“Possibility Of Additional Outbreaks:” Bird Flu Strikes Iowa Egg Farm With Million Hens
The unseasonable return of avian influenza or bird flu continues to wreak havoc on the US poultry industry. Iowa agriculture officials announced Monday that the first infection since April was detected at a large commercial egg-laying farm, AP News reported.
Iowa Department of Agriculture officials said the commercial farm with 1.1 million chickens in Wright County (central Iowa) just detected the highly contagious and deadly virus.
All chickens at the facility were culled and disposed of to avoid spreading the disease. Iowa has been hit hard by bird losses this year, with more than 13 million killed. On a national level, 47.7 million birds have been affected in 43 states.
Bird flu continues “to be a significant threat across the country,” Iowa Agriculture Secretary Mike Naig told The Des Moines Register. He added:
“We have been preparing for the possibility of additional outbreaks,” working closely with producers and the US Department of Agriculture.
“With migration ongoing, we continue to emphasize the need for strict biosecurity on poultry farms and around backyard flocks to help prevent and limit the spread of this destructive virus.”
In late September, we noted there was concern that the fall migration of wild birds could spread the virus. That appears to be correct.
The culling of tens of millions of birds has dented national egg supplies, sending prices sky-high and above 2015 outbreak levels (last major bird flu) to about $3 per dozen at the supermarket.
Retail egg prices have doubled since August 2020, straining consumers’ wallets as breakfast inflation soars. What used to be a cheap source of protein in the morning has become expensive.
Besides eggs, turkeys have also been impacted by bird flu, sending prices to record highs ahead of the Thanksgiving holiday.
The Supreme Court refused to hear an appeal on Oct. 31, leaving in place a federal appeals court ruling that allowed the Transportation Security Administration (TSA) to require the wearing of masks on airplanes, trains, and buses during the COVID-19 pandemic.
Although the TSA abandoned its mask mandate in April, the decision allows a Dec. 10, 2021, ruling by the U.S. Court of Appeals for the District of Columbia Circuit to remain on the books as a legal precedent that the government may rely upon in the future.
In a brief filed with the high court on Sept. 27, the Biden administration urged the Supreme Court to reject the case.
U.S. Solicitor General Elizabeth Prelogar noted in the document that the TSA had announced on April 13 that it would extend the mask directives through May 3, 2022.
But days after the announcement, when a federal district judge in Florida vacated the Centers for Disease Control’s order requiring masking at transportation hubs and in airplanes, the TSA backed out of its mask mandate extension.
The TSA mandate was allowed to expire on April 18.
The D.C. Circuit Court’s ruling was correct because it recognized TSA was acting within its statutory authority and its actions were aimed at addressing the threats to transportation posed by COVID-19, the brief stated.
The high court refused to take up the petition filed in Corbett v. TSA (court file 22-33), without explaining why.
Justice Ketanji Brown Jackson did not participate in the consideration of the petition, but the court did not explain why she refrained from doing so.
Frequent flyer Jonathan Corbett challenged the TSA’s January 2021 directives requiring that passengers wear masks.
Corbett argued that the agency’s authority under the federal Aviation and Transportation Security Act was limited to developing policies and directives aimed at guarding against violent attacks on transportation infrastructure.
The statute did not empower TSA to do things like require mask-wearing to protect public health, he argued.
But the appeals court disagreed.
“The COVID-19 global pandemic poses one of the greatest threats to the operational viability of the transportation system and the lives of those on it seen in decades,” the circuit court ruled in an opinion written by Judge Harry T. Edwards, who was appointed by then-President Jimmy Carter in 1980. One judge on the three-judge panel dissented from the ruling.
“TSA, which is tasked with maintaining transportation safety and security, plainly has the authority to address such threats under” the Aviation and Transportation Security Act.
Congress granted the TSA “broad authority” to analyze potential risks to aviation and national security and respond to those risks and conferred upon the agency “an expansive power to act in relation to the transportation system during a national emergency.”
