Chinese trade negotiators suddenly canceled a visit to meet U.S. farmers after they wrapped up trade talks in Washington this week.Marketsread more
Trump also said he is "not looking for a partial deal" with Beijing, moving away from his suggestion last week that he would consider an "interim deal."Politicsread more
For investors taking a breather from the chaos in August, buckle up as the market is about go crazy again, Goldman Sachs warned.Marketsread more
Canadian trade union Unifor said roughly 4,500 of its members have been temporarily laid off because of the GM strike so far.Autosread more
Since the Cambridge Analytica scandal in March 2018, Facebook has suspended tens of thousands of apps stemming from an investigation into its developer ecosystem.Technologyread more
The former top aide of retired United Auto Workers Vice President Joe Ashton, a former member of the GM's board, was charged Friday with conspiracy to commit wire fraud and...Autosread more
Stocks fell to their lows of the day on Friday on news that Chinese trade officials are cutting short their visit to the U.S.US Marketsread more
The wearables company has retained advisors to consider exploring a sale of the business.Technologyread more
Roku shares have more than quadrupled this year, but the stock has had some rocky days of late as more players jump into streaming.Technologyread more
"I really want to encourage competition because I think competition creates innovation, and when you create innovation everyone wins," Humana CEO Bruce Broussard says.Health and Scienceread more
Walmart is the latest to pull back from the industry. Federal regulators said they will soon ban flavored e-cigarettes, while some nations have outlawed the products...Health and Scienceread more
There are houses for sale, but not nearly enough. There is high housing demand, but more potential buyers are struggling to afford down payments. Home price gains are accelerating. Homebuilders are not operating at historically normal production levels, nor are they shifting significantly to entry-level models.
Add all these current dynamics together, and the sum casts a long shadow over the U.S. housing market — and two more this fall could make matters even worse.
First, mortgage interest rates may finally move higher. Yes, they have been sitting at year-lows for nearly a month. Uncertainty in Washington over the president's economic agenda, as well as volatility in overseas markets have combined to lure investors to the relative safety of the U.S. bond market, keeping yields low. Mortgage rates loosely follow the yield on the 10-year Treasury.
There are, however, other factors that influence interest rates. For one, the Federal Reserve is heavily invested in mortgage-backed securities — supporting the entire market since the housing crash — but it is about to shed much of that.
"Investors have been bracing for this balance sheet tapering business for a long time and, for the most part, a certain pace of tapering is already priced-in to today's rates," noted Matthew Graham, chief operating officer at Mortgage News Daily. Graham is more concerned about inflation.
"No, I'm not worried about '70s-style hyperinflation — simply the small chance that inflation can manage a healthy enough rebound to steel the Fed's resolve to tighten policy. If core inflation were to return above 2 percent and continue trending moderately higher, it would be a game changer for rates," said Graham.
In addition to higher mortgage rates, potential homebuyers could also be facing a change in the mortgage interest tax deduction. While this tax break only benefits 20 percent of taxpayers, it has always been very popular in the emotional rhetoric of the housing market and therefore politically untouchable. That may be about to change. In one of his first interviews, Treasury Secretary Steve Mnuchin suggested the cap on the deduction, currently at $1 million of mortgage debt, could be reduced.
Then this week, House Speaker Paul Ryan, R-Wis., told CNBC: "We recognize and acknowledge and believe you need to maintain the mortgage interest deduction. Whether it can be improved in how it works, that's the decision and discussion we'll have on an ongoing basis."
Industry insiders told me earlier this week that the conversation is already centered on cutting the deduction cap in half. Doing so would only affect about 4 percent of taxpayers who benefit from it but would slash 15 percent of the $77 billion cost to the government. That is because the vast majority of the tax benefit goes to higher-income taxpayers.
A change in the deduction would have "a rather small effect" on home values, according to Nobel Prize-winning economist Robert Shiller, who opined on it in an interview this week on CNBC's "Power Lunch."
For some taxpayers, a loss of the deduction could be offset by a change in the standard deduction. The deduction has always been sacrosanct because it is linked to the emotional and political rhetoric of homeownership being part of the "American dream," but there are even bigger factors at play today.
"What's really driving the real estate market is our sense of where we're going and the uncertainty at the time with the new administration in Washington, and all this talk. These are bigger things than the mortgage interest deduction," added Shiller.