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Authored by Mike Shedlock via MishTalk.com,

It’s a perfect time to do something really stupid, like offering zero percent down payments on mortgages.

Case-Shiller national and 10-city indexes via St. Louis Fed, OER, CPI, and Rent from the BLS

Perfectly Stupid Timing

Morningstar reports One of the Biggest U.S. Lenders is Offering 0%-Down-Payment Mortgages for First-Time Home Buyers.

Not Like 2008?!

• Housing prices are stretched

• The economy is slowing

• The lender has no cushion against falling home prices

• There are indications of steeply falling homes in many markets.

OK, we don’t have massive liar loans like we did in 2008. But mortgage affordability is the lowest ever, and unemployment is starting to tick up.

Anything to Keep the Bubble Going

To top it off, these mortgages are explicitly for people who make 80% or less of an area’s median income.

How dumb is that? In general, such borrowers have no down payment, if any savings at all, and many are already likely on the edge.

It would make more sense giving these mortgages to those who make 120% or more of an area’s median income, provided they also have little debt, and just lack the down payment.

Vote Buying

President Joe Biden called on Congress to provide up to $25,000 in down-payment assistance to first-generation home buyers in his State of the Union Address.

These vote buying proposals to keep the economy humming long enough to win an election are always at the expense of those who fall for the scheme.

The loss of a job or any unexpected debt will throw these buyers right over the cliff.

There are many signs a slowdown is underway.

Economic Slowdown Underway

May 24, 2024: Another Massive Revision, This Time Durable Goods, What’s Going On

May 23, 2024: New Home Sales Sink 4.7 Percent on Top of Huge Negative Revisions

May 22, 2024: Discretionary Spending Tumbles at Target, Shares Drop 10 Percent

May 22, 2024: Existing-Home Sales Decline 1.9 Percent, Sales Mostly Stagnant for 17 Months

Key Highlights

• Existing-home sales faded 1.9% in April to a seasonally adjusted annual rate of 4.14 million. Sales also dipped 1.9% from one year ago.

• The median existing-home sales price rose 4.8% from March 2023 to $393,500 – the ninth consecutive month of year-over-year price gains and the highest price ever for the month of March.

• The inventory of unsold existing homes climbed 9% from one month ago to 1.21 million at the end of April, or the equivalent of 3.5 months’ supply at the current monthly sales pace.

Big Negative Revisions to BLS Monthly Jobs in 2023

On April 24 the BLS released a little-read jobs report that shows reported jobs in 2023 may be wildly overstated.

Business Employment Dynamics (BED) data and and Monthly Job Data both from the BLS, chart by Mish

On April 24, I commented Expect Big Negative Revisions to BLS Monthly Jobs in 2023, GDP Too

The BED report is based on records on 9.1 million private sector establishments. Current Employment Statistics (CES) is the monthly jobs report based on 670,000 establishments.

Obviously, the BED report is more timely, but it lags. CES provides an opportunity for economists (and the president) go gaga over numbers likely to be wildly wrong.

CES Overstatement

• 2023 Q2 CES Overstatement: 489,000 Jobs

• 2023 Q3 CES Overstatement: 832,000 Jobs

• Q2+Q3 Overstatement: 1.321 Million Jobs

Thus, the BLS says that the BLS monthly job reports for 2023 Q2 and Q3 are overstated by a total of 1.321 million jobs.

Zero Percent Down Synopsis

An economic slowdown is underway (see five previous links).

Jobs are overstated by 1.3 million, discretionary spending is faltering, and UWM (UWMC) is offering zero percent down mortgages to buyers most likely to get in trouble if anything goes wrong.

For discussion of the lead chart, please see Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation

Other than the late stages of the 2008 housing bubble, there has been no worse time in history to offer zero percent down mortgages.