Given the language in the statute, “it cannot seriously be doubted that Congress’ delegations of authority to TSA authorize the Mask Directives issued to contain the spread of the COVID-19 virus.”
If Congress wanted to limit the reach of the TSA it could have done so, but instead it “selected broad language in its mandate to the agency.”
Israel Election: Exit Polls Show Netanyahu On Brink Of Returning To Power
Early exit polls show former Prime Minister Benjamin Netanyahu is poised to return to power in a Tuesday vote that reportedly had huge turnout – the largest the country has seen in over two decades.
Israel is on edge waiting for the results after five rounds of voting in three-and-a-half years, which still has yet to produce a clear winner and new government; instead there’s been nothing but gridlock and power-sharing arrangements so far.
Fox News reports as Israel approaches midnight local time, based on national media, “Early exit polls predicted that former prime minister and current opposition leader Benjamin Netanyahu might very well be that winner this time around.”
And further: “His bloc of right-wing, religious parties was slated to draw up to 62 seats, the number of mandates needed to form a majority in the 120-seat Knesset, Israel’s parliament.”
Two of the three exit polls give the pro-Netanyahu bloc 62 of the Knesset’s 120 seats, with the other putting the party at 61. The anti-Netanyahu bloc won 54 seats, according to two exit polls, and 55 according to the third.
Fox cites Assaf Shapira, Director of the Political Reform Program at the Israel Democracy Institute, who points to all major exit polling pointing to the opposition “Bibi bloc” – a controversial alliance of far-right and ultra-Orthodox parties – holding a lead…
“All of the exit polls predict between 61-62 seats for the pro-Netanyahu political bloc, which was quite expected,” he said, adding however that previous exit polls in 2021 also gave Netanyahu between 61-62 seats, but they missed one small Arab party that ended up becoming a decisive factor that allowed the other factions to unite and oust Netanyahu from power.
Results might not be known for a number of hours, or possibly days.
But then there’s still the potential scenario of gridlocked results stretching into more weeks or even months, possibly resulting in the current “transitional prime minister” period being extended.
Middle East Eyenotes that “Months ago, Israelis started repeating a bitter joke that a sixth round of elections would follow these. Now that may soon become a nightmarish reality.”
Benjamin Netanyahu gives brief statement to the media in Hebrew *AND* English on election results. pic.twitter.com/oQi67bXmOo
“This is, in fact, not bad news for Yair Lapid. In case of 60-60 deadlock, no new government can be formed and Lapid gets to keep the title of ‘transitional prime minister’ for another six months,” MEE adds.
Weak ISM and PMI data (and a big drop in prices within them) was shrugged off by the market which focused on a notable headline JOLTS beat (a two-month-old metric that’s likely manipulated ahead of the midterms) sparking a ‘good news is bad news’ reaction in markets, punching rate-trajectory expectations dramatically more hawkish just a day ahead of the FOMC decision. The market is now pricing in a cycle-high terminal of 5.06%…
Source: Bloomberg
And while tomorrow’s 75bps hike is a lock, the odds of a 75bps hike in Dec jumped today and the odds of a 50bps hike in Feb also jumped notably today…
Source: Bloomberg
There was one weird headline today (that sparked consternation among many Fed watchers) as White House economic advisor was interviewed on Bloomberg TV and told the anchor that “President Biden has endorsed The Fed’s policy pivot.” Did Bernstein just front-run tomorrow’s announcement? How does Bernstein know that Powell is pivoting given that the FOMC meeting just started? Is Bernstein explicitly signalling to pressure Powell and the independent Fed to ‘pivot’?
No, none of the above, Bloomberg headline writers ‘corrected’ their report to note that Bernstein was merely confirming that Biden endorsed The Fed’s pivot to tightening this year. Pretty big difference there, Bloomberg!
