Morning Report: New Home sales drop 1/26/17

Vital Statistics:

Last Change
S&P Futures 2294.5 0.5
Eurostoxx Index 367.7 1.1
Oil (WTI) 53.1 0.3
US dollar index 91.2 0.4
10 Year Govt Bond Yield 2.53%
Current Coupon Fannie Mae TBA 102.1
Current Coupon Ginnie Mae TBA 103.2
30 Year Fixed Rate Mortgage 4.16

Stocks are flattish as earnings roll in. Bonds and MBS are down small.

New Home sales fell pretty dramatically in December, to an annualized pace of 536k from November’s revised 598k number. New home sales is a notoriously volatile number, so don’t read too much into it. The 3 month moving average has been pretty steady for the past 6 months. The median sales price was $322k (up about 7.8%) and the average sales price was $384k (up 7.2%). There were about 259,000 units for sale at the end of December, which represents a 5.8 month supply at the current rate. Sales were flat in the West, rose in the Northeast, and fell in the Midwest and South.

Initial Jobless Claims rose last week to 259k from 239k the week before.

The Chicago Fed National Activity Index improved in December to .14 from -33 the month before. This is a meta-index of about 85 different variables, some of which lag quite a bit. The 3 month moving average was still negative however. Production related indices drove the increase, while consumption and housing became somewhat less negative. Employment was flat.

The Index of Leading Economic Indicators improved to 0.5% in December versus 0.1% in November.

At 2:00 PM EST, I will be participating in Housing Wire’s 2017 outlook webinar, where I will discuss the Fed, interest rates, and why fears of further hikes in mortgage rates might be overblown. Here is the link to the webinar. Other subjects include the regulatory environment in Washington DC as well as the latest developments in mortgage insurance premiums. Registration is free.

Despite the change in MIP, Washington might be coming to a consensus that tight credit in the housing market is a problem and it might be time to roll back some of the more restrictive regulatory policies and begin to encourage homeownership. Now that the housing market is back to record highs, liberals want to see more lending to lower credit / income borrowers and are realizing that bashing the banks isn’t the best way to go about it. On the other side of the aisle, conservatives are becoming more accepting of government social engineering via the housing market and want to see housing starts rebound to some semblance of normalcy. Of course the elephant in the room is the mortgage interest deduction, which could become a casualty of tax reform.

What Dow 20,000 means for mortgage rates. Punch line: not much. It is indicative of the current “risk-on” mentality of investors, where they sell safer assets like Treasuries to buy stocks. At the margin, this does push up interest rates, however that doesn’t necessarily mean mortgage rates move up in lockstep. Note that Dow 20,000 doesn’t have nearly the hype associated with it as Dow 10,000 had. That is the difference between the tail end of a secular bull market and the tail end of a secular bear market. It took the Dow roughly 17 years to double between 10,000 and 20,000. During the 80s-90s stock bull market, the Dow quintupled from 1982-1999. Dow 10,000 was the age of stock split beepers, “poof IPOs,” and companies that found they could double their multiple by adding “.com” to their corporate moniker. This time around, investors are more jaded.

One strategist expects the Fed to begin a rapid-fire 25 basis point every quarter starting in late 2017. The consensus is that the Fed would really like to see the Fed Funds rate at 3%, which it considers a “normal” level. Much depends on what we get out of Washington and whether we get some sort of major fiscal stimulus. Aside from fiscal policy, wage inflation is probably going to be the biggest driver.

Here are the hottest markets in real estate according to Some markets are what you would expect to see (like San Francisco) while others are surprises (Fort Wayne, IN). As usual, California dominated the list with 8 of the top 10 markets. California’s housing crunch is creating pushback against laws intended to discourage development.

28 Responses

  1. This article is making the rounds this morning:

    The Bernank is discussing shrinking the Fed’s balance sheet. Rumor has it that the announcement will be done later this year in lieu of a rate hike.


    • So that would mean selling off things on the balance sheet vs holding them to maturity, which I thought was the original strategy?


      • I don’t think they are going to sell, just let things run off as they mature.

        Currently, they are re-investing maturing proceeds back into the market to maintain a $4.5 trillion level of assets.


      • jnc:

        So that would mean selling off things on the balance sheet vs holding them to maturity, which I thought was the original strategy?

        It could mean either active selling or simply not buying to replace maturing notes.

        edit: corked.


      • Ahh got it.


  2. Pretty good interview with Kelly Ann Conway:

    “‘They never saw this coming’: A Q&A with Kellyanne Conway
    By Joe Heim
    January 26 at 11:27 AM”


  3. Scott Adams on Trump’s Method:

    “Outrage Dilution
    Posted January 26th, 2017 @ 8:24am”


    • @jnc4p: “In only a few days, Trump has made us question what-the-hell every other president was doing during their first weeks in office. Were they even trying? ”

      I’ve had that thought myself. He does have a point.


      • KW:

        I’ve had that thought myself. He does have a point.

        I actually find it somewhat disturbing that a single person has the power to do so much so quickly. This is not how we are supposed to be governed.

        Liked by 1 person

        • Well, a lot of it is simply reversing Obama’s EO’s.

          Liked by 1 person

        • jnc:

          Well, a lot of it is simply reversing Obama’s EO’s.

          And to that extent it is good, but still an indication that too much power rests with a single person.


        • @scottc1: Obviously, he’s leveraging what’s available, and doing it fairly impressively. Obama clearly left some executive power on the table. Donald’s just grabbing it.

          But clearly things like the wall wouldn’t be happening had there not already been a law passed on the construction of a border wall that he could leverage. But good or bad, Trump does share a characteristic with the past dictators and despots of the world: he can both accomplish and get away with things that other people cannot. If Ted Cruz were doing half as much there’d probably already be an impeachment.

          To go full Godwin: not everybody can be Hitler. It takes a Hitler to be Hitler. In the same way, not everybody can be Steve Jobs (as Tim Cook is illustrating). It takes a particular kind of person to get things done in complex system, and they are rare. Most people taking over a company just try to juggle some stuff and work on the books and talk up the stock and stuff . . . when Steve Jobs came back, he blew things up, ala Trump, and the result was an increase of value of 20,000%. They outperformed the general market.

          So lets hope he’s more Jobs and less Hitler.

          And that may explain the crazier-than-normal nature of Trump Derangement Syndrome. Trump can actually make things happen in ways that other people probably could not. So it’s non-stop Trump-is-Hitler/Impeachment-Time/Insert-Lunacy-Here from his opponents.

          Perhaps an illustration that the executive branch has too much power. Someone should have thought of that sooner!

          Also, the folks who thought it was a good idea to use the SCOTUS as a legislative branch . . . Well, Trump may appoint several justices they aren’t going to like. And some of them may be in there for a very long time. So . . . you know. Maybe they should have thought about that, too.


        • KW:

          Also, the folks who thought it was a good idea to use the SCOTUS as a legislative branch . . . Well, Trump may appoint several justices they aren’t going to like. And some of them may be in there for a very long time. So . . . you know. Maybe they should have thought about that, too.

          Well, on this front I think those who turned SCOTUS into just another legislative branch probably have less to worry about, because what makes a conservative judge “conservative” isn’t that he seeks conservative policy outcomes, but rather than he ignores ideological outcomes in favor of what the law/constitution says. So, while progressives may be disappointed that it will be harder for them to implement progressive policy from the bench, they don’t have to worry so much about conservative policy being implemented by the bench.


        • Plus they tend to favor precedent, so the ratchet still goes only one way.


        • McWing:

          Plus they tend to favor precedent, so the ratchet still goes only one way.

          Good point.


  4. That much incompetence is hard to replicate.

    “It’s the single biggest simultaneous departure of institutional memory that anyone can remember, and that’s incredibly difficult to replicate,” David Wade, who served as State Department chief of staff under Secretary of State John Kerry, told The Post.



    Open Blogger at Ace explains why it makes no difference to him that Trump is an a$$h*le, and while I think some of it may be rationalization, I think it’s indicative of the effect Trump has had on his supporters and a lot of not-exactly-supporters and wafflers, especially on the right. Whether it’s really just because Democrats and Obama set a bad example or not, I think the effect—”Grabbing cats? Divorces? Tax returns? Insulting people? Twitter obsessed? I just DON’T CARE!”—is a real thing.


  6. I love the fact that the dude debunks his own study. I’m sure it’s just because, as Lebowski would say, “New shit has come to light, man.”

    Now even its authors concede that it probably overstated the amount of noncitizen voting. “The high-end estimates are likely incorrect,” Jesse Richman,

    Wait, what?

