Morning Report: Housing starts jump 11/17/16

Vital Statistics:

Last Change
S&P Futures 2173.8 1.0
Eurostoxx Index 338.3 -0.2
Oil (WTI) 46.1 0.5
US dollar index 90.8 0.2
10 Year Govt Bond Yield 2.25%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

Stocks are flattish on no real news. Bonds and MBS are down small.

Janet Yellen is speaking on Capitol Hill this morning. Her prepared statement is here. She said that job growth has been lower than last year but still above forecasts. They believe the labor market has further room to run. She pointed out that economic growth has improved from its sluggish start of the year and inflation remains tame. Nothing in the statement would change the forecast for a 25 basis point hike next month.

Speaking of inflation, the consumer price index rose 0.4% in October, in line with forecasts. Ex-food and energy, it rose 0.1% and is up 2.1% YOY.

The NAHB / Wells Fargo Housing Market Index, a measure of homebuilder sentiment was flat at 63, and is still well above neutral.

Housing starts rose to 1.323 million. This is an increase of 23% YOY, which shows the housing market may finally be getting some traction at long last. This is a 9-year high. Remember, “normalcy” is closer to 1.5 million units, so we still have a lot of room for growth. Building Permits were up 4.6% YOY to 1.23 million.

Initial Jobless Claims fell to 235k last week, which is the lowest level since early 1973, just after the Vietnam War draft ended. Employers continue to hang onto their workers.

House prices increased 7% in October, according to RedFin. Inventory dropped by 8.6% YOY, which is the 13th consecutive monthly drop. Homes stayed on the market an average of 49 days, a drop of 5 days from a year earlier. 21% of all homes were under contract within two weeks, and 20% sold for more than their asking price.

Average FICOs for closed loans dropped somewhat in October to 730 from 731, according to Ellie Mae. Purchases accounted for 53% and refis accounted for 47%.Time to close was steady at 48 days. ARMS slipped to 4% of all loans, however as rates increase they will undoubtedly become more popular at some point.

Consumer comfort increased last week, according to Bloomberg.

Democrats named Chuck Schumer Senate Minority Leader yesterday. As a practical matter, he comes from NY so he should be at least somewhat sympathetic to the financial sector, which could go a long way in helping fix some of the issues with Dodd-Frank.

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