Morning Report: The Fed stands pat 7/28/16

Vital Statistics:

Last Change
S&P Futures 2159.5 -1.0
Eurostoxx Index 341.6 -1.2
Oil (WTI) 42.0 0.1
US dollar index 87.5 -0.2
10 Year Govt Bond Yield 1.56%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.52

Stocks are lower this morning after the FOMC statement yesterday. Bonds and MBS are down small.

The FOMC statement from yesterday was relatively upbeat about the economy, but gave none of the signals that a September rate hike would be in the cards. They noted that May’s exceptionally weak jobs report was offset by the improvement in June. There was none of the “risks to the economy balanced” “risks to the economy tilted to the upside” language that would have been taken as a signal that they were contemplating a September hike. Note historically the Fed has tried to stay out of the way during election years, particularly in September, for fears of appearing political. With inflation well contained, they will probably maintain that posture. No reason not to.

There wasn’t much reaction to the statement yesterday. Stocks had been down on the day, rallied on the announcement and then suffered a late day sell-off that took them right back to where they were pre-announcement. The two year bond yields fell 2 basis points and the 10 year fell 4. The Fed Funds futures are now pricing in a 100% chance of a rate hike by next year this time.

Initial Jobless Claims rose to 266k last week. Consumer comfort was flat.

Where is the most expensive place to buy a starter home? Honolulu, where the income required to buy a starter home is over 6 figures and the median income is somewhere around $75k. Unsurprisingly, the West Coast dominates the unaffordable area. On the other side of the coin, if you make just over minimum wage, you can afford a starter home in Pittsburgh.

Meanwhile, here are the top 20 hottest real estate markets in July this year, according to Realtor.com. Interesting mix of West Coast high flyers and Rust Belt bottom fishing..

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