Morning Report: Wages and salaries accelerating 1/31/18

Vital Statistics:

Last Change
S&P Futures 2835.5 11.0
Eurostoxx Index 396.6 0.4
Oil (WTI) 64.2 -0.3
US dollar index 83.0 0.0
10 Year Govt Bond Yield 2.71%
Current Coupon Fannie Mae TBA 103.591
Current Coupon Ginnie Mae TBA 103.688
30 Year Fixed Rate Mortgage 4.19

Stocks are higher this morning after global markets recovered overnight. Bonds and MBS are flat.

We should get the FOMC decision today around 2:00 pm EST. Be careful locking around then. The consensus seems to be that this will be a no change / hawkish tone type of statement.

This will be Janet Yellen’s last FOMC meeting. Jerome Powell seems to be cut more or less from the same cloth as Yellen, so the Fed’s go-slow approach to hiking interest rates will probably continue.

Treasury increased the size of its debt issues for the first time since 2009 this morning on the back of increased deficit spending and lower purchases from the Fed. They are offering $66 billion of 3, 10, and 30 year notes this time around, an increase from $62 billion in November. Less purchasing by the Fed plus increased issuance = higher interest rates, at least at the margin.

Mortgage Applications fell 2.6% last week as both purchases and refis fell by the same amount. The average 30 year conforming rate increased 6 basis points to 4.41%

The ADP jobs number came in at 235,000 last month, which was higher than expectations. The Street is looking for 175,000 jobs in this Friday’s jobs report.

Compensation is accelerating, according to the Bureau of Labor Statistics. The Employment Cost Index rose 0.6% in the fourth quarter, and is up 2.6% YOY. Private Industry compensation rose faster than government, with wages and salaries up 2.8% YOY. A year ago, that annual increase was 2.3%. The industry with the biggest increase? Truck drivers.

The “typical” mortgage payment rose 12% last year, according to CoreLogic. This measure takes the median home price and calculates the principal and interest payment using the prevailing Freddie Mac mortgage rate and assumes a 20% down payment. They are looking for this payment to increase another 13% next year as home prices and interest rates continue to rise.

Pending home sales rose 0.5% in December, according to NAR. Home sales are being depressed by tight inventory despite strong growth in wages and jobs.

5 Responses

  1. “Home sales are being depressed by tight inventory despite strong growth in wages and jobs.”

    We see a great reduction of multifamily homes for sale in nearby San Antonio, which we track.

    Our San Antonio rental duplex has appreciated substantially based on comps. But we notice that few are selling now even though profit taking might be in order. Is it that because the cost to buy is now a higher multiple of rent so that there are fewer investor-buyers?

    As we got in “cheap” we are holding for the long run. Great cash return. Is it that most small investors like us who got in when the getting was good are enjoying the income too much to sell?


    • Don’t know about that market specifically, but a lot of professional money went into the rental market. The returns are pretty decent, as you point out. Question is, where can you earn a better return with lower risk? Not a lot of place, IMO..


  2. NoVA (& anyone else), should you find yourself in Miami The Bazaar by José Andrés is highly recommended.

    As is the pool party at the hotel the restaurant is in.


  3. Odds that an elected D literally weeps while begging Trump to not release the memo? I’m guessing it’s 100%.

    The question is who will be the one to do it.


  4. Good thread.


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 )

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: