Morning Report: Homeownership rate ticks up 11/7/17

Vital Statistics:

Last Change
S&P Futures 2588.5 -0.3
Eurostoxx Index 396.3 -0.3
Oil (WTI) 57.3 -0.1
US dollar index 87.9 0.0
10 Year Govt Bond Yield 2.32%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.95

Stocks are flat on no real news. Bonds and MBS are flat as well.

Small business optimism slipped in September, according to the NFIB. The big driver was a drop in sales expectations, which may have been influenced by the hurricanes in Texas and Florida. The drop was not just concentrated in the affected areas, so it is hard to attribute the drop to simply that. Small business shed an average of .17 workers during the month, and again this was not simply a hurricane effect. Small business optimism is high by historical standards, however and the Atlanta Fed is forecasting a 4.5% jump in GDP growth the fourth quarter of 2017.

Job openings were 6.1 million at the end of September. The quits rate edged up to 2.2%. The quits rate has historically been a leading indicator for wage growth, and a data point the Fed invariably references during their FOMC deliberations.

Tax reform continues to work its way through the committee process. Partisan tensions are already beginning to show. One thing to note: the Senate bill maintains the mortgage interest deduction at $1 million versus the House’s plan to cap it at $500,000. Corporations are digesting a surprise provision that levies an excise tax on payments made to overseas affiliates. Here is the state of play.

Home prices rose 7% YOY, according to CoreLogic. They are up 0.9% MOM. Rental price inflation was about 3%, less than half the increase in the index, which reflects tight inventory conditions. They estimate that about a third of the major metropolitan areas are overvalued. Rental price inflation is lagging as the homeownership rate increases. It hit 63.9% in the third quarter, according to the Census Bureau.

The Bank of England plotted the real risk free rate of interest going back to 1311. It puts into perspective how depressed the current global economy is, when you consider the real rate has been around 4% historically. The blue shaded areas are real rate depressions, and the one starting in the early 1980s has been the second-longest and is most similar to the long depressions of the late 19th century. These periods have been historically associated with low productivity growth, populism, and protectionism. Note that the bounceback from these periods has been sharp: typically you have seen an increase of 315 basis points in the two years after the cycle ends. The late 19th century phase was associated with the birth of Marxism. Is it a coincidence that Millennials are embracing socialism and communism?

interest rates

JP Morgan estimates there will be 4 rate hikes in 2018. A tightening labor market will drive the increases, however we are seeing commodity price inflation as well, which will eventually flow through to overall inflation. Food and energy prices are increasing, and for the builders, lumber prices are at multi-year highs.

24 Responses

  1. From the piece that was linked earlier, this is rather disappointing:

    “Gary Johnson: Well for me, just speaking personally, I do not aspire to be president of the United States anymore. Why would anybody want to be president of the United States now that Donald Trump’s been president of the United States?”

    Maybe it wasn’t about you.

    Liked by 1 person

  2. The Bloomberg article cites a survey about preferences for socialism that is discouraging.

    I don’t think there is a single cause for it.


    • The Stalin and Mao Mulligan.. It wasn’t real socialism.


      • All we have to do is do it right.

        What people generally mean is they want somebody else to pay for everything. These are not principled socialists. They just don’t want to have to work. Can’t say I disagree on that, it’s just as a practical matter, if nobody is doing anything, nothing is gonna get done.


  3. Good turn of phrase from Charles Pierce:

    “The Constitution doesn’t give anyone an alibi. Nobody rides for free. It gives us a choice—either we govern, or we are governed.”


    • jnc:

      The Constitution doesn’t give anyone an alibi. Nobody rides for free. It gives us a choice—either we govern, or we are governed.

      That might once have been true, but it isn’t any more. Not since the elevation of SCOTUS to super-legislature.

      Liked by 1 person

    • Brent:


      She is hilariously unhinged. But at least she is willing to acknowledge what has always been true but denied more generally about the left: she’s the real “hater”.


    • Imagine, coming to the US illegally and then having to wait for a free abortion.

      It’s like Pol Pot’s Kampuchea!


    • I loved this line:

      “In the old days, the days before Trump, it bothered me that so many people loved things I thought were stupid.”

      It never ceases to amaze me how much trivial shit the left gets worked up about… Can you show me on the doll where Caddyshack touched you?


    • “Tell it to that undocumented teenage girl who was blocked for a month from getting an abortion . . . ” blah blah blah. These anecdotal stories can be told all the time, under every president, always. They are always there. They aren’t an argument, and if you’re using them to make yourself rage-filled, that’s on you, nothing external.


  4. What do NoVA and jnc think of the Virginia results?



    Another hoax. Racism exists and is real. People who gratuitously play the race card exist and are real.

    Never rush to judgment about an incident. As with allegations of crime, my first lawyer boss, the then DA of Travis County used to say, “Where there’s smoke there’s fire, but you can’t know what the fire is about or who started it without investigation.”

    Liked by 1 person

    • Of the number of these things that actually get solved, I wonder how many are hoaxes… Gotta be the vast majority.


      • Yes, the vast majority. Most of them. There are far more trolls out there than there are racists or Nazis. All the one’s I’ve heard come to a resolution are fake. Same thing with attacks on Republican offices and campaign workers with backwards ‘B’s carved into their forehead . . . self-inflicted, fake. Any time something like that happens, I will assume it is a hoax unless proved otherwise beyond any reasonable doubt.


        • Ace ask a reasonable question, re the “hoax” linked to earlier by Mark and jnc:

          So why is the same sort of hatred written by a white person treated a hate crime — all prosecutorial tools deployed, minor crimes like vandalism pushed to the hilt, even possible charges of intent to make terroristic threats added — and the hate graffiti, when written by a not-white, though with the exact same intentions of making minorities fear for their safety, stirring up racial divisions, and directing hatred and contempt at one racial group — treated as mere mischief?

          Why is that if a white guy had written this, we’d know his name and know the criminal charges against him, but now that it’s revealed a black guy wrote the hate message with the same intent to cause fear and hatred, his name is concealed, details are withheld, no chargers are tendered, and he’s merely asked to leave the school (which, based on this article, it seems like he was being asked to leave anyway)?

          Why is a hate crime for a white guy to write a hateful message but just a bit of acting-up shenanigans when a non-white guy writes the same fucking thing for the same fucking purposes?

          A lot more at the link.


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