Morning Report: Home prices jump in October 12/27/16

Vital Statistics:

Last Change
S&P Futures 2261.2 1.2
Eurostoxx Index 360.5 0.5
Oil (WTI) 52.2 0.1
US dollar index 93.4 0.2
10 Year Govt Bond Yield 2.56%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.29

Stocks are flattish this morning on no real news. Bonds and MBS are up small.

Expect a dull week with thin volume on the exchanges as many traders take this week off. We will have some minor economic reports this week, but nothing should be market-moving.

New Home Sales increased to 592k in November. This is an increase of 17% YOY. New home inventory is about 250k, which is a 5.1 month supply at current levels. The median sales price was $305k, while the average sales price was $359k. The Midwest and the West had the biggest increases in sales.

Home prices rose 5.6% in October, according to the Case-Shiller Home Price Index. Affordability measures have shown 20% – 30% decreases since home prices bottomed in 2012. While affordability is not yet at a point to suggest a reversal in home price appreciation, we are probably approaching the limits of home price appreciation unless wage growth accelerates.

Note that these indices are not inflation-adjusted. While inflation has been pretty tame over the past 10 years, it hasn’t been zero. If you adjust the index for inflation, we are still below our 2006 highs.

The national foreclosure inventory fell below 500k for the first time in 10 years, according to Black Knight Financial Services. Delinquencies ticked up on a seasonal basis, but are down almost 10% YOY. Improvements in delinquencies are getting smaller as the market normalizes.

For bond investors who were taken by surprise by the Fed’s forecast of 3 rate hikes this year, it is instructive to look at how many hikes they thought they would be making this year. In fact, no one suggested less than 2. We only had one. This again stresses the data-dependency of what the Fed is thinking. GDP growth came in slower than expected, and then we had Brexit, which caused the Fed to think about being less aggressive. Ultimately, it will depend on inflation and whether it returns. Despite inflation being below the Fed’s target rate, they still plan to tighten.

Consumer confidence jumped in November, driven primarily by the election and improving expectations for future growth. Note that the current conditions part of the index actually fell, so this is largely a jump based on the perception of the future which may not play out as assumed.

16 Responses

  1. So it is ok for a President to implement foreign policy decisions out of personal pique.

    GWB will be receiving apologies from the left now that it turns out it was ok to invade Iraq because Saddam Hussein tried to kill his father.

    Liked by 1 person

    • George, I think the Admin was correct to abstain. Every Admin since 1967 has pushed for a 2 state solution and claimed that the settlement policy was a violation of international law. Consistency may be the hobgoblin of small minds, but it is also the mark of a good diplomacy, one that can be relied upon.

      BHO’s big[gest] screw-up was not authorizing a no-fly zone and then reversing himself on the red line in Syria, thus making him an easy target for any middle east country that wanted to push him, especially Israel.

      Scott, DJT is nothing but a con artist, like his apparent mentor. Whatever the rules for conflicts of interest may be, and they are very few and limited for a POTUS, they can be debated without reference to Berlusconi.


      • Mark:

        George, I think the Admin was correct to abstain. Every Admin since 1967 has pushed for a 2 state solution and claimed that the settlement policy was a violation of international law. Consistency may be the hobgoblin of small minds, but it is also the mark of a good diplomacy, one that can be relied upon.

        Are you saying that O’s abstention is consistent with previous US policy?


      • mark:

        Scott, DJT is nothing but a con artist…

        You don’t need to convince me of that. My only point is that Trump’s ability to con his way to conflict-of-interest gains via the presidency is largely – almost exclusively – a function of in the inflation of both federal and executive power far, far beyond that legitimately authorized by the Constitution.

        Liked by 1 person

      • I have no interest in doing a “no fly zone”, I differ from most people in that I would not create that. If people in Europe are upset over it, they can create one.

        My point re pique still seems to stand however.

        The smart play for the Israeli’s is to expel the Pali’ s from the West Bank and Gaza and then declare Jordan as the new Palestine.


    • Resolved: The modern need for a president to divest himself of his financial interests before taking office is proof that the federal government is far too involved as a manager/regulator of the private economy.

      Sub-resolution: George Washington was the epitome of corruption for not only maintaining but indeed exercising on-going control over his personal financial interests while in office, including many that were impacted by federal policy, such as slavery and real estate speculation.



  2. Good piece on Obama and drone strikes and how avoids taking responsibility for his own policies.

    “The following year, a significant escalation in the drone war occurred not because “this technology really began to take off,” to repeat Obama’s construction, which seems to assign responsibility for targeted killings to drones themselves, but in part because of a deliberate response to a suicide attack on a U.S. outpost in Afghanistan that killed multiple CIA officers, prompting an unnamed official to tell The Guardian, “This attack will be avenged through successful, aggressive counterterrorism operations.” ”


  3. Worth a read:

    “How Jon Stewart, Stephen Colbert blazed a trail for Trump
    By Lee Siegel
    December 22, 2016”

    Liked by 1 person

  4. Goddamn those Ruskies are clever.

    Rig the votes so he wins the electoral votes but not the popular vote.

    Fuck, that is threading the needle.

    Liked by 1 person

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