House Republicans wont budge on demands for federal spending cuts in return for agreeing to lift the debt ceiling and avoid a US payment default, GOP Representative James Comer said.

Republicans who gained control of the House in the US midterm election campaigned on the the fact that we were going to be serious about spending cuts, Comer, who heads the House Oversight Committee, said Sunday on CNNs State of the Union.

The Democratic-led Senate is going to have to recognize the fact that were not going to budge until we see meaningful reform with respect to spending, he said.

Prospective talks on raising the debt ceiling are quickly emerging as a potentially global flashpoint. US Treasury Secretary Janet Yellen said last week the department will begin taking special accounting maneuvers on Jan. 19 to avoid breaching the debt limit and urged lawmakers to boost the ceiling to avert a US default.

The debt ceiling is no doubt going to be a knife fight, Representative Tony Gonzales, a Texas Republican, said on Fox News Sunday. 

Yellens warning kicked off what is likely to be a prolonged political battle over US fiscal policy, a showdown that could strain financial markets and elevate dangers for an economy battling inflation and already facing the risk of recession. Economists expect the Treasury will run out of cash around August if the debt ceiling isnt boosted.

Rep. John Garamendi, a Democrat from California, said using the debt ceiling as leverage could backfire on Republicans. 

Republicans should learn from their own history that using the debt limit as a lever to gain some sort of political advantage or some policy change really doesnt work well for them and terrible for the American economy, he said on Fox News.

Some economists and bond strategists are warning of the risk of the kind of turmoil seen in 2011, when a debt-ceiling standoff led to S&P Global Ratings downgrading the sovereign US rating from AAA. Equities tumbled around the world and US consumer confidence was hit.

With assistance from Ian Fisher.

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Crypto investors have been starved for good news for months and late on Friday they finally got some: Bitcoin unexpectedly soared past the $20,000 mark for the first time since the calamitous implosion of the FTX exchange last November.

The surprise rally was holding up as of mid-day Sunday with Bitcoin trading around $20,600 after briefly eclipsing $21,000 on Saturday. The weekend breakout comes after Bitcoins price had been stuck in a narrow band around $17,000 for weeks.

Fans took to Twitter to celebrate the recent uptick, noting it was Bitcoins biggest one week gain in almost two years, and that the currency appears to have already bounced back from FTXs demise, which many regarded as an existential event for the crypto industry.

Meanwhile, the CEO of the worlds biggest exchange, Binance, used the rally to mock celebrity stock picker Jim Cramer, who has been famously wrong about crypto on numerous occasions and on January 9 suggested it was a good time for investors ditch their crypto positions.

Its no surprise to see crypto boosters taking a celebratory lap after the recent rally, which represents a gain of more than 20% for Bitcoin. What is less clear is the cause of the uptick and whether it is sustainable.

The most common explanation for Bitcoins bounce back is a spate of positive macroeconomic news, notably reports that inflation is easing. The price of cryptocurrencies have historically tracked trends in the larger economy with investors more willing to be on them when times are good, so Bitcoins recent gains are likely explained in part by the Labor Departments latest Consumer Product Index.

Not everyone is convinced Bitcoins upward momentum is here to stay, however. One analyst told Bloomberg that recent trading patterns suggest prices are unlikely to go past $21,500, pointing to deeply overbought short-term readings [that] challenge positive momentum.

Meanwhile, one quant analyst told The Block that Bitcoins recent surge might be driven by futures traders looking to exploit short-term liquidity gaps at a time when a number of big players have left the crypto market. This could mean the recent rally is a temporary blip rather than a broader return of investor confidence. The analyst added, however, that he believes the market is near the bottom.

In any case, history shows that Bitcoin is highly subject to momentum and that it has embarked on long-term rallies at times when many mainstream investors have written it off. Finally, Bitcoins fundamental value propositionthat it is a new type of decentralized and unhackable digital moneyremains true even as the broader crypto market staggers through its worst period in recent memory.

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On one hand, the 2.4% drop in U.S. home prices seen between June and October is small relative to the housing crashs 26% national home price decline from the top in 2007 to the bottom in 2012. On the other hand, the ongoing home price correction might have a lot of gas left in the tank.

Look no further than a Goldman Sachs paper put out last week with the title Getting worse before getting better. Researchers at the investment bank argued in the paper that the national home price correction will continue through 2023.

We are lowering our 2023 forecast for year-over-year depreciation in the Case-Shiller Home Price Index to -6.1% from -4.1% previously. This would represent an aggregate peak-to-trough decline of roughly 10% in U.S. home prices through the end of this year from June 2022, write Goldman Sachs researchers.

