Morning Report: New Home Sales and prices soar 4/24/18

Vital Statistics:

Last Change
S&P futures 2682 10.5
Eurostoxx index 383.28 0.1
Oil (WTI) 68.68 0.01
10 Year Government Bond Yield 2.99%
30 Year fixed rate mortgage 4.56%

Stocks are up this morning on strong earnings by Caterpillar. Bonds and MBS are down.

New Home Sales rose 4% MOM and 8.8% YOY to an annualized pace of 694,000 in March. The median sales price was$337,200 and the inventory of 301,000 represented about 5 month’s worth. The number was well above Street estimates, however the confidence interval for this estimate is invariably wide.

Consumer Confidence improved to 128.8 in April as tax cuts have pushed sentiment to post-recession highs.

Home price appreciation is accelerating, with the Case-Shiller Home Price index up 6.8% YOY. We saw double-digit annual increases in San Francisco, Seattle, and Las Vegas.

The FHFA House Price Index reported a bigger increase – 7.2% YOY. The FHFA index only covers conventional loans, so it is a narrower index than Case – Shiller. The increases ranged from 4.8% in the Middle Atlantic to 10.3% in the Pacific.

What is the issue with the lack of home construction? Lack of labor. The construction industry has about 250,000 unfilled jobs right now, according to the NAHB. At the peak of the bubble, there were about 5 million people in construction; today that number is closer to 3.8 million. Many of these workers found employment in other industries (especially energy extraction) and aren’t about to go back. Immigration restrictions are another headache, as the government estimates that 13% of the construction workforce is working illegally. Finally, the opiod epidemic is particularly problematic in an industry where people are likely to be injured on the job and in pain generally. Ultimately, wages will have to increase to the point to lure a new generation of construction workers out of their climate controlled offices.

Round numbers always bring out the strategists, and as the 10 year sits close to the 3% level, we are seeing pieces discussing the asset allocation implications. Since the financial crisis, the earnings yield on the S&P 500 has been higher than the 10 year, although the premium is at the lowest level since 2010. One strategist thinks the 1950s are a good analogy for investors, where interest rates gradually rose as the memories of the Great Depression faded and the economy was strong. As an aside, Jim Grant discusses how the big retail investor trade in the 1950s was the leveraged curve flattener, where people would borrow short term money to invest in long-term Treasuries. That trade worked until the bond market crashed in the late 50s and a lot of people got carried out.

Is demand falling for houses? According to Redfin’s Housing Demand Index it is. “Abnormally late winter weather and an early Easter likely delayed homeowners planning to list their homes for sale in March,” said Redfin chief economist Nela Richardson. “While inventory levels are still not nearly high enough to meet strong buyer demand, we do expect new listings to pick up in April and May.”

The House has introduced legislation to end regulation by enforcement by the CFPB. HR 5534 would require the CFPB to provide guidance on its regulations and to establish a framework for monetary penalties.

27 Responses

  1. Crazy talk. How can you make effective environmental regulations when you don’t hide the data so people can’t challenge it?

    Liked by 1 person

    • The proposed rule would only allow EPA to consider studies where the underlying data are made available publicly.

      That’s madness.

      Seriously, I don’t get why this should be a problem. Even to the left. Ultimately, the EPA can over-react and over-regulate things even with strictly factual data. They can come up with their own doomsday scenarios that require immediate action. And, of course, future administrations can restore the ability to use studies with fake data in determining policy.

      Such research often involves confidential personal or medical histories or proprietary information.

      Proprietary = bullshit, over-massaged models in formulas and modeling that we want to hide?

      “barring scientists who received agency grants for their research while still allowing those funded by industry”

      Eh, if he’d bar both kinds I’d support that.

      Most of the complaints sound like BS. Personal data can be anonymized, in most cases it should have zero impact on the study. Patient 1, Patient 1, Subject 1 . . . etc. You don’t have to include their names and social security numbers to be transparent on the collected data.


