Morning Report: Homes are still affordable, but for how long?

Vital Statistics:


Last Change
S&P futures 2732.75 -6.85
Eurostoxx index 362.55 -0.95
Oil (WTI) 62.68 -0.42
10 year government bond yield 3.20%
30 year fixed rate mortgage 4.96%


Stocks are lower as voters head to the polls for Midterm elections. Bonds and MBS are flat.


Regardless of what your politics are, I think everyone will agree that it will be refreshing to not get spammed everywhere with political ads, starting tomorrow.


The Midterm elections will hold the press’s attention today, however they won’t have much (if any) of an impact on markets. Expect Democrats to take the House and a few governorships and Republicans to hold the Senate. This means gridlock for the next two years, which is good news for stocks and bonds.


The ISM Non-Manufacturing Index slowed a touch in September, but was still pretty strong. New Orders rose while employment was a drag on the index. Employment issues referred to the labor supply, with comments like: “Low unemployment causing team members to leave for higher wages in other businesses and industries” and “Challenging to replace vacant positions.” Expect to see more wage inflation ahead. Tariffs are still worrying some respondents and construction is experiencing cost push inflation. Retailers are reporting strong traffic and expect it to continue through the rest of the year. All of this adds up to a probable hike in December.


Rising mortgage rates have cut the size of the refinanceable pool of mortgages to 1.85 million, a 56% drop from the beginning of the year. Overall, there apparently were 6.5 million borrowers in total who had the opportunity to refinance during the ZIRP years that missed the boat. Despite the concerns about affordability, it takes 23.6% of median income to make the monthly payment on the average house which is lower than the pre-bubble benchmark of 25.1%. (Note: I did a deep dive into that metric earlier this year in the Scotsman Guide: Homes are Not Overpriced.) Black Knight estimates that an additional 50 basis points rise in the mortgage rate will push the monthly payment metric above the historical average, even if home prices don’t rise further.


refinance candidates


The residential homebuilding sector has had a lot of headwinds to deal with, from labor shortages, to rising materials prices and also the lack of buildable lots. The issue is that in the areas where demand is highest (places like Seattle and SF) there are geographical issues that make building out hard. On the other hand, in places like the Midwest, where there is less demand, there is plenty of land available.

19 Responses

  1. Like

  2. No lines, in and out in less than ten minutes.

    They switched back to paper ballots with optical scanners this time from touchscreen machines.


    • Anectodal, I voted about 8:45 AM in my precinct and had to wait in line about 15 minutes, there were about 6 people in line when I left.

      In 2016 I voted in the same place about 10:00 AM with no waiting.

      Tried to early vote on Friday and the line was at least 1-2 hours long. Fuck that, if I’m going to have to wait in line to vote I’ll do it on Election Day as God intended.

      No idea what to make of it other than I was surprised at how busy it was this cycle.

      Liked by 1 person

    • we’ve had the optical scanners the past 2-3 elections.


  3. There’s a lot to live in the quote in the tweet, beyond the fact that it gives lie to the linked article’s headline.


    • the left will never understand that a lot of Trump voters know he is a lying scumbag and they don’t care, simply because the progressive left is even less appealing


  4. Oh dear


  5. This is the last year when straight ticket voting will be permitted in Texas. I always vote for Mike Wright for the RR Commission which regulates the O&G industry. He is the only petroleum geologist with field expertise who ever runs, but he is a Libertarian. Both the Rs and Ds run hacks. Maybe next time, if anyone pays attention, Mike will have a chance.

    Unlike George I cannot understand straight ticket voting. At all. Never vote for a crook. Even a default D should never vote for Menendez, If you are a default R, never vote fro Duncan Hunter. Sometimes all the choices are awful. Vote for yourself. Don’t buy into parties are your friend.


    • They’re not your friends, they’re tools. Right now, the only way to get your preferred policies enacted is through majority control, thereby rewarding the party. It is what it is. I also write in Sarah Palin forPOTUS. Did it in’16.

      Liked by 1 person

    • Mark:

      Never vote for a crook.

      Might as well never vote, then. All politicians are crooks in one way or another.


      • Some are worse than others, but I consider the importance of democracy more about checks and balances and opppsing forces, rather than the moral quality of individuals in question. Which is why I consider the bureaucracy pernicious: the moral quality of the unelected and non-term-limited bureaucrats makes their moral terpitude matter significantly more.


  6. Fucking Tepublican voter suppression!

    Ceding power so that Democrats run the elections! Diabolical!

    Liked by 1 person

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