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Government and central bank intervention have created a new housing bubble

Today's mortgage market is much more regulated and has much stronger fundamentals than during the housing bubble of the mid-aughts, but it's not a story that's as simple as rising demand and low supply.

What's happening: Unlike the environment ahead of the 2008 crash, housing prices are not being driven higher by a raft of underqualified borrowers getting mortgages they can't afford from unscrupulous banks.


  • They're being driven by government and central bank intervention — radically increased money supply, mortgage forbearance, stimulus checks, low taxes and low interest rates.

Driving the news: Mortgage applications decreased for the second week in a row, down 0.9% from one week earlier, according to data from the Mortgage Bankers Association (MBA) for the week ending April 30, 2021.

  • Both conventional and government purchase applications declined, but average loan sizes increased for each loan type.
  • Applications have fallen in 8 of the past 9 weeks and 13 of the 18 weeks so far this year, according to MBA's data.
  • Yet prices have only risen higher, with existing homes reaching a record high average sales price of $329,100 in March.

By the numbers: CoreLogic's latest report finds housing prices increased 11.3% in March over March 2020 — the most in 15 years — and were up 2% from February when prices jumped by 10.4%, which had been the largest annual increase since 2006.

  • Boise, Idaho, led all metropolitan areas with a year-over-year increase of 27.7%.

What they're saying: "This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity," Joel Kan, MBA’s associate vice president of economic and industry forecasting, says in a statement.

  • "The higher prices are also affecting the mix of activity, with stronger growth in purchase loans with larger-than-average balances.”

Between the lines: Economists have been quick to point to a lack of housing stock as the reason for rising prices, but homebuilders already have ramped up new home construction.

  • In fact, new homes made up more than a quarter (25.7%) of single-family homes for sale in the U.S. during the first quarter. That’s up from 20.4% a year earlier and represents the highest share on record, according to Redfin.
  • New home prices are only expected to rise further as prices for homebuilding essentials such as lumber, steel, copper, aluminum and corn jump.
  • New homes are on average more than $35,000 more expensive than they were last year.

The bottom line: This isn't your older brother's mortgage bubble. It's a paradigm shift in the market that could be here for quite some time.

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Why the startup world needs to ditch "unicorns" for "dragons"

When Aileen Lee originally coined the term "unicorn" in late 2013, she was describing the 39 "U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors."

Flashback: It got redefined in early 2015 by yours truly and Erin Griffith, in a cover story for Fortune, as any privately-held startup valued at $1 billion or more. At the time, we counted 80 of them.

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Scoop: Facebook's new moves to lower News Feed's political volume

Facebook plans to announce that it will de-emphasize political posts and current events content in the News Feed based on negative user feedback, Axios has learned. It also plans to expand tests to limit the amount of political content that people see in their News Feeds to more countries outside of the U.S.

Why it matters: The changes could reduce traffic to some news publishers, particularly companies that post a lot of political content.

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Scoop: Amazon quietly getting into live audio business

Amazon is investing heavily in a new live audio feature that's similar to other live audio offerings like Clubhouse, Twitter Spaces and Spotify's new live audio platform, sources tell Axios.

Why it matters: As with Amazon's efforts in podcasting and music subscriptions, the company sees live audio as a way to bolster the types of content it can offer through its voice assistant, Alexa, and its smart speaker products.

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Hurricane Ida exposes America's precarious energy infrastructure

The powerful hurricane that plunged New Orleans into darkness for what could be weeks is the latest sign that U.S. power systems are not ready for a warmer, more volatile world.

The big picture: “Our current infrastructure is not adequate when it comes to these kinds of weather extremes,” Joshua Rhodes, a University of Texas energy expert, tells Axios.

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"We must go further": 70% of adults in European Union are fully vaccinated

About 70% of adults in the European Union are fully vaccinated against COVID-19, Ursula von der Leyen, the president of the European Commission, said Tuesday.

Why it matters: The milestone makes the E.U. one of the world's leaders in inoculations, after an initially lagging vaccine campaign, the New York Times notes.

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What Elizabeth Holmes jurors will be asked ahead of fraud trial

Jury selection begins today in USA v. Elizabeth Holmes, with the actual jury trial to get underway on Sept. 8.

Why it matters: Theranos was the biggest fraud in Silicon Valley history, putting both hundreds of millions of dollars and thousands of patients' health at risk.

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