Through October, the lagged Case-Shiller National Home Price Index has registered a -2.4% national home price decline. However, researchers at the investment bank estimate once we get the November and December readings, well see national home prices are already down -4%. That means we might already be half-way to Goldman Sachs estimated 10% peak-to-trough decline.

Nationally, a 10% peak-to-trough decline in U.S. home priceswhich climbed 41% between March 2020 and June 2022shouldnt do too much financial damage, says Goldman Sachs. However, the firm says some regional markets wont be so lucky.

This [national] decline should be small enough as to avoid broad mortgage credit stress, with a sharp increase in foreclosures nationwide seeming unlikely. That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021, writes Goldman Sachs.

In 2023, Goldman Sachs expects double-digit home price declines in major markets like Austin (-15.6), San Francisco (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the very places that the home price correction hit the hardest in the second half of 2022. Indeed, through November, Austin is down 10.4% from its 2022 peak home price.

Why does Goldman Sachs expect the correction to deliver the biggest blow to markets like San Diego and Austin? The investment bank says those markets are "overheated," which implies that home price growth there got too detached from fundamentals during the Pandemic Housing Boom. Being detached from fundamentals packs a particularly hard punch when mortgage rates spike like they did in 2022.

Heading forward, Goldman Sachs thinks many Northeastern, Southeastern, and Midwestern markets could see milder corrections (if any correction at all). In 2023, the investment bank expects home prices to barely fall in places like Chicago (-1.8%) and New York (-0.3%), while its forecast has home prices rising in Baltimore (+0.5%) and Miami (+0.8%) in 2023.

"Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with 10-year Treasury yields peaking in 2023 Q3. As a result, we are raising our forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023 (representing a 30 bp increase from our prior expectation)," write Goldman Sachs researchers. "This path would cause affordability to worsen incrementally, after a slight improvement over the past two months."

While the investment bank expects U.S. home prices to fall 6.1% in 2023, it doesn't expect a prolonged downturn like the previous bust: In 2024, Goldman Sachs expects U.S. home prices to rise 1% even as markets like Austin and Phoenix continue to fall.

"Assuming the economy remains on the path to a soft landing, avoiding a recession, and the 30-year fixed mortgage rate falls back to 6.15% by year-end 2024, home price growth will likely shift from depreciation to below-trend appreciation in 2024," writes Goldman Sachs.

Whether it's Goldman Sachs' forecast or Moody's outlook, the biggest wildcard for any home price forecast model remains mortgage rates. (You can find the latest home price forecast from 27 of the nation's leading real estate research firms here.)

At the peak in November, the average 30-year fixed mortgage rate as measured by Mortgage Rate Daily sat at 7.37%. However, following positive news on the inflation front the past few months, financial conditions have loosened and the average 30-year fixed mortgage rate has fallen to 6.09%. If mortgage rates were to continue falling, firms like Goldman Sachs might have to start upgrading their home price outlooks.

Looking for more housing data? Follow me on Twitter at @NewsLambert.

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Carl Hahn, who led Volkswagen AGs international expansion in the 1980s after directing the rise of the Volkswagen Beetle in the US in the 1960s, has died. He was 96. 

Hahn died in his sleep on Saturday at his home in Wolfsburg, Germany, according to a spokeswoman from his charitable foundation. A ceremony is planned for Jan. 24. 

Carl Hahn was a great visionary and a great personality, Oliver Blume, current CEO of the German carmaker, said in emailed statement on Sunday. Volkswagen AG and Wolfsburg owe Carl Hahn a great debt of gratitude and mourn with his family.

As head of New York-based Volkswagen of America Inc. from 1959 to 1964, Hahn took a hands-on approach to selling cars. He toured the US in a VW bus, using his charisma and excellent English to turn Americans onto the Volkswagen way, Andrea Hiott wrote in Thinking Small: The Long, Strange Trip of the Volkswagen Beetle (2012). He computerized Volkswagens offices and standardized service to increase efficiency.

Most important, he brought Volkswagen to Madison Avenue, choosing Doyle Dane Bernbach which became DDB Worldwide, part of Omnicom Group Inc. to design what Advertising Age magazine called the top campaign of the 20th century. 

As conceived by art director Helmut Krone and copywriter Julian Koenig, the plan included the unconventional print ads Think Small, celebrating the compact size of the Beetle, and Lemon, focusing on quality control.

At a time when US automakers were running stupid advertising focusing on the ever-changing looks of their cars, VW and DDB presented our philosophy of a car that doesnt change for the reason of change, only for the benefit of the consumer, Hahn said in a 2011 talk at the University of California-Berkeleys Haas School of Business.

