Morning Report: Existing home sales fall 11/21/17

Vital Statistics:

Last Change
S&P Futures 2590.3 8.3
Eurostoxx Index 388.5 2.1
Oil (WTI) 56.2 -0.3
US dollar index 87.4 -0.1
10 Year Govt Bond Yield 2.36%
Current Coupon Fannie Mae TBA 102.651
Current Coupon Ginnie Mae TBA 103.494
30 Year Fixed Rate Mortgage 3.9

Stocks are higher this morning on overseas strength. Bonds and MBS are flat.

Existing Home Sales rose 0.7% in September, according to NAR. This was the second slowest this year, behind August. Overall, sales were down 1.5% YOY. Tight inventory and the hurricanes affected sales. The median home price increased 4.2% YOY to 245k. Inventory was 4.2 month’s worth. First time homebuyers fell to 29% of sales, driven by a dearth of inventory at the lower price points. The NAR also puts in a plug for maintaining the mortgage interest deduction and the state / local tax deductions, as eliminating them will make homeownership more expensive. “There’s no way around the fact that any proposal that marginalizes the mortgage interest deduction and eliminates state and local tax deductions essentially disincentives homeownership and is a potential tax hike on millions of middle-class homeowners,” said Brown. “Reforming the tax code is a worthy goal, but it should not lead to the middle class, who primarily build wealth through owning a home, footing the bill. Instead, Congress should be looking at ways to ensure more creditworthy prospective buyers are able to achieve homeownership and enjoy its personal and wealth-building benefits.”

Economic activity picked up in October, according the Chicago Fed National Activity Index. Production-related indicators drove the increase. Employment-related indicators were positive, but less so than September. The economy definitely seems to be accelerating.

What is driving global growth? China and India for the most part, but it looks like Japan is waking from its long slumber at last. Japanese growth has been missing since the early 90s and is transitioning from being a drag on global growth to a driver of it. Don’t forget, Japan is the third biggest economy in the world and has been largely moribund since the early 90s. Want to see what a real bear market in stocks looks like? Take a look at the long term chart of the Nikkei 225: The Nikkei is hitting 20 year highs, and is still 43% below its 1989 peak.


The Japanese resurgence will probably mean higher interest rates, at least at the margin, as well as higher commodity prices. Much of this will depend on what happens in China, which has a massive real estate bubble and will probably have to go through a secular recession like the US did in the 30s and Japan did for the last 2 decades.

Janet Yellen said she will resign her position on the Federal Reserve Board once Jerome Powell is sworn in. “As I prepare to leave the Board, I am gratified that the financial system is much stronger than a decade ago, better able to withstand future bouts of instability and continue supporting the economic aspirations of American families and businesses,” Yellen said in her resignation letter. Her term officially expires in 2024, but it is rare for an ex-chairman to stay on. Donald Trump will have four open positions to fill, leaving him with the ability to make his mark on the Fed.

17 Responses

  1. 1] It has been clear for years that wind power is spreading on its cost/ROI merits. It is becoming clear that solar will, too. Batteries will become useful for storage of major power because of rapidly improving tech, and sucking carbon from the air will become ever more profitable. I have posted tech articles on most of this here, IIRC. And the insurance industry will dictate coastal building or not. Thus the market will make policy before policy makes the market, although there will be interaction among the variables.

    2] Completely unrelated:

    Articles stress he would be the first Mayor to step directly to the WH.

    In an earlier time, articles would have stressed “first Italian-American”, “first Jew”, or “first Hispanic.” He is all of the above, as he delights in telling whomever will listen.

    Is the change in reporting a sign of “progress”? Or is it simply PC? Or is it actually more unlikely that a Mayor would be a nominee of the D Party than an Italian-Mexican-Jewish American in hyphen rich America?


    • No question, which is why I dismiss most of these doomsday ecological scenarios. If they are simply extrapolating energy consumption trends over the past couple of decades without taking into account the expected changes in the mix of energy consumed (natural gas increases at coal’s expense, and renewables increase at fossil fuel’s expense) then the projections are garbage. Second, if they are simply extrapolating population growth trends, they will overshoot as well. Population growth trends at the moment are influenced by declining infant mortality, which will be offset by smaller families going forward.

      But these studies are in the business of scaring people to get more funding or to push government subsidies for renewables. Or, by politicians who are itching to raise taxes and increase government control of our lives.


    • If only he were a woman.


  2. Chuck Schumer has some advice for Thanksgiving….

    Liked by 1 person

  3. Was he ever really a conservative?


    • Brent, the HR guy for one of my clients used to accompany me to EEOC complaint hearings. What he heard from the disgruntled fired employee and the sympathy the hearings examiner would display for the most lame and bogus civil rights claims always had him mumbling “this brings out my inner Republican”.

      I think it is possible for Kristol to be a situational ethics guy, because I have seen it as normal behavior when your own world view whatever it is comes up against an odious reality.


      • He, like his father is a neocon. That’s more of a Foreign Relations viewpoint and less a Limited Government viewpoint. Republicans adopted the neocon viewpoint with Reagan and they kept their more Liberal political inclinations in check. Now that the party seems to be drifting away from Neocon foreign relation priorities, there is less need to suppress liberal political tendencies.


    • Brent:

      Was he ever really a conservative?

      If I am not mistaken, he was a neo-conservative back when the term actually meant something other than simply someone the Guardian wantes to demonize. And what the term really indicated was someone who, as a conservative viewed foreign rather than domestic policy as being the proper primary focus of federal power, but had a traditionally liberal view of government as an interventionist force for “good”. Hence “neo”-conservative, and the reputation for supporting a very activist government overseas. So at least in that sense he has always been a liberal.


      • If he is an Israel-firster he is going to find the democrats more and more inhospitable to him as the left takes over the party…


        • Very true. Although my sense is that, more than anything else Kristol’s loyalties belong to the Georgetown cocktail circuit.


    • Trotsky-ite at heart.


  4. Hah!

    A 2001 study of a sexual harassment program for faculty and staff at a university found, based on responses to a questionnaire, that training increased knowledge about laws pertaining to sexual harassment but had no significant positive effects on behavior. Men who participated in the training were less likely to view coercion of a subordinate as sexual harassment, less willing to report harassment and more inclined to blame the victim than were women or men who had not gone through the training.

    Forcing people into training may be especially ill-advised. Another study found that mandatory diversity training — which is broader than, but similar to, harassment training — did not increase the proportion of white women in management and actually led to a decrease in the proportion of black women. Voluntary diversity training had more positive effects.

    Liked by 1 person

  5. Now this is a hot take.

    Liked by 1 person

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