Morning Report – New Home Sales still depressed 2/25/15

Markets are down small this morning as we go into Day 2 of Janet Yellen’s Humphrey-Hawkins testimony. Bonds and MBS are flat.

New Home Sales fell to 481k from 482k in December. We are still at something like 34% of peak levels during the bubble, which is a historically recessionary level. Toll Brothers was somewhat bullish, and it seems like the spring selling season is improving, but tight inventory remains an issue. Given that builders have pushed price hikes about as far as they can go, in order to boost revenues, they will need to push through more units.

Chart: New Home Sales 1963 – Present

Mortgage Applications fell 3.5% last week. Purchases were up 4.6% while refis fell 7.5%. Rates jumped a lot for jumbos – from 3.92% to 4.09%, while the 30 year FRM forse from 3.93% to 3.99%. The 10 year picked up 6 basis points in yield last week as well. Mortgage rates did not follow Treasuries down during the plunge of late January, and therefore had held steady as rates went back up. It looks like we are back to mortgage rates moving with Treasuries. Not sure what is going on in jumbos, though – that is a big move.

Janet Yellen’s prepared remarks pretty much revealed nothing new. “Patient” still means 2 FOMC meetings. She came out strongly against the “audit the Fed” movement, pointing to 1970s inflation as the result of Congressional meddling in monetary policy. Elizabeth Warren laid into her like a prosecutor on cross over of matters, even getting Yellen to roll her eyes at one point. There was talk about possible regulatory relief for small community banks. For the most part, it was a non-event. Day 2 continues today in front of the House.

Mortgage REIT Annaly Capital reported better than expected earnings yesterday. It looks like they made few adjustments to their portfolio.  Their conference call is later today. Annaly is a big player in the TBA market, which is the starting points for loan pricing.

Big Box Home Improvement Retailer Lowe’s reported good numbers this morning as home improvement continues to drive sales. Can’t afford a new home? How about a new kitchen?

Retailer TJ Maxx is raising wages to $9.00 to compete with WalMart in attracting and retaining the best talent. While we are still nowhere near seeing anything that could be considered “wage inflation,” it appears we could be laying the ground work for it. Wage inflation and new home construction are the last pieces to the puzzle for the US economy.

3 Responses

  1. Can’t afford a new home? How about a new kitchen?

    Don’t know about not being able to afford it, so much as a lot of the homeowners I know are either looking at selling five-ish years from now or are planning on staying in their house for longer than that. Lots of upgrading and remodeling going on.


  2. Oh–and frist!


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