Morning Report: Real estate prices rising, but problems developing at the high end? 4/26/16

Talk about it here:

Stocks are up this morning on overseas strength. Bonds and MBS are flat.

The S&P / Case-Shiller index of home prices rose .66% on a MOM basis and is up 5.38% YOY. Their take on the housing market: “Mortgage defaults are an important measure of the health of the housing market. Memories of the financial crisis are dominated by rising defaults as much as by falling home prices (see first chart). Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004. Moreover, the figure has drifted down in the last two years. While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession.”

In other economic news, durable goods orders rose 0.8% in March, versus Street expectations of an increase of 1.9%. Capital Goods orders (a proxy for business capital investment) was flat. The Markit US Services PMI and the Markit US Composite PMI indices both improved in April. The Richmond Fed Manufacturing index fell, as did consumer confidence.

The FOMC begins their two day meeting today. Here is Mohammed El-Arian’s take on what to look for in the statement. Here is a more in-depth parsing of what the Fed may say and what it means.

What is going on this weekend aside from the NFL draft? Buffetapalooza or Woodstock for Capitalists. The Berkshire Hathaway shareholder meeting in Omaha, where you can play ukelele with the Fruit of the Loom guys listen to Warren wax poetically about value investing. This year, it will be streamed live.

We are starting to see weakness in the top end of the hottest real estate markets as supply surges and foreign demand begins to wane. Will it spread?

Did you know Trump and Hillary share the same address?

Get Your Piece of ARAMCO 4/26/16

The 31 YO rising star of the Saud dynasty, Mohammed bin Salman, has announced a broad goal of bringing Saudi Arabia into the mid 19th Century by 2030.  Being an incrementalist myself, I recognize some movement out of the Ston[ing] Age as a positive.

One worry everyone in the west seems to share is that the blowback from other parts of the family will stifle this little candle in the night.

I also must wonder if it is a good business decision to do an IPO of 5% of the nation’s wealth when the current pricing for its one commodity is low.  That move has an air of desperation to me.


Am I wrong?  Why?


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