Morning Report – Home Prices continue to rise 5/21/15

Stocks are mixed as economic data continues to come in. Bonds and MBS are up small. Lots of economic data today.
Existing Home Sales fell to 5.04 million in April from 5.21 in March, according to the NAR. Inventory is still low, however the situation is improving, with the unsold inventory increasing to 5.3 months’ worth from 4.6 months in March. The median home price rose to 219,400, which is up 8.9% year-over-year. Real estate prices are getting frothy, as the median home price to median income ratio is now 4x, which is higher than its historical range of 3.2x – 3.6x. Low interest rates are playing a part here. That said, home price appreciation will be tough to come by going forward until we get some more wage growth. At some point, the builders will begin pumping out supply.

Initial Jobless Claims came in at 274k, which is a very good number. The labor numbers continue to look okay, however it is a bifurcated market, where people with jobs are keeping them and the long term unemployed have given up.
Consumer Comfort fell to 53.8 from 54.1, however the big number was the steep drop in economic expectations: from 50 to 44.
The Chicago Fed National Activity Index improved in April from -.36 to -.15. The Markit US Manufacturing PMI fell to 53.8 from 54.1, the Philly Fed index fell to 6.7 from 7.5, and the Index of Leading Economic Indicators jumped from 0.4% to 0.7%.
The ECB threw a nickel to Greece yesterday, giving them the smallest aid rise ever. Greece is warning that it will default in June, unless it gets more aid. Whatever money they have is going to go to public sector workers and pensioners. While both sides want Greece to stay in the Euro, their left wing government is complicating things. Which means the bond market will be susceptible to violent swings as we sort this out.
The markets generally took the FOMC minutes to be dovish, and focused on the fact that only “a few” members of the Committee believed it would be appropriate to raise rates at the June meeting. They still believe that the first quarter weakness was “transitory” due to bad weather and the West Coast port strike. That said, the economy seems to not be exhibiting the same sort of rebound we saw last year, where we had a weak Q1 followed by a strong Q2 and Q3. We are definitely not seeing the same sort of rebound in economic activity this year. The Fed noted the additional volatility in the bond market (as has pretty much everyone in the mortgage business) and attributed it to the increasing presence of high frequency traders, lower dealer inventory, and the elevated holdings of bond funds. The minutes more or less confirmed the direction of market forecasts – a September hike is becoming more likely and a June hike less so.

6 Responses

  1. Frist!

    Feel my fristing. That’s right, I fristed you all but good!

    Like

  2. These are hoaxes, right? Or attempts to bring attention to the concepts of Animal Rights, not real concern over giving offense to animals, correct?

    Like

  3. how was Mad Max?

    Like

  4. Outstanding! Road Warrior is still the best but MM:FR is a very worthy successor. Non stop action, stunt after stunt and the trailers really don’t do it justice.

    I enjoyed it.

    Like

  5. Still my favorite Letterman skit:

    Like

  6. Heh.

    Rules are for the people under me.

    Like

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