Morning Report: Inflation comes in lower than expected 4/11/18

Vital Statistics:

Last Change
S&P futures 2632.25 -22.75
Eurostoxx index 375.86 -2.56
Oil (WTI) 66.25 0.74
10 Year Government Bond Yield 2.77%
30 Year fixed rate mortgage 4.43%

Stocks are lower this morning on tensions in the Middle East. Bonds are up on the risk-off trade.

In political news, House Speaker Paul Ryan will not run for re-election.

Inflation came in lower than expected in March, falling 0.1% MOM and rising 2.4% YOY. Ex-food and energy, the index rose 0.2% MOM and 2.1% YOY. Bonds are breathing a sigh of relief on the number.

We will get the minutes from the March FOMC meeting today at 2:00 pm. They usually aren’t market-moving, but just be aware. Since this is Jerome Powell’s first meeting as head of the FOMC, it might be parsed a little more closely than usual.

Mortgage applications fell 2% last week, as both refis and purchases fell by the same amount. This was in spite of a 3 basis point drop in the typical 30 year fixed mortgage rate. Refis are at their lowest level in a decade. Refi activity is going to be driven more by home price appreciation these days.

Luxury homes are taking longer and longer to sell, and are trading at bigger discounts to the asking price. This is especially acute in high tax states like New York, where there is an absolute glut of homes above $1 million. Part of it is simple over-pricing. The homes that sat on the market for over 180 days went for 71% of asking price, while homes that went in under 180 days got 93% of the asking price.

The CFPB released its annual review of consumer complaints, and credit / consumer reporting topped the list, which is unsurprising given the Equifax data breach last year. Debt collection was the next biggest issue, followed by mortgages. Richard Cordray’s bugaboo – payday lending – failed to garner even 1% of complaints. This is what Mick Mulvaney was referring to when he said “data will drive our decisions.”

Rising home prices relative to incomes are pushing up debt to income ratios, which is why this Spring Selling Season is shaping up to be the worst in years. Part of the problem was alluded to above – a dearth of inventory at the low end of the price scale and a glut at the high end.

City grind got you down and you are thinking of moving to the country? Here are some things to consider..

A record 64 million Americans (or about 20%) live in multi-generational households. This is largely driven by younger adults who continue to live with their parents. The ratio bottomed in 1980 and has been moving steadily upward ever since.

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