    Mr. Richman still maintains that some small percentage of noncitizens vote in American elections. But the debate over this study has moved on. It’s no longer about whether millions of illegal votes were cast, but whether there’s any evidence for noncitizen voting at all.

    So, they’re voting pattern is consistently democratic (as in, they don’t vote in midterm elections) like other immigrants.

    But most important, among the 85 respondents who said they were noncitizens in both 2010 and 2012 — those most likely to really be noncitizens — none had voted in the 2010 midterm elections.

    These poor bastards.

    Well, I’m satisfied.


  7. Interesting debunking of the left-wing caricature of Trump voters….by a Clinton voter.

    Liked by 1 person

    • I remember the first time I heard “Oh, you’re the Trump Girl,” from somebody I just met. It’s amazing how quickly people label you, and how much people are afraid to be labeled. Thoughtful, nuanced ideas get shut down—even if they are coming from a prominent intellectual guest speaker. Did the lack of dissenting voices at Yale play a part in my vote for Trump? Absolutely. And that’s a big reason why I publicly say what I think. Why not? There’s an enormous culture of fear, and playing into it only makes it worse.

      And that’s where you get likely liberals turned conservative thanks to brow-beating, how-dare-you-not-think-like-me lefties. God bless ’em. If it weren’t for them, this country would be socialist Democrats for as far as the eye could see. 🙂

      I’ve lived here since 1993 but I’m still a European at heart and read the European papers. Let me tell you, Benghazi was covered with graphic detail. Reading the news in Europe I understood how censored the news in the U.S. has become, giving me flashbacks of a Commie regime. I also resented that when I opened the October issues of my fashion magazines, the editors all endorsed Clinton for president. Somehow you have to believe that because the media was so one-sided – it actually backfired!

      And then there’s the media. This is an ongoing problem for the Democrats and the American left/progressives, and it’s not going away any time soon. This isn’t 1940s Soviet Russia. You can’t redact and fictionalize news reportage and expect the entire public to take their marching orders from it because you’re the 4th estate and you said so. Admittedly, the government directly created the news in the 1940s Soviet Union, and now the media is an independent entity that manufactures the news based on partisan goals … but we’ve got the Internet, access to foreign news if we want it, and of course competing partisan news sources. For every CNN, there’s a Fox News. There’s Rush Limbaugh and Sean Hannity and Glenn Beck (sort of) and even Alex Jones–admittedly, Jone’s fictions are more obvious, but if he were a left winger he’d sound a lot like the folks speaking at the recent women’s march, only with a little more conspiracy and a little less emotional catharsis and poetry reading (which is not a criticism of either thing, just an observation).

      I think the mainstream media presently (and Fox as well) are letting Trump control the narrative under the mistaken belief they are revealing the corruption and speaking truth to power. They are also doubling down on the massaging of the news to “rebel against the American dictator” and “change the world”. This is well-receive by maybe 40% of the population, at best, and they constantly risk going to far for some people who are generally on their side, and alienating another 2% or 3% or 5%.

      While I did not vote for Trump, I agree with everything that woman says, and she’s super hot and apparently super smart as well. She does not fit the stereotype of the “typical Trump voter” hawked by the MSM.

      I invite all feminists, the LGBTQ community, men, women, whoever thinks President Donald Trump is not your president: I am more than happy to give you my Indian citizenship (freebie!) so you can go live for 24 years in New Delhi, India, and then come back and chat with me. I can guarantee, you will be very thankful for the USA and very glad with what you already have right now.



  8. JNC — do you have that link re: how to beat an authoritarian authored by someone who actually lived in a real authoritarian country?


    • “The case for normalizing Trump
      Foreign populists have been beaten by talking issues, not personality.
      Updated by Matthew Yglesias
      Nov 30, 2016, 7:30am EST

      But several students of authoritarian populist movements abroad have a different message. To beat Trump, what his opponents need to do is practice ordinary humdrum politics. Populists in office thrive on a circus-like atmosphere that casts the populist leader as persecuted by media and political elites who are obsessed with his uncouth behavior while he is busy doing the people’s work. To beat Trump, progressives will need to do as much as they can to get American politics out of reality show mode.”


  9. Talking point:

    Donald Trump’s favorability rating: 41.6%

    The press’s favorability rating: 32%.

    But no articles on how Donald Trump is taking office while the press has the lowest favorability rating in it’s history. Not sure why they aren’t covering that angle. It is, after all, another historic, Trump-related low.


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

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: