Morning Report: Home price appreciation is decelerating 9/25/18

Vital Statistics:

Last Change
S&P futures 2929.5 4
Eurostoxx index 383.66 1.52
Oil (WTI) 72.54 0.46
10 Year Government Bond Yield 3.09%
30 Year fixed rate mortgage 4.86%

Stocks are higher as the Fed begins their 2 day meeting. Bonds and MBS are down small.

Home prices rose 0.2% MOM  / 6.4% YOY according to the Case Shiller House Price Index. Prices are appreciating at a slower rate than last year (the second derivative has flipped to negative) and we are seeing less dispersion between geographic areas. The yellow highlighted portion of the graph shows the derivative flipping. The convergence is happening at both extremes – the red-hot Western markets are cooling a little, and some of the laggards in the Northeast and Midwest are picking up a little.

FHFA cumulative

Separately, the Case-Shiller HPI reported that prices rose 0.1% MOM / 5.9% YOY. The index showed the same slowdown that FHFA reported, although Las Vegas and Seattle are still super-strong.

JP Morgan is out with an aggressive call this morning: The Fed will raise rates every quarter through June 2019, taking the Fed Funds rate up to 3.0%. FWIW, the Fed funds futures are predicting only a 6% probability of that forecast, which would have to include an off-meeting hike or a 50 basis point hike at one of the meetings to play out. IMO, the Fed would need to see inflation accelerate meaningfully from here to do that, but the dot plot forecast tomorrow will tell a better picture.

The jump in the 10 year over the past month is setting up for a “buy the rumor, sell the fact” situation if the FOMC statement and dot plots are not sufficiently hawkish. In other words, if the statement is hawkish, the move up in rates has kind of already been made. And if it is dovish, we should see a retracement back down in rates.

Regardless of the increase in rates, the consumer remains ebullient, with the Consumer Confidence index increased in August and is sitting close to an 18 year high. Retailers are noticing as well, as same store sales rose 5.8%. This is despite a run up in gasoline prices. Q4 GDP should be well-supported by strong consumption numbers. It is surprising to see the jump in oil prices have pretty much no effect on confidence or spending. It could be an indication of rising wages.

Fascinating statistic: It can cost $750,000 to build a unit of affordable housing in California. Obviously it is hard to come up with a business model that supports it at those sort of pricing levels.

21 Responses

  1. I’m baffled why Ted Cruz would trust the food at a restaurant in DC?

    Liked by 1 person

  2. Another fascinating DailyKos thread.

    https://m.dailykos.com/stories/1798578#comment_71450865

    As always, the comments are the best part.

    Like

  3. Thought you all might be interested in my own personal brush with the Kavanaugh saga…Renate Dolphin, the subject of the latest deep dive into Kavanaugh’s high school years, lives in my town and is a friend of my wife’s. Can’t imagine she’s all too pleased to be dragged into this.

    Like

  4. What percentage of the left would say it is morally acceptable to lie in order to save abortion?

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    • Brent:

      What percentage of the left would say it is morally acceptable to lie in order to save abortion?

      100% of the left currently sitting on SCOTUS would, we know that much.

      Liked by 1 person

      • How’s the move to London going?

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        • Getting close. My last day in the NY office is next Tuesday, and I am scheduled to start in the UK on Oct 11. My wife is going to stick around through Christmas in order to manage the house situation and get my youngest through her first semester in DC. But it’s all happening!

          Like

        • I missed that you were moving to London. What was the impetus? Job opportunity or you just have to get some of that #brexit action? 🙂

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        • The asked me back in the spring if I would be open to moving back to London to run the trading desk there. (The local guy who was slated to take over the trading desk had some health issues and basically made it clear in the Spring that he wasn’t coming back.) It’s a good move professionally, and since my youngest was about to go to college and the house would be empty, I told them if they could wait until the fall when she left for school, I could do it. Since we lived there before and still have a lot friends there, and wouldn’t have to start from scratch on a social circle, my wife was up for it. She really liked living there before, anyway. So it’s happening!

          Maybe I will have to re-start my old American Expatriate blog, ranting about the anti-American press over there.

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        • I will read that blog. You could cross-post here. Report on Nigel Farage. Give us #brexit updates! That would be cool.

          Like

    • 100%. I can’t imagine an example where that would not be true. The strange thing about the Kavanaugh nomination is that more people haven’t stepped forward with bogus accusations.

      Like

    • Can’t access it, unfortunately.

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      • Use a different browser.

        Like

        • That worked! Why do these places bother to put on such limitations if they are so easily gotten around? (Although if most people are as dumb as me, maybe that explains it.)

          Like

        • It works but they are getting better at it. Eventually, they’ll have something that tracks a machines MACID or something (they can’t do it by IP, generally, because so many workplaces present the same IP to the outside world, which is why they do it via cookies). My problem is I prefer to use Safari which apparently constantly reports that it’s blocking ads, so I’m always getting “You can’t read this, you’re blocking ads” but I’m not. At least not on purpose.

          Like

    • Otherwise, nominee after nominee would go down to a string of unverifiable allegations.

      This is the problem with this strategy. In a lot of ways, they are painting the Republican’s into a corner. If they withdraw the nomination on allegations that seem not iron-clad to the left and an outright lie-filled smear campaign to the right, it will provide an incentive to use a strategy of false or unverifiable allegations on all subsequent nominations.

      but also threatens to turn #MeToo into yet another divide in the culture wars.

      Yeah, that ship has sailed.

      Like

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