Morning Report: Buying is still a better deal than renting 10/20/16

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S&P Futures 2135.3 -3.0
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Oil (WTI) 50.7 -0.9
US dollar index 88.0 0.0
10 Year Govt Bond Yield 1.75%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.57

Stocks are lower this morning after ECB President Mario Draghi said the ECB is not looking at doing more QE after the program ends in March. Bonds and MBS are up.

In economic data this morning, initial jobless claims rose 13k to 260k. Separately, the Bloomberg Consumer Comfort Index fell. The Philly Fed manufacturing index improved in September, but manufacturing has generally been weak across the board as the stronger dollar hurts competitiveness overseas.

Existing Home Sales rebounded in September to an annualized pace of 5.47% from a downward-revised pace of 5.3 million in August. The median home price was up 5.6% to $234,200. The first time homebuyer represented 34% of all sales, which is a big improvement from the 30% – 32% range it had been stuck in for the past year. Inventory remains tight, however with about 2.05 million homes on the market, which represents a 4.5 month supply. A balanced market is closer to 6.5 months. Distressed sales (foreclosures and short sales) represented 4% of all sales, which is a post-crisis low. Days on market ticked up to 39 days from 36 in August. The increase in the first time homebuyer is definitely good news, and we may finally be seeing the pent-up demand that has been building over the past 10 years finally come to market.

In spite of all that pent-up demand, housing starts remain anemic given where we are in the economic cycle. Housing construction has been the missing link this whole recession. Note the shaded grey areas on the chart. Those are recessions. See how housing construction historically experienced a sharp rebound after the economy bottomed? We haven’t seen that this time around. Some of that was due to an overhang of inventory from the bubble years that needed to be sold, however that adjustment was made by 2011 or so. Since then, tight inventory and rising prices have been the story. The reason why this recovery has been so tepid has been the absence of a robust housing construction market.


Note that Fannie Mae thinks that housing construction will remain muted. In their latest Economic Commentary, they forecast housing starts will grow to about 1.3 million in 2017, which is about 12% higher than their forecast for 2016. The bright spot? SFR will increase to 15% to an annualized pace of 883k. SFR will cannibalize multi-fam going forward as the economy improves and more Millennials go from being renters to being buyers. Speaking of which…

Trulia has a good piece out on the advantages of buying versus renting. Buying a home is 37% cheaper than renting nationally. Naturally, the advantage differs from market to market, but even the worst markets for buying are still 17% cheaper. This assumes the buyer puts down 20% and stays in the house for 7 years. The advantage was as high as 41% in 2012, and got as low as 34% in 2014. Of course this is a moving target as mortgage rates and house prices change. Where are the tipping points to flip the relationship? For home prices, it is a median house price of $468k. For mortgage rates, it is 9.1%.


24 Responses

  1. Before I go read the Trulia blog, did it make an assumption about what would happen based on how the renter would have used the “retained” 20% down payment?


  2. More hate crimes that aren’t:

    Combined with fake memes and news reports going viral on social media, and so-called fact-checkers often acting as fact-massagers (or fact replacers), technology seems be amazingly limiting our ability to have any idea what is true. The advantage of the 3 network monopoly of the past, of having one or two city newspapers, etc, was that you only had a few propaganda arms to deal with. Now life is becoming a 24 hour barrage of propaganda.

    Is the fire bombing of a GOP headquarters legit or a false flag? If a false flag, then who? The GOP? Over-enthusiastic underground supporters wanting to create a narrative? Anti-Trump partisans wanting to create a situation that will be perceived as a false flag or provoke retaliatory violence? How do we know?


    Note that generally the facts seem to be there, but the mainstream media tends not to pay much attention. If the internet and right wing press didn’t exist, we’d likely have no idea these hate crimes were staged.

    Kudos to the HuffPo for actually having a section on Fake Hate Crimes.


  3. And FactCheck websites aren’t always great at checking facts:


    • The best was Politifact giving Bernie Sanders a “mostly true” for claiming the black unemployment rate was over 51% and Trump a “mostly false” for claiming it is 59%.

      They interpret what Democrats meant to say and parse Republican statements like a Talmudic Scholar.

      Liked by 1 person

  4. Went to PL for a minute. Apparently, asserting that Donald Trump isn’t undermining Democracy makes me a Nazi. So I’m done for the day!

    Mission accomplished.


  5. As I was walking into the elevator, some stranger commented to me on Donald Trump and his acceptance of the result of the election only if he wins…

    I replied that many of the people getting bent out of shape over this were chanting “selected, not elected” in 2000.. He told me that was different because it was Florida or something.. I walked out of the elevator at my floor and he was still explaining why Bush vs. Gore was different…


  6. @jnc4p: Observed some of your discussion with Ruk and Cons on SSI.

    The purposely don’t want to hear what you’re actually saying. Fascinating. In another world, they’d make great Trump supporters.


    • Nothing new. Cons just follows me around like a little yipping dog even though I haven’t bothered replying to him for months. I don’t have enough respect for him as a poster, or even as a human being to engage with him. Of course, he’s usually too busy spamming the board with his sock puppets.

      But the real tell is every time they try to conflate entitlements with infrastructure spending as an argument somehow. They can’t really defend the welfare state and redistribution by arguing that it benefits the people paying for it, so it’s a bunch of hand waving.

      They want to start talking about cutting off the undeserving poor, then there’s a conversation to be had.

      On the other hand, I’ve long gotten past any expectation of an intelligent conversation at Plum Line.

      Liked by 1 person

  7. The debate, radically improved;


  8. Just read HRC’s comments about the Supreme Court from the “debate” the other night.

    The Supreme Court should represent all of us. That’s how I see the Court

    As I have said…she is plainly not qualified to be the president.


    • But Trump said pussy?

      Why do you hate America and love Putin?

      Liked by 1 person

    • “The Supreme Court should represent all of us.”

      The Supreme Court should represent all of us, except evangelicals, conservatives, libertarians, moderates who might vote with the right wing sometimes, white males, the patriarchy generally, conservative African Americans, and anyone whose ever done or said anything that might possibly offend any progressive anywhere ever.


      • KW:

        The Supreme Court should represent all of us, except…

        The problem is not that Hillary doesn’t actually mean what she says (although she surely does not). The problem is that what she says is constitutionally ignorant. The Supreme Court isn’t suppose to represent anyone. The Supreme Court is suppose to represent the law, first and foremost the constitution, in legal disputes between people, or between people and the government.


        • I realize that (I suspected this reply was coming!).

          The Supreme court is suppose to adjudicate and ultimately interpret the law. I suspect Hillary is suggesting that there’s some obligation on the part of America to have a supreme court that reflects American diversity (of gender preference and race, if not ideology). There’s a constant expansion of the concept of “representation” in our country to suggest that only people who share a numbering of qualities with a certain population can possibly represent those people. Though given that the Supreme Court is an appointed judicial body, not a panel of elected representatives, that’s a stretch.


        • KW:

          And BTW, when I say that what she says is ignorant, I don’t mean to imply that she is ignorant. I strongly suspect that she knows exactly what the Supreme Court’s constitutional role is supposed to be. But like most progressives, she is at least indifferent to, and most likely contemptuous of, the constitution as an authority over the role of government and its various parts.


Be kind, show respect, and all will be right with the world.

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