Morning Report: Homebuyer sentiment softens.

Vital Statistics:

 

Last Change
S&P futures 2571 20
Eurostoxx index 346.77 3.89
Oil (WTI) 49.14 0.86
10 year government bond yield 2.69%
30 year fixed rate mortgage 4.43%

 

Stocks are higher this morning on no real news. Bonds and MBS are down small.

 

As the shutdown drags on with no end in sight, the IRS has decided to begin issuing tax transcripts. It will probably take a few days to catch up with the backlog, but at least this headache for originators will go away.

 

Small business sentiment remains strong, according to the NFIB. “Optimism among small business owners continues to push record highs, but they need workers to generate more sales, provide services, and complete projects, said NFIB President and CEO Juanita D. Duggan. “Two of every three of these new jobs are historically created by the small business half of the economy, so it will be Main Street that will continue to drive economic growth.” Bill Dunkelberg notes the cognitive dissonance in the business press these days:  “Recently, we’ve seen two themes promoted in the public discourse: first, the economy is going to overheat and cause inflation and second, the economy is slowing and the Federal Reserve should not raise interest rates,” said NFIB Chief Economist Bill Dunkelberg. “However, the NFIB surveys of the small business half of the economy have shown no signs of an inflation threat, and in real terms Main Street remains very strong, setting record levels of hiring along the way.”

 

Growth in the service sector decelerated in December, according to the ISM Non-Manufacturing Index. New Orders were the bright spot in the report while most other indicators fell. Note that we are still at historically very strong levels, so there is nothing recessionary in this report. Residential construction remains an issue. One of the respondents said: “New residential home sales have slowed significantly. Tariff delay has slowed material cost increases, but all indications are that January will bring price increases.” I found that surprising given that lumber prices have been falling steadily for the past 6 months and are down 22% YOY.

 

lumber

 

Homebuyer sentiment has been souring as well, according to the latest Fannie Mae National Housing Survey. Blame high house prices: “Consumer attitudes regarding whether it’s a good time to buy a home worsened significantly in the last month, as well as from a year ago, to a survey low,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Although home price growth slowed in 2018, the cumulative impact of sustained, robust increases in home prices outpