecasted that weak earnings are going to drag on stocks. What's more, the market historian and GMO cofounder said the slump in asset prices could be prolonged — and added that the S&P 500 might plunge another 25%.
8. Morningstar's chief market strategist said these stocks offer safe and stable gains during the bear market. Defensive stocks have been overlooked in recent months, but Dave Sekera said now is the time to invest in the asset class to secure profits. See his 9 picks.
9. Crypto billionaire Sam Bankman-Fried said the crypto market may have reached the bottom. He broke down why the next phase of digital assets will be about user-friendly apps and institutional money — and what developments he's most excited about next.
10. Shares of Tesla rose after the EV giant reported earnings after the bell Wednesday. Second-quarter earnings beat Wall Street estimates, despite a factory shutdown in China. Tesla said it sold 75% of its bitcoin holdings, after spending $1.5 billion on the cryptocurrency in 2021. Check out how the stock is moving this morning.
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Curated by Phil Rosen in New York. (Feedback or tips? Email [email protected] or tweet @philrosenn).
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.