Morning Report: Existing Home Sales hit a 10 year high 4/21/17

Vital Statistics:

Last Change
S&P Futures 2355.0 3.0
Eurostoxx Index 378.8 0.7
Oil (WTI) 50.6 -0.1
US dollar index 89.8  
10 Year Govt Bond Yield 2.23%
Current Coupon Fannie Mae TBA 102.97
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.98

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

Existing Home Sales rose to their fastest pace in 10 years, according to the NAR. Existing Home Sales increased at a 5.79 million annual rate, which was the fastest since January 2007. Lawrence Yun, Chief Economist of NAR said: The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” he said. “Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does.” The median existing home sale price was $236,400, up 6.8% from a year ago. Inventory increased, however it remains at about 3.8 months’ worth. Days on market dropped to 34, a huge decrease from a year ago, when it was in the mid-high 40s. Inventory remains the biggest problem as homebuilders have yet to pump out the required supply to meet demand.

More Millennials (ages 18-34) live with their parents than with a spouse. Of course we have seen a general trend of waiting until later in life to get married and have kids, so this is somewhat just the extension of a trend. How many of these young adults would like to move out of their parent’s home but find rents / house prices too expensive?

The next big issue for the bond market (and markets in general) is the debt ceiling debate. The government will run out of money by the end of the month, although it can play some accounting games to keep the lights on until a new CR is passed. If not, we could see a partial government shutdown on April 29. It appears that Trump will need some Democrats to pass a CR, and they are demanding that funds be appropriated to shore up the Obamacare exchanges. Trump wants more money for a wall, immigration enforcement and defense spending, which the Democrats oppose. So far, the markets view this as so much theater, but we will see how far the brinkmanship goes.

Delinquencies have hit an 11 year low, according to Black Knight Financial Services. Total non-current inventory (30 days down +) is at 2.3 million. Prepay speeds increased however, as rates fell. Foreclosure starts ticked up slightly MOM, but are down 18% YOY.

Why the exurbs are the new high growth area, and what that means for urban living (and politics). Technology is lowering the cost of transportation (basically lowering the cost of distance), and more manufacturing does not need to be near the big cities, and it looks like the exurbs will take up the slack. This has enormous implications for politics, as Democrats dominate the cities and Republicans dominate the suburbs.

More problems for Backwards Newco. North Carolina is prohibiting them from acquiring new servicing until it fixes defects in how it handles escrow accounts. Separately, the CFPB is going after them as well. The stock was down over 50% yesterday on about 20x normal volume.

Legendary macro trader Paul Tudor Jones is sending a warning about the stock market. You are seeing more and more strategists fretting about valuations as the Trump reflation trade deflates. If the stock market takes a swoon, that will not be lost on the Fed. Yet another reason why we may have seen the highs for mortgage rates and the 10 year already.

That said, Treasury Secretary Steve Mnuchin says the Administration is “pretty close” to bringing major tax reform. It will probably be an end-of-year event, as the previous August deadline is not going to happen. The Administration has a narrow window to get things done, as politicians will turn to the 2018 midterms soon after the new year.

27 Responses

  1. The left continues on their mission to re-define hate speech as anything democrats disagree with:


    • Brent:

      The left continues on their mission to re-define hate speech as anything democrats disagree with:

      Isn’t that what it has always meant? Apart from speaking ironically or in an attempt to point out the hypocrisy of the left, does anyone who is not on the left ever complain about or label anything as “hate speech”?


    • David Brooks is right:

      “These days, the whole idea of Western civ is assumed to be reactionary and oppressive. All I can say is, if you think that was reactionary and oppressive, wait until you get a load of the world that comes after it.”

      Liked by 1 person

  2. Good Scott Adams piece on climate science messaging:

    “I remind new readers of this blog that I’m not a climate science denier. The consensus of climate scientists might be totally right, but I have no practical way to know. My point here, and in past posts, is that you can’t sell a truth by packaging it to look exactly like a huge lie. And those complicated climate prediction models look exactly like lies we have seen before, albeit in unrelated fields.”

    Liked by 1 person

    • I have always thought most people’s conviction and alacrity concerning climate science is inversely proportional to the probability that they passed high school algebra…

      Liked by 1 person

      • I only passed high school algebra because I had a teacher that forced me to work. Just sayin’. But experience and observation and a little reading of history (including icons like Carl Sagan, just sayin’) have taught me that science is highly biased, not an objective practice (this is pretty much the thesis of Sagan’s Broca’s Brain) and that people predicting the end of the world are going to be, by definition, wrong 99.9% of the time.


  3. Isn’t the “March for Science” more aptly named the “March for more redistribution of income in the name of the environment?”


    • Eh, Climate Science Data is a polluted admixture of opinion, political agenda, weather reports, convoluted and largely unverifiable models, and so on. There are facts there, and detectable correlates, but in terms of what is spewed onto general politics and doled out for political fodder, it’s a mix of entertainment/psuedo-science/opinion/made-up-crap/insults/anecdotes/actual data/political agendas/cash grabs/product branding/confusing metaphors.

      In comparison, the cancer paper and subsequent peer review fraud is straight forward and easily digested, and much more within the boundaries of our traditional understanding of both science and peer review than anything happening with the climate that involves the general public, the government, or money.


    • Yeah. I’m a Thomas fan (it is known) but I’m scratching my head on this one. Perhaps from a strictly procedural point of view, I get it, put his dissent seems to one of picking nits. I don’t see any reason the state should not be liable to refund costs once a conviction is overturned, generally. I also don’t much care for the procedural assumptions that all money so-confiscated essentially belongs to the state, even when it turns out the previously guilty-party was innocent.

      This is seems to be promising as a start in terms of curtailing states tendencies to use asset forfeiture or seizure as a form of revenue collection (although I expect more on that front in the coming years).


      • “refund costs”

        I’d draw a distinction between court costs and financial penalties that were imposed solely due to the conviction.

        The state isn’t obliged to refund filing fees or the cost of parking in the court’s parking garage.


    • I agree, and this is spot on:

      “Many civil forfeiture regimes look an awful lot like the hypotheticals set forth above”

      Thomas did take the argument to it’s logical conclusion though:

      “Colorado is therefore not required to provide any process at all for the return of that money.”

      Edit: Sounds like the argument was made poorly

      “But, intuitive and rhetorical appeal aside, it does not seriously attempt to ground that conclusion in state or federal law. If petitioners’ supposed right to an automatic refund arises under Colorado law, then the Colorado Supreme Court remains free on remand to clarify whether that right in fact exists. If it arises under substantive due process, then the Court’s procedural due process analysis misses the point.”


    • mark:

      Lousy dissent by Thomas.

      Intuitively it certainly seems questionable.

      But I don’t think Volokh’s examples are analogous. In each those two cases, as well as the asset forfeiture cases he mentions, the state is taking property prior to any due process procedure, while in the case at hand, it is taking the money after the due process procedures have already occurred.

      It is an interesting problem, though. It seems to me that rejecting Thomas’s logic implies that the “due process” requirements cannot be said to be fulfilled until after all possible appeals have been exhausted. That is, as long as there remains a chance that a conviction could be vacated or reversed, whatever property has been relinquished on the basis of the original conviction can never actually be said to belong to the state.

      And perhaps even more interestingly, since the 14th prevents the deprivation of liberty as well as property without due process, what does this ruling imply for the jail time that people have done before a conviction gets vacated or reversed? If the state can be successfully sued for the repayment of court fees owed upon the initial conviction on the grounds that the funds were taken without due process, why can’t it be sued for the value of the time that the person spent in jail, which must have been equally imposed without due process?

      BTW, Volokh says this:

      Pretty breathtaking stuff, when you think about it — enough to send chills down the spine of any right-thinking libertarian out there, I would think. The state gets to define the conditions under which it can turn your property into its property.

      Yes it sends chills down the spine, but it isn’t just the implication of Thomas’s opinion. It is the implication of the 16th amendment.


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