Stocks are lower as earnings have been generally disappointing. Bonds and MBS are up small.
Earnings season is off to a lousy start, highlighted by a miss from Apple. The stock is down 8% pre-open. IBM and United Technologies (which is selling its Sikorsky unit to Lockheed) reported disappointing earnings as well. The NASDAQ has been hitting records lately (it finally eclipsed its early 2000 high), but earnings are looking like a headwind.
Existing home sales rose 3.2% to a seasonally adjusted annual rate of 5.49 million units, the highest number in 8 years. Lawrence Yun, NAR chief economist, says backed by June’s solid gain in closings, this year’s spring buying season has been the strongest since the downturn. “Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” he said. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”
Inventory remains tight as a drum, with 5.0 month’s worth of inventory, well below the 6.5 months that historically represents a balanced market. Time on market hit a record low of 34 days, down from 40 in May. The first time homebuyer represented 30% of sales, down from 32% in May and below its historical run rate of about 40%. All-cash sales fell to 22%, the lowest since December 2009.
The median house price rose to $236,400 a new record. Yes, we have surpassed the heights of the bubble years. That puts the median house price to median income ratio at a sporty 4.4x, well outside its traditional range of 3.15x – 3.6x and not far off its record of 4.8x. Either wage growth gets on its horse or further home price appreciation is going to be hard to come by.
Mortgage Applications rose 0.1% last week as purchases rose 1% and refis fell .5%. The 30 year fixed rate mortgage has been stuck at 4.23% for the last 3 weeks.
House prices rose 0.4% in May, according to the FHFA. On a year-over-year basis, prices are up 5.4%. Home prices are now about 1.8% from the peak in 2006. Note that this index only considers homes with conforming / government mortgages, so it excludes the jumbos and cash sales. While home price appreciation is accelerating nationwide, it is actually decelerating in the markets that have lagged the most – the Northeast and the Mid-Atlantic states. It has truly been a tale of two markets, with the red-hot West Coast and the ice-cold East Coast. That may be a result of increasing foreclosure activity in the Northeast / Mid-Atlantic judicial states.
Washington is looking for a way to fund infrastructure spending without raising the gasoline tax. It looks like at least one possibility would be to extend the 10bp Fannie Mae G-fee to 2025 from 2021. Banks may also see less dividend income on the shares of regional Fed bank stock they must hold.
Freddie Mac’s latest Housing Market Insight and Outlook is out, along with their forecasts for 2015 and 2016. 2015 GDP is forecast to be 2.2%, while 2016 is forecast to be 2.7%. The 30 year fixed rate mortgage is expected to be 4.0% for 2015 and 4.9% for 2016. Originations are expected to fall from 1.35T to 1.27T. They discuss why low downpayment loans are less risky now than they were in the bubble days.
Filed under: Morning Report |