Hahns marketing skills helped the Beetle become the best-selling single car model in history, with more than 21.5 million produced between 1945 and 2003. Though commissioned and envisioned by Adolf Hitler, the Beetle was embraced by America, where it inspired artists, transported hippies and starred as Herbie in the Disney movie franchise that began with The Love Bug (1968). 

Hahn returned to VW headquarters in Wolfsburg following his election to Volkswagens governing board in 1964 and led the sales department. He lost his seat in a shakeup that took effect in early 1973 and left VW to lead Continental Gummi-Werke, Germanys largest rubber company, a forerunner of Hanover, Germany-based Continental AG. 

In 1982, Volkswagen brought Hahn back as chairman and CEO following the resignation of Toni Schmucker. During Hahns tenure, Volkswagen became the No. 1 carmaker in Europe, opened new plants in China and Eastern Europe, acquired the Spanish car company Seat SA, and introduced new versions of its Golf model, known in the US as the Rabbit.

Following the fall of the Iron Curtain, Hahn put Volkswagens industrial might behind German unification, building plants in the formerly communist East, and entered a joint venture with Czech carmaker Skoda Auto.

At his retirement at the end of 1992, Hahn told Automotive News that his biggest regret was losing market share in the US, where he had first made his mark.

Global vision

My objective was to make a global network out of a company that was a big exporter and had many foreign subsidiaries, he said.

Carl Horst Hahn Jr was born on July 1, 1926, in Chemnitz, part of the Saxony region of eastern Germany, to Carl Hahn and the former Maria Kusel. His father headed sales for Auto Union AG, the carmaker that is a forerunner to what became Audi AG.

Drafted as a teenager into the German military, Hahn ended World War II in a US-run prison camp in Ingolstadt, he told a German newspaper in 2011.

He fled communist East Germany for the West after the war, earning a doctorate in economics from the University of Bern in 1952. He trained in Italy for Fiat and worked in Paris for the Organization for European Economic Cooperation.

Fast rise

From Paris, he wrote to Heinz Nordhoff, Volkswagens postwar leader, offering his idea for exporting cars throughout Europe. Nordhoff liked Hahns way of thinking, if not his specific proposal, and hired him in 1954 as personal assistant, Hiott wrote in Thinking Small. Hahn soon was promoted to the export department, then landed the assignment to open the US market.

At the time, Hiott wrote, the US was finally beginning to take a second look at the little car that it had rejected and ridiculed for so long the Beetle. By the mid-1950s, while most adult Americans still identified the car with Hitler and the war, there was now a new generation that had come of driving age who had less connection to the cars turbulent history.

They had nobody assigned to America, Hahn recalled in 2011. I had never been to America. I learned, apparently very fast, to get to know and understand America. And I loved it.

With the US-born former Marisa Traina, whom he married in 1960 and who died in 2013, Hahn had four children and nine grandchildren. 

With assistance from Chris Reiter.

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At least 68 people were killed after a Yeti Airlines flight crashed in Nepal on Sunday just seconds before it was due to land, the latest deadly air disaster in the Himalayan nation.

The twin-engine ATR-72 turboprop, which took off from Kathmandu at 10:32 a.m. local time, crashed close to Pokhara airport at around 11 a.m., Sanjay Kumar, deputy director of the Civil Aviation Authority of Nepal, said by phone. There were 68 passengers and four crew members on board, airline spokesman Sudarshan Bartaula said. 

The flight crashed 10 to 20 seconds before landing, Bartaula said. There was no distress call from the cockpit before the disaster, he said. Nepals armed forces and police are carrying out rescue operations, Kumar said.

There were 15 foreigners on board including those from India, France, Australia, Ireland, Russia and Korea, the Civil Aviation Authority of Nepal said.

The weather was clear when the aircraft crashed, said Kumar. 

ATR said in a statement Sunday that it has been informed about the accident and its specialists are fully engaged to support both the investigation and the customer.

Pokhara, in central Nepal, is a lakeside tourist mecca nestled below the Annapurna mountain range.

Flying is notoriously risky in Nepal, the picturesque Himalayan nation thats a favorite with adventurous tourists, pilgrims and mountaineers. In May, a Tara Air plane carrying 22 people from Pokhara crashed in the mountains, killing all on board. 

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The World Health Organization urged China to share more detailed information on its coronavirus situation after Beijing reported that there had been almost 60,000 Covid-related deaths in the country since early last month. 

