Market 11/27: New home sales drop sharply in October

New home sales drop sharply in October

Mortgage rates in recent months reached a record high of ~8%, causing the MBA home purchase index to drop to 119.6 - the lowest level since 1995.

New home sales fell more than expected to -5.6% MoM, contrasting with the strong increase last month.

Based on experience from previous periods, this figure will drop even further after adjustment.

Home prices continue to trend downward under reduced demand pressure, with new home selling prices down -17.6% YoY (average price down to 409,300 USD).

• For the first time since 2005, new home prices are trending lower than existing home prices.

Delinquency rate for home purchase loans in concentrated residential areas is at the highest level since 2013 → Warning of housing defaults.

Global consumers spend heavily on Black Friday

Online sales revenue on the recent Black Friday reached 9.8 billion USD in the US, up +7.5% YoY and reached a record 70 billion USD globally.

Buy now, pay later ratio during Black Friday increased +20% YoY.

→ Consumers are enjoying an additional 20% benefit from deferred payments, but this is financed by credit debt at 30% interest!

Expected average spending during this holiday season surges +13.5% YoY (~ each person spends about 1,652 USD).

Uranium shortage fuels investment frenzy

Geopolitical tensions and supply shortages have pushed uranium prices to the highest level in 15 years (around 80.25 USD/Lbs).

A significant uranium shortage could occur in the next decade. Uranium mining has also increased nearly 50% in the past few months.

Some other news:

• Since the Fed began raising rates in March 2022, the expected default probability on high-risk debt has increased nearly 5-fold (1% to 5%).

  • The number of employees working in companies issuing these high-yield bonds and high-risk debt is about 19 million…

→ Warning of corporate defaults and rising unemployment in 2024.

• US gasoline prices have been falling continuously for 60 consecutive days, facilitating consumption and travel during the holidays.

• The European Central Bank is preparing to launch the digital EURO currency (CBDC), after considering usage methods, social credit, and vaccine passport systems in Europe.

• The total value of USD bonds guaranteed by banks in China has dropped sharply -90% YoY due to concerns over issuers' default risks.

• Inflation gauge posts smallest annual increase since 2021, bolstering sentiment that Fed and ECB rate-hiking cycle is ending.

• China's top shadow bank Zhongzhi faces potential $64 billion default, compared to assets worth only about $30 billion, warning of widespread liquidity risks.

  • FYI: Shadow bank is credit institutions that lend like banks, but are not subject to the regulations of the banking system.

Events this week:

1. New Home Sales - Monday

2. Consumer Confidence Index - Tuesday

3. Q3 GDP - Wednesday

4. PCE Inflation Index - Thursday

5. Fed Chair Powell speaks - Friday

6. A total of 10 speaking events by Fed officials.

Earnings report schedule for some companies this week: