Morning Report: Existing Home Sales fall 8/24/17

Vital Statistics:

Last Change
S&P Futures 2447.0 5.5
Eurostoxx Index 375.8 1.8
Oil (WTI) 47.7 0.3
US dollar index 86.1 0.1
10 Year Govt Bond Yield 2.19%
Current Coupon Fannie Mae TBA 103.09
Current Coupon Ginnie Mae TBA 103.97
30 Year Fixed Rate Mortgage 3.89

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

Today starts the Fed conference in Jackson Hole. No major speeches are planned for today, however Janet Yellen speaks tomorrow. There is the possibility of some volatility around then. The big question will be whether Yellen is nominated for another term or will she be replaced when her term expires next year. National Economic Council Chairman Gary Cohn is the name most mentioned as a replacement. Donald Trump criticized the Fed’s low interest rate policy while on the campaign trail, but it will be interesting to see if he nominates a hawk. Most politicians prefer doves when push comes to shove.

Initial Jobless Claims fell to 234k last week. The labor market remains strong as companies hang on to their workers.

Existing home sales fell 1.3% in July, according to NAR. This is up 2.1% YOY, but is the lowest number of 2017. Lawrence Yun, NAR chief economist, says the second half of the year got off on a somewhat sour note as existing sales in July inched backward. “Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace,” he said. “Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month.” The median house price was $258,300 which is up 6.2% YOY. Unsold inventory is down to 4.2 month’s worth, from 4.8 months a year ago.

What are the most active real estate markets right now? Colorado Springs, Chicago, and Reno. Least active? San Francisco, where the average house price is now over a million. Much of the Northeast is cold as well. What makes a market active? Access to both good jobs and affordable homes.

Big money managers are swapping corporate debt for mortgage backed securities, particularly subprime MBS from before the crisis. Corporate debt simply got too expensive, and MBS got too cheap. The supply of subprime MBS has been shrinking however as loans get paid off, and non-agency MBS outstanding are about 25% of what they used to be. For fixed income managers, MBS have outperformed most everything this year. The appetite for MBS paper is encouraging, as it would open up the origination business to more outside-the-box product and allow credit to be extended to borrowers who have been more or less shut out of the market post-crisis.

A reduction in the mortgage interest deduction is on the table as part of tax reform. The talk is that the cap would drop from $1 million to $600k or so. Toll Brothers CEO Doug Yearley said reducing the MID would be bad policy and would discourage homeownership. Of course Toll is in the McMansion business, so he is talking his book a little. Bob Shiller thinks the effect would be de minimus as it would only affect something like 4% of taxpayers.

32 Responses

  1. Epic trolling.

    “BAMN is organizing to shut down what it claims is a “Neo-Nazi” rally in Berkeley on Saturday. The rally is titled “No to Marxism in America.” The rally organizer, a biological man who identified himself as a transgender woman to media outlets , claims the rally is not a “right-wing” rally, embraces diversity and is meant to oppose the spread of Marxism in Berkeley.


    BAMN has direct ties to the North American Man/Boy Love Association (NAMBLA), one of the nation’s most prominent pro-pedophilia organizations, according to internal NAMBLA documents obtained by TheDC.

    Liked by 1 person

  2. The media is still grappling with what happened with the election, but maybe they are starting to get it…

    But, Hewitt said, these Republicans are ultimately more enraged by the conduct of the “elite media.” Trump, he concluded, “has all the right enemies.”

    Was this a factor in the willingness of so many people who didn’t like him to vote for Trump anyway?

    Liked by 1 person

  3. Bloomberg argues if Trump pardons Arpaio, he should be impeached…

    Were these judges that ruled against him just liberal grandstanders? Or did they actually get it right?


    • These people are nuts. I don’t think Arpaio should be pardoned, but neither should have Marc Rich. None of those turkeys deserved a pardon. It’s just a thing presidents do when they want to because they can. They clearly have that power. Under what argument could he possible be impeached for making a “bad” pardon?


    • I started attending Klan meetings after my discharge.


    • I don’t think he realizes the implications of his own argument, namely that people who don’t start out as prejudiced become so after direct personal experience with the people they are now biased against.


      • Hah!

        That is what he is saying, isn’t it?

        I don’t think it’s a credible argument. All you have to do is meet (in a non-mob setting) a variety of people from a given race to realize individuals can be a$$holes, but it’s not because of skin pigmentation. Some of the biggest libs I know are former military. One dude was a green beret and once kind of pretend-threatened to cut my throat with a very real giant knife, so . . . interesting guy. Super-liberal guy now. If he were younger, might be joining antifa in the fight against racism. Used to be on a list run my a former military guy, who was super, super liberal-democrat-progressive-anti-Republican. I feel fairly sure he was not particular racist-ized by his military experience.

        40% of active duty military is some form of minority, right? Are they getting racist against white people or what’s happening there?


        • “That is what he is saying, isn’t it?”

          Yes, that their biases are the literal opposite of “prejudice”. They are the result of knowledge gained through their lived experiences.

          Liked by 1 person

    • They’re just trolling the 50%+(60%+) that don’t agree with them, and think they’re mentally ill. They want to prove it!


    • The author is some Millennial hipster living in NYC. I will bet most members of the military are more worldly and less provincial than he is…


  4. Worth noting.

    “The protests are part of a growing movement in Australia—mirroring the recent efforts to topple Confederate monuments in the United States—to stop celebrating the 26th day of the year. Of course, it’s not the beer and cricket that are objectionable but the controversial history the holiday commemorates.

    Australia Day is not the day the Australian nation came into being. (That would not occur until 1901.) Rather, it marks the arrival of the “First Fleet” of British settlers, around half of whom were prisoners, into Sydney Cove in 1788.

    Australia, like America, will always be a nation born from genocide, just as America was built by slaves. The least we can do is condemn it. The very least we can do is not celebrate it.”


  5. Somehow I don’t remember WaPo getting bent out of shape about this sort of thing in 2009

    Liked by 1 person

    • See level of hysteria over reverting Transgender policy for the military to the pre June 2016 status quo.

      Live by EO, Die by EO.

      Liked by 1 person

      • I have been on PL (first time in a long time) debating it. The outrage over reversing something that was perfectly fine for 95% of Saint Obama’s term is astonishing…

        Liked by 1 person

        • They should call their congressperson. Get them to pass a law that one president can’t just overturn cuz he feels like it. Because another president made it happen cuz he felt like it.

          You know. Laws. 😉


    • Most of this stuff, I just don’t care about. I mean, I wouldn’t have been agitating for Trump to undo half of them he did, but it’s just not that big a deal. Maybe a Democrat wins in 3 years or 7 years, and they all come back.

      The magic of the Executive Order.


  6. Lord the press is and the Ds are dumb. Trump’s a clown. so they oblige him by providing a circus.

    Liked by 1 person

    • My friend Chris [USN – VietNam, EE retired from IBM] and I ate burgers last night and were laughing at DJT the Clown but we thought the same thing – the Ds provide a freaking circus for him in which to perform. Or maybe it is the media, as well – they are fascinated by him like rubbernecking drivers passing a car wreck.

      Somehow, it seems the Ds are defending illegal immigration, which is an awful place to be. Making clear that they only want to excuse those brought here involuntarily as minors and who then made something of themselves by way of career or doing well in school would be marketable, but sounding like they are for open borders just plays right into DJT’s bombastic twitter account.

      Never mind that the left wing seems to be about to swallow the Ds, simply appearing to favor open doors to all immigrants should be enough to kill their electoral chances in swing areas.


  7. Liked by 1 person

  8. A poor diet and frequent masturbation, leading to abnormally large testicular veins, are believed to be behind falling fitness levels, according to a report published in state-run military newspaper

    Mine must be like the Amazon then.


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