WHO chief Tedros Adhanom Ghebreyesus reiterated the importance of Chinas deeper cooperation and transparency in talks with Ma Xiaowei, director of the Asian nations National Health Commission, according to a statement on Saturday.  

While Beijing reported earlier that the omicron sub-lineages BA.5.2 and BF.7 are currently circulating in the country, the WHO asked for a more detailed breakdown of Covid data from China, including information on further sequences.

Chinese authorities reported on Saturday that there had been a total of 59,938 Covid-linked deaths at hospitals across the country between Dec. 8 and Jan. 12. Global health officials have expressed concern about on a lack of timely information sharing in China, with some countries imposing restrictions on Chinese travelers.

WHO said it is analyzing the latest information and the overall epidemiology situation in China, which is experiencing a rapid and intense wave of infections with higher clinical impact on older people and those with underlying conditions. The outbreaks are similar to the experiences of other countries, with increased pressure on health services.

China will continue to support the role of the WHO in pooling international efforts to fight the virus, the National Health Commission cited Ma as saying in a statement. 

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The Federal Reserve raised rates at the fastest pace in 40 years in 2022, causing savings and money market accounts to reach levels that savers havent seen since 2008.

Bankrate Chief Financial Analyst Greg McBride, CFA, says to expect top-yielding savings and money market rates to hit 5.5% annual percentage yield (APY) in the middle of 2023, reaching 2007 levels. He also expects those yields to end the year at around 5.25% APY. Both top yields are for nationally available accounts.

The Fed should be comfortable moving to the sidelines if inflation begins decreasing, like weve started to see just in the past month or two, for a period of time, McBride says.

I want to be specific: Im not saying that inflations going to hit their 2% target by the middle of the year and theyre going to move to the sidelines, McBride says. No way. Its just theyre going to feel comfortable enough that its moving in the right direction and that theyve put enough rate hikes in effect to sustain that.

Key takeaways:

  • Top-yielding savings and money market rates are projected to peak at around 5.5% APY in the middle of the year and to end the year at 5.25% APY, according to McBride.
  • The national average rate for savings accounts will be 0.29% by the end of 2023, McBride forecasts, while predicting an average of 0.34% for money market accounts.

Savings and money market account rates surged in 2022

The federal funds rate decreased to near-zero levels on Sunday, March 15, 2020during an emergency meetingand stayed there until March 16, 2022. It didnt take long for savings rates to recover and raise APYs to compete for deposits.

Savings and money market accounts at top-yielding banks soared to levels savers havent seen in more than a decade in 2022, closing out the year at 4.16% APY for savings and 4.15% APY for the top money market yield.

The national average for savings accounts ended 2022 at 0.20% APY and 0.25% APY for money market accounts.

Higher yields were a win for savers, but they also had to contend with decades-high inflation. That surging inflation was the main reason that the Fed raised ratesusing its rate-raising tool to try to cool the economy.

Both the top-yielding savings account and the top money market account began 2022 at 0.55% APY. The national savings average yield was 0.06% APY at that time, and the money market account national average was a little higher, at 0.07% APY.

Expect banks to fiercely compete for your deposits

Top-yielding online banks are competing for your money. This was the trend for most of 2022 and should continue in 2023. While savings and money market yields are expected to peak in the middle of 2023, youre not going to find APYs this high everywhere, McBride says.

Particularly for online banks or smaller community banks that dont have the marketing budgets of their larger competitors, the one effective way to boost deposits is to pay a better rate, McBride says. And thats the path that theyll follow. And as a saver, if you go down that path too, you win.

This high inflation and increasing savings yield environment is unique.

Even if rates held steady and inflation came down, thats a win for savers, says McBride. And so, you get rates to go up and inflation to come downthats the holy grail. Thats going to be a very positive backdrop for savers in that rates will continue to rise a bit more and that well start to see inflation pulling back.

Next steps for savers

So, what should consumers do with these predictions? McBride says only one in four Americans has an adequate emergency savings account.

For the majority of households, their focus should be on emergency savings shoring that up first. And I think the environment is certainly very positive.

Greg McBride, CFABankrate chief financial analyst

Its going to be the most positive at online banks. So you have to be willing to move your savings account to one, McBride says.

Its not an all-or-nothing decision, says McBride. Youre not talking about severing your entire banking relationship. You can just move your savings and then link it to the checking account you have with your current financial institution. But you have to be willing to move that savings in order to get the higher rate of return.

As rates increase, the disparity between the top-yielding banks and the average yields is going to continue to grow, McBride says.

Thats why its important to shop around and compare banks to find the best account for you.

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