    • Yeah, also, entirely not-credible. Despite The Intercept digging them as “horrific and bigoted passages”, they mostly express old-school discomfiture with gay people. She doesn’t like two men kissing! She doesn’t want to see two men have sex so skipped Brokeback Mountain! She noted a “lesbian haircut” etc . . . this isn’t awful anti-gay hate, it’s normal straight person not real deep into the gay community uncomfortable, at the time, with homosexuality and saying so. Also feeling that gay guys are attracted to young men, which they totally are, so that was just an observation of a fact. (Straight guys are attracted to young women . . . it happens).

      So she’s trying to say she was hacked, when a hack would have posted some awful stuff (and, at the time, the common hack was to completely replace a site, not carefully insert new blog posts in the author’s voice).

      I seriously doubt the Wayback machine got hacked. It would easily be secure just via isolation of the stored data, which doesn’t require the kind of access a blog might. In other words, a blog is much more hackable, the Wayback machine much less so. And there would be much more interesting things on their by much more famous people to hack, if one was so inclined.


  2. Shouldn’t they get new forecasters?

    Corporate earnings this season have mostly outperformed analyst expectations thus far. Of the S&P 500 companies that have reported as of Tuesday morning, 83 percent have posted better-than-forecast earnings, according to FactSet.

    Liked by 1 person

  3. Liked by 1 person


    So we don’t need presidents or congress anymore, right? Judges basically run the country and decide what D.C. can or cannot do?


  5. I nutted again.


  6. The absurdities of modern day racial discrimination laid bare.

    On May 11, the male golf team of Lincoln University, an historically black college in Jefferson City, will compete in this year’s PGA Minority Collegiate Golf Championship. The tournament begins May 11 in Port Lucie, Florida.

    The goal of the tournament founders was “to provide a national stage for players from minority colleges and universities to compete in NCAA collegiate golf events.” That said, not all of the golfers at Lincoln are black. Truth be told, none of them are.


  7. nova:

    Thought you might be interested….despite my best efforts, I was not able to convince my youngest daughter to enroll at Notre Dame next year. She’s chosen to become a Hoya rather than a Golden Domer (those were her two finalists).


    • “was not able to convince ”
      what? a daughter ignoring the sage advice of her father?

      Two very different choices. If I had to recommend a DC school, it would be Georgetown. You still get that campus feel and can be part of DC if you want to be. South Bend can’t compete with that. Plus, an outstanding school.

      But if she got into both, she’ll do great regardless.
      plus, the bar right off campus was built in 1780s


      • nova:

        what? a daughter ignoring the sage advice of her father?

        Yet again.

        South Bend can’t compete with that.

        Very true, but Georgetown can’t compete with South Bend on football Saturday! And the alumni network at ND is second to none, although G’town is pretty solid as well.

        plus, the bar right off campus was built in 1780s

        We had dinner at The Tombs when we visited the campus for accepted students weekend. I’m a fan.


        • you’re right about that alumni network. particularly by residence hall. had she lived in Lyons Hall, that’s a network unto itself.


        • Congrats to your daughter, Scott. I remember when my oldest daughter seriously considered G’town. She visited DC/VA/MD on her own, where I have many relatives and friends. She spent time at G’town, at American [where my cousin was the tennis coach at the time], at Hopkins, and at W&M. She thought the student atmosphere was more engaged in the actual pursuit of knowledge at G’town than at the other schools, and she really liked it. Even tavern buzz was about guest lecturers, she told me. Not everyone’s cup of tea, or ale, but it would have been hers. She did not apply to any of them, in the end.

          Two fine universities, but comparing South Bend to DC is likely to be all one or all the other, depending on the student’s preferences outside, at least as much as preferences inside, the classroom.


        • Thanks Mark.

          Yes, the two schools have totally different atmospheres and benefits, which I think made comparing and choosing all the more difficult. But ultimately tough to go wrong either way. And I’ve got lots of family in and around DC, so lots of support for Georgetown.


  8. Bad lip reading with Zuckerberg.


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