US equity market had been grinding higher overnight but puked on the JOLTS data and Nasdaq extended losses while Small Caps caught a BTFD bid back into the green…
AMZN was ugly today, losing as much today as it did after earnings last week, and falling back below $1 trillion market cap for the first time since April 2020…
Source: Bloomberg
Treasury yields followed a mirror path, sliding overnight then spiking dramatically on the JOLTS data. The long-bond remains a significant outperformer on the week (-2bps) while the short-end is getting slammed (+13bps)…
Source: Bloomberg
10Y yields broke back below 4.00% overnight but by the close were back to unchanged at around 4.05%…
Source: Bloomberg
The yield curve flattened dramatically with the 3m30Y spread inverting for the first time since 2019 and now the most inverted since April 2007…
Source: Bloomberg
…and its also the 5th consecutive inverted close in 3m10Y…
Source: Bloomberg
The dollar mirrored everything else with overnight weakness instantly reversed on the JOLTS data…
Source: Bloomberg
The Brazilian Real extended its massive short-squeeze today (to its strongest against the dollar in 7 weeks) but then faded a little after Bolsanaro’s quasi-concession. That was a 32-handle rally in 2 days…
Source: Bloomberg
Bitcoin roundtripped (higher then lower) to end practically unch today…
Source: Bloomberg
Oil prices jumped today after the JOLTS data, ahead of tonight’s API data
NatGas prices plunged on warmer weather hopes…
Gold held on to some gains on the day after tumbling on the JOLTS data…
Finally, despite tomorrow’s huge event risk, VIX has continued to press to one-month lows, decoupling from stocks in the last few days…
Source: Bloomberg
As SpotGamma notes, the thing which most catches our eye this morning is IV, which continues to decline lower despite tomorrows FOMC. Below we’ve plotted VIX, VOLI, SDEX, VVVIX – they’re all at 1 month lows. Further, our RiskReversal metric remains at -0.04 which is reflecting puts being sold and/or calls being bought.
It’s always a bit surprising to us when volatility is crushed into a catalyst like FOMC. This serves to both “pull forward” some of the potential rally-fuel (via vanna) and also expose the market to more of a violent downside reaction. The point here is that its harder for well hedged markets to crash, and we’re no longer well hedged with IV readings at relative lows and the 3600 Put Wall a full 300 points lower.
So do you feel lucky again?
When $SPX was (15%) or worse at the October-end mark:
In First Appearance Since Election, Bolsonaro Refuses To Concede, Vows To Follow Constitution
Update(1600ET): Brazilian President Jair Bolsonaro finally spoke publicly for the first time since losing Sunday’s election by a narrow margin. Many expected, or were hoping, for a concession speech – but that didn’t happen. But it appears the short press event itself was all about the optics of accepting the loss.
He vowed to “follow the Constitution” and called for “order” in the country- and yet didn’t explicitly concede nor did he congratulate declared winner Lula da Silva on victory for the Brazilian presidency, which he’s expected to take over on January 1st. At the same time Bolsonaro didn’t contest the result either.
As one Brazilian national outlet said of the very short speech, “Jair Bolsonaro has not said whether he will accept the election result. He didn’t mention Lula and he didn’t even congratulate the new elected president. It was a subtle pronouncement.”
Brazil’s Chief Of Staff: To Begin Process Of Transition With President Lula
Meanwhile raging protests in some parts of the country continue, though they’ve reportedly waned in intensity and reach since the night prior…
ALERT: Truckers and other protesters on Tuesday blocked highways for second day in support of President Jair Bolsonaro, who has yet to accept his election loss to leftist Luiz Inacio Lula da Silva https://t.co/8AIjqSZ6Mvpic.twitter.com/AdSkVtY7Ui
Incumbent Jair Bolsonaro has still not acknowledged his loss with any public statements over a day after Luiz Inacio Lula da Silva was declared winner of Brazil’s 2022 presidential election held Sunday.
Local media says President Bolsonaro, who is now expected to leave office by January 1st, has not so much as issued any official comments to government ministers. Lula da Silva said in front of a crowd of supporters while celebrating the historic win Sunday night, “Anywhere else in the world, the president who lost would have called me by now and conceded.”
Lula said he remains “part happy, part worried” about the transfer of power, given that “He still hasn’t called, I don’t know if he will and I don’t know if he will concede.”
As we detailed earlier, already many world leaders including those previously considered key global allies of Bolsonaro have called to offer their congratulations to Lula, including Russia’s Vladimir Putin and China’s Xi Jinping, among many others, as well as US President Joe Biden.
CNN notes that the formal process of certifying the vote is underway: “It is Brazil’s Supreme Electoral Court that officially validates election results and communicates them to the Senate, Chamber of Deputies and State Assemblies.”
A number of major highways in Brazil blocked by truck drivers and other Bolsonaro supporters refusing to accept Lula’s victory in the elections
Many we spoke to are openly calling for a military takeover of the country… no sign of anything like that but it’s a tense situation pic.twitter.com/noFWc8MENX
However that validation process is not completed yet: “A press officer for the Electoral Court told CNN that the vote’s results are already considered validated, since the court’s declaration of the outcome on Sunday. A court session at a later point will formally confirm the win, but no date has been set for it yet, he said,” according to the CNN report.
Protests by Bolsonaro supporters against the election results – which saw Lula receive 50.9% to Bolsonaro’s 49.10% of the vote – have popped up reportedly in more than 100 locations.
Bolsonaro supporters are claiming the election was “stolen”…
HAPPENING NOW: Things are developing quickly in Brazil, and not in a good way after the election that was STOLEN from Bolsonaro.
The police are starting to join with the Bolsonarista truck drivers who are protesting the fraudulent results of the Brazilian election. pic.twitter.com/FFWV7EOuDu
BBC reports Tuesday morning, “Lorry drivers in Brazil loyal to President Jair Bolsonaro have blocked roads across the country, after his poll defeat to leftist rival Lula.” The report describes, “Blockages were reported in all but two states, causing considerable disruption and affecting food supply chains.” And more:
By Monday night, the federal highway police reported 342 such incidents, with the biggest protests going on in the country’s south. Some of the blockages were later cleared by police.
…Supreme Court judge Alexandre de Moraes on Monday ordered the police to disperse the roadblocks immediately. He warned that all those still blocking the roads on Tuesday would be each fined 100,000 Brazilian reals (£16,700: $19,300) per hour.
Bolsonaro has recently expressed concern over the potential for the country’s voting machines to be manipulated or tampered with, something that his political opponents have dismissed as “Trump-style” election denial rhetoric.
Rural producers and truck drivers block highways after the defeat of President Jair Bolsonaro. Some demonstrations take place in the interior of Mato Grosso and Santa Catarina. #Brazil#Politicspic.twitter.com/rTPrMiESIZ
Into Tuesday morning, nothing has been posted to Bolsonaro’s official social media accounts since the night before Sunday’s vote.
His last last tweet came shortly before midnight on the eve of the election. He quoted from the Bible, the book of Ephesians, which says “Put on the whole armor of God, that you may be able to stand against the wiles of the devil…”. Some are taking this as a sign he could be readying to not go down without a political fight contesting the election results.
The New York Times is meanwhile reporting that Presient Bolsonaro is expected to give a speech on Tuesday, but it’s unclear when or precisely what he will say.
Cybertruck Mass Production Set To Begin At End Of 2023
If you were hoping for your Tesla Cybertruck in 2023, it might be time to (again) realign your expectations.
A new report from Reuters indicates mass production of the Cybertruck will begin at the end of 2023, which means those who put down $100 to reserve the vehicle will have to wait for another year, according to two people with direct knowledge of the plans.
“We’re in the final lap for Cybertruck,” Elon Musk told investors on a conference call last month. The company said, “early production” of the vehicle will start in the middle of 2023. A full ramp-up in production would occur later in the year.
People have already waited several years for the sharp-angled electric truck, which could be years before all 1.3 million reservations are filled.
Recall, last year, we reported that Tesla was delaying the Cybertruck to “late 2022”. We noted at the time:
Before we even opine on the details, we’re going to take the “over” regarding this timeline and guess the truck doesn’t happen until 2023, perhaps even later.
In January, Tesla removed its 2022 production date for the Cybertruck. Musk cited supply chain woes and shortages in sourcing components as one of the main reasons for the delay.
Musk revealed the Cybertruck at an infamous 2019 Tesla event where a demonstration of the vehicle’s unbreakable windows miserably failed.
Meanwhile, competitors like Ford’s F-150 Lightning, Rivian’s R1T Explore, and GMC’s Hummer EV continue to gain market share and significant attention.
Climate activist Greta Thunberg has gone fully mask off and is now calling for the overthrow of “the whole capitalist system.”
Thunberg made the extremist comments during an appearance on Sunday night at London’s Royal Festival Hall to promote her new ‘Climate Book’.
Nicholas Harris from UnHerd was there to watch Thunberg outline her demented manifesto.
Previously, she’d sold herself as a five-foot human alarm bell, a climate Cassandra. Her role was to warn, not to instruct: her most viral moments involved her scolding political leaders, not trying to supplant them. She strenuously avoided programmatic detail, saying such things were “nothing to do with me”. But now, on stage and in this book, she has found her political feet, specifically the Left-wing ideology of anti-capitalism and de-growth.
Interspersed among the usual directives about the need to pressure political leaders, her message was more radical and more militant than it has been in the past. There is no “back to normal”, she told us. “Normal” was the “system” which gave us the climate crisis, a system of “colonialism, imperialism, oppression, genocide”, of “racist, oppressive extractionism”. Climate justice is part of all justice; you can’t have one without the others. We can’t trust the elites produced by this system to confront its flaws – that’s why she, much like Rishi Sunak, won’t be bothering with the COP meeting this year. COP itself is little more than a “scam” which facilitates “greenwashing, lying and cheating”. Only overthrow of “the whole capitalist system” will suffice.
So now we are finally seeing the contours of Thunbergism. Run your eye down the contributors to The Climate Book and you can see who she’s been reading: Jason Hickel, Kate Raworth, Naomi Klein. For these people the climate crisis isn’t man-made. It’s made by capitalism, as are the other forms of social injustice which plague society. There’s no GDP growth – especially of the capitalist sort – without increasing carbon emissions. The only solution to this state of emergency is for rich countries to immediately abandon economic expansion as a social goal.
As we have previously documented, the climate change agenda is merely radical leftism dressed up in a more palatable format.
The co-founder of Extinction Rebellion, the offshoot of which, Just Stop Oil, is currently engaged in blocking roads across London, admitted in his own words that his movement “isn’t about the climate.”
In 2019, Stuart Basden revealed the true goals of the far-left environmentalist action group in a lengthy article posted on Medium.
Basden asserted that whatever climate problems exist can’t be fixed and that the movement should instead be focused on tearing down the entire system of western capitalism (China, the world’s biggest polluter, isn’t mentioned once).
He claimed that “European civilisation” is to blame for spreading “cruelty” and “violence” throughout the globe for the last 600 years and bringing “torture, genocide, carnage and suffering to the ends of the earth.”
Basden then cited numerous “delusions” which are to blame for this situation, including “white supremacy,” “patriarchy” and “class hierarchy” (a strange one given that most Extinction Rebellion protesters are upper middle class snobs who do little but inconvenience and harm the working class).
“The delusions of hetero-sexism/heteronormativity propagate the idea that heterosexuality is ‘normal’ and that other expressions of sexuality are deviant,” writes Basden.
So there you have it, it isn’t about the climate, it’s about bringing down the west and replacing everything it stands for with a nightmare far-left form of identity politics-mad totalitarianism.
Finnish PM Urges Two Holdout Countries To Swiftly Approve Sweden, Finland NATO Bids
On Tuesday Finland’s Prime Minister Sanna Marin appealed directly to holdout countries Hungary and Turkey to approve the Finnish and Swedish NATO applications, a process which has for months been at standstill especially over Turkish accusations that both countries have supported Kurdish outlaw “terrorist” groups.
Marin pointed out that the commitments of the trilateral deal which Turkey’s leadership previously agreed to in the early summer are not fulfilled yet. “All eyes are now on Hungary and Turkey. We are waiting for these countries to ratify our applications. I think it would be important that this would happen preferably sooner than later,” Marin told a joint news conference with other Scandinavian leaders.
So far, 28 NATO member countries have ratified their applications, with the only two which haven’t done so among the 30-member bloc being Turkey and Hungary.
The June trilateral summit agreed to implement Turkey’s requirements designed to ensure that Sweden and Finland would take steps to distance their countries from individuals and groups Turkey deems terrorists. This has included a demand to extradite wanted individuals back to Turkey.
Spokesman for Turkey’s ruling Justice and Development Party (AK Party) Ömer Çelik suggested on Monday that Finland and Sweden have yet to implement what was agreed upon earlier in Madrid at the trilateral summit.
Om Monday Çelik said: “We do not find statements sufficient until they are implemented and materialized. Because we have heard a lot of words, striking statements, very elegant and very aesthetic words from our European friends, but still we witnessed actions of terrorist organizations on the streets of those countries as well as terrorist propaganda on their televisions.”
Finland had long maintained historic neutrality regarding NATO membership, but declared within months after Russia’s invasion of Ukraine that this marked a “turning point” for the world, saying that relations between Helsinki and Moscow could never go back to the way they were before.
Just days ago Zero Hedge reported that rent-controlled vacancies in New York City have soared. And it should also be no surprise that just yesterday they wrote about a mansion outside of Philadelphia that cost $35 million to build, but recently sold for just $9.26 million.
That’s because indications are that Philadelphia, like many other home markets in the northeast, is seeing ownership rates collapse. My friend, and Philly-based realtor Kira Mason wrote this past week about how the city’s affordability issue “just got a lot worse” relative to where it stands against other Northeastern cities. These are her thoughts.
Philadelphia has long been praised for its affordability when compared with other cities in the Northeast. Due in large part to relatively low-cost housing and some very compelling grants and regional loan programs, it has a higher percentage of individuals living in homes that they own than do DC, New York City, Baltimore, Pittsburgh, and Boston. But despite higher levels of homeownership, a key element of wealth-building, over 23% of Philadelphians live below the poverty line (double the US average).
Homeownership is an important piece of keeping that number from getting even higher, and I fear and suspect that the shift taking place in the housing market today will further stratify a Philadelphia that is already starkly divided along class lines.
Even before interest rates made their historic jump above 7% this fall, homeownership numbers in our city had started to decline. In 2019, they were down almost 9% from their highest recorded level of 58.2% in 2006. Many will attribute this shift to developers outbidding first time buyers in Philadelphia’s most affordable neighborhoods. I saw this firsthand in 2020 and 2021; those of my buyers who had the biggest hurdles to overcome on their paths to home ownership were repeatedly losing bidding wars to investors, even when putting forth offers that were significantly above asking price with favorable non-monetary terms.
While wages remained stagnant between 2013 and 2021, Philadelphia’s median residential sales price rose a staggering 80%. If wages had grown at the same rate as did the median sales price, the annual income of the average Philadelphian would have been almost $112,000 in July of 2021: an insultingly far cry from reality.
While rates were at historic lows in 2020 and 2021, many lower income Philadelphians were able to become homeowners despite rising prices. Now that rates have spiked above 7%, plummeting affordability to its lowest level in 37 years, these buyers are the first to be ejected from the market. Fortunately there are programs available to help keep rates as low as possible for buyers from a range of financial circumstances, but even the most competitive interest rates these days can be a tough pill to swallow.
For buyers with lower incomes, Pennsylvania Housing Finance Agency (PHFA) loans or Fanny Mae’s HomeReady loans are often a good fit. For buyers dealing with lower credit, FHA plans are generally offered. All of the above help keep rates and terms as favorable as possible by today’s standards.
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Higher income buyers have the option of buying a lower priced home in order to keep their monthly payments within bounds. Lower income buyers are limited by the bottom bracket of available home prices, and are therefore liable to be priced out of the market completely. A buyer in spring of 2021 with a 2.8% rate with a 10% down payment on a $300k house would have had a monthly principal and interest of $1,609. Today, at 7%, their monthly payment would be $2,296- a 42% increase. Today’s affordability strain makes the members of this population who are able to remain in the market at all especially likely candidates for higher risk loan offerings like Adjustable Rate Mortgages (ARMs) and temporary rate buydowns (TBDs).
ARMs, which had their reputation as a risky loan product cemented with the housing crisis of ‘08, are seeing renewed demand. Buyers are rightfully suspect of these loans with the crisis in recent memory, but ARM applications are still on the rise. They now comprise about 12% of total mortgage applications, up from 3% at the start of the year. Though this is fairly low in absolute terms, the recent spike has brought ARM applications to their highest level since 2008: nothing to sniff at.
While ARMs are growing in popularity, the real engine behind the plodding forth of the entry level housing market, to whatever degree it is still doing so, are temporary rate buydowns. These are the ARMs of 2022, and though they are without a doubt a safer proposition, they are not without their risks. I haven’t seen a deep dive into all of their implications, so let’s get into it.
First, a definition: a temporary rate buydown (TBD) is a device in which a seller or builder pays the buyer’s lender to offer them a lower rate for a given number of years. The buyer him or herself is not permitted to contribute. Once the sale is consummated, monthly payments and their associated interest rates begin on a graduated schedule, rising annually until reverting to what they would have been had the buydown never been enacted. Like an adjustable rate mortgage, this gives the buyer the opportunity to pay a lower principal and interest for a period of time. Unlike an ARM, every month’s rate (and associated payment) is known in advance.
While the predictability of a temporary rate buydown makes it a safer bet than an ARM, the truth is that many buyers who opt for either of these programs are doing so with the intention of refinancing in the future. In either case, if home values drop significantly enough, they would be prevented from following through with any refinancing plans, leaving them to contend with either an unpredictable future rate (ARMs) or a higher-than-desired monthly payment (TBDs). Let’s say a home is purchased today for $325k at 5% down and the buyer makes use of a 2-1 temporary buydown. If they later want to refinance, homes in that range would need to appraise for at least $320k in order for the refinance package to work.
While concerning, it’s important to keep in mind that the presence or absence of a TBD cannot factor into a buyer’s loan eligibility. These loans are still underwritten at the base rate. If a buyer is prequalified for a loan of a given amount, their lender has determined that they are capable of paying off the loan with or without a temporary rate reduction. This offers some real stability, but I can’t help but see the danger of buyers wedging themselves into homes at the very tops of their budgets because they are enamored with those year one and two rates. I’ve often thought of maximum prequalification amounts as akin to credit card limits: just because someone says you can, doesn’t necessarily mean that you should. I always advise my buyers to purchase below their means if they can afford to do so.
Temporary buydowns are not a long term financial plan. They are a temporary solution that should be used with full understanding and caution. – Laura Corley, CrossCountry Mortgage
We’re on the brink of a recession, and if history repeats itself, the same population opting for TBDs and ARMs could also be the first to face layoffs. Many of these buyers expect to either make more money in the future or refinance their home if it appreciates normally. What if neither of these scenarios come to pass? We could find ourselves with today’s buyers underwater in the not-too-distant future.
Temporary buydowns have become a popular option because they appear to help everybody in what has proven to be an exceedingly (and increasingly) difficult market. They offer sellers higher net proceeds when compared with a price reduction that would result in an equal monthly payment for the buyer, they help buyers to manage soaring monthly housing costs, and they help real estate agents and mortgage lenders to continue transacting at a business-sustaining pace. Their full implications are yet to be seen. For now, we should be keeping as close of an eye on seller assist data as we do on home prices, especially as the homes that went under contract this and last month settle in November and December.
Almost everyone is feeling the pain of today’s viciously unhealthy housing market. Buyers who finance at all price points are getting sucker punched by high rates, cash buyers are still transacting on Philly homes that are 35% more expensive than they were three years ago, and anyone compelled to sell is often getting less than their neighbors did and waiting longer to get it. But many first timers and less financially solvent buyers are being forced to quit before they’ve even begun. I think we’re likely to see Philadelphia’s historically impressive homeownership rate take a serious hit in the years ahead, with potentially far-reaching consequences for the health of the city as a whole. Those who remain on the market should be advised to proceed with caution; all of us could benefit from revising our boomtime “consumption without consequence” mindset to better suit our impending reality.
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About Kira Mason
Kira is a realtor with Berkshire Hathaway Fox & Roach and The Kevin McGillicuddy Team, winner of the 2021 Chairman’s Circle award and ranked within the top 1% of the national Berkshire Hathaway HomeServices network. She independently won Homesnap’s “Fastest Growing Agent” award in 2021 and specializes in the purchase and sale of residential real estate in Philadelphia.
Kira runs the Substack Gritty City Real Estate, which you can read & follow free here and she is @kmasonrealtor on Twitter. She can be reached via e-mail at the address: contact@kiramasonrealtor.com.
Meta, Snap Surge After FCC Boss Says US Should Ban TikTok
Social media stocks jumped following an interview from Brendan Carr, one of five commissioners at the Federal Communications Commission (FCC), who told Axios that the Council on Foreign Investment in the US (CFIUS) should take action against the hugely popular (Chinese-owned) short-video app TikTok.
US lawmakers demanding TikTok banned from US phones is nothing new (see: here & here), but as Axios explained in Carr’s interview:
“It’s the strongest language Carr has used to date to urge action on TikTok. With more than 200 million downloads in the US alone, the popular app is becoming a form of critical information infrastructure — making the app’s ownership by a Chinese parent company a target of growing national security concern.”
Even though FCC has no authority to regulate TikTok directly, they can certainly call on Congress to act.
Axios said TikTok is in talks with CFIUS about whether it can be divested from ByteDance, a Chinese company, to an American company to remain operational in the US.
Though, Carr wasn’t too optimistic about the future of TikTok in the US. He indicated:
“I don’t believe there is a path forward for anything other than a ban.”
He warned there is increasing concern about the high amount of user data flowing back to China and the risk Beijing could influence US politics. He added:
There simply isn’t “a world in which you could come up with sufficient protection on the data that you could have sufficient confidence that it’s not finding its way back into the hands of the [Chinese Communist Party].”
News of Carr’s interview sent beaten down social media companies, such as Meta Platforms, up more than 3% on the session.
Snapchat jumped more than 5%.
A TikTok spokesperson responded to the interview by telling Axios:
“Commissioner Carr has no role in the confidential discussions with the US government related to TikTok and appears to be expressing views independent of his role as an FCC commissioner.”
“We are confident that we are on a path to reaching an agreement with the US Government that will satisfy all reasonable national security concerns.”
Just days ago, one of the Democratic Party’s leading figures, Sen. Mark Warner (D-Va.), head of the US Senate intelligence committee, admitted that President Trump was right regarding the security risks surrounding the video app.
Across the political spectrum, Republican lawmakers are in line with Democrats about TikTok:
“No surprise there, TikTok is just another invasive tool for communist China to infiltrate Americans‘ personal and proprietary information,” Rep. Ken Buck (R-Colo.) told The Epoch Times. “This app presents a very real threat to our national security, and the United States should take strong action to stop the CCP’s espionage campaign.”
(@VishBurra) 
