Morning Report: Housing starts fall 1/20/16

Another down day in stocks as global indices hit bear market levels. Yes, Virginia that is a 1-handle on the 10 year…

Housing starts fell in December from 1.17 million to 1.15 million, missing the 1.2 million Street estimate. Building permits fell from 1.28 million to 1.23 million, topping the 1.2 million estimate. Single-fam permits hit the highest level in 8 years. I sound like a broken record, but the economy isn’t going to hit the next level until housing construction returns to normalcy, about 1.5 million units per year. The plus side of this is that the housing deficit continues to grow, which means the rebound (when it happens) will be stronger and longer. Confidence and credit remain the issues at the moment.

Mortgage Applications rose 9% last week as refis rose 18.7% and purchases fell 1.6%. With the 10 year trading below 2% again, there should be refinance opportunities. With the 10 year yield falling and the Fed Fund rate increasing, the strategy to pitch is to swap out of an ARM (which is pegged to short term rates) and into a 30 year fixed.

Inflation remains under control, as the consumer price index fell 0.1% in December. Ex-food and energy it increased 0.1%.

The dramatic sell-off in the markets has taken down rate hike expectations out of the Fed. You can see this in the 2 year bond yield, which has fallen 25 basis points since late December. This forecast was borne out in the latest Bank of America survey on the economic outlook. A month ago, 40% of fund managers expected no more than 2 rate hikes in 2016. Now that number is closer to 50%.

Earnings season is upon us, and the first companies to report are out of the banking sector. The main theme: a withdrawal from mortgage banking. The only big bank to report an increase in mortgage banking? Wells. Jamie Dimon said on JP Morgan’s conference call that the banks remain under assault. And politicians in DC continue to scratch their heads and wonder why the economy remains tepid.  Refer to housing starts above.

19 Responses

  1. Frist!

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  2. So looks like Bernie is going to give Clinton a race. And that tells you all you need to know about Clinton. She sucks ass at this. There is no reason — not one — that this should be close at all.

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    • nova:

      There is no reason — not one — that this should be close at all.

      What about Hillary’s legal issues? Isn’t it possible that potential Hillary voters are turned off by her obvious corruption and lies? I don’t know if this e-mail scandal is hurting her much, but it certainly should be. It should be difficult to get elected president while at the same time one is headed to a jail cell.

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      • I’m not sure how much the more damning details of Hillary’s email scandal are getting out to the lower information voters. I think it’s mostly Bernie’s promise of way more free goodies and a Peace in Our Time foreign policy that’s making him competitive with the Democratic base.

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      • the left could’t care less about hillary’s legal issues.. she could get caught with a freezerfull of cash and a dead body in the basement and democrats wouldn’t care…

        Gotta find a D replacement before RBG keels over…

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        • Brent:

          Gotta find a D replacement before RBG keels over…

          I have a bad feeling that even a President Trump would suffice for those purposes.

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  3. Bernie is now acting like a pol who thinks he can win…

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  4. It’s still Clinton’s to lose. but this should be like an NFL team playing a college team.

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  5. I suspect the media is pulling for Bernie. Once she has the nom, she will walk on water..

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  6. until she faceplants. they can’t carry here the whole way.

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  7. My husband was just asking me last night who the hell we’re supposed to vote for……he doesn’t like Hillary or Bernie and the R’s are ridiculous to him. He’s been watching their debates.

    It’s gonna be a rough year and so I mentioned voting for Gary Johnson and he’s considering it. He used to work with me on third party candidates so maybe we’ll finish out our voting career the same way we started…..LOL

    I’m certainly not in love with Gary Johnson but compared to anyone else who is running I guess I’d give him a shot!

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  8. Academy Members Defend Their Oscar Votes: “To Imply We Are Racists Is Extremely Offensive”

    Now dance for us boy.

    http://www.hollywoodreporter.com/race/oscarssowhite-academy-members-defend-oscar-857416

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  9. There’s the tell, Trump is Cruz’s stalking horse.

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  10. I’m already tired of Sarah Palin and it’s only been 36 hours. . .

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    • Look, she’s got to hitch her wagon to something. And I’m all for her flipping the bird to the GOP. I’m a believer in the free market, and the GOP is doing a bad job of managing their company. And they aren’t too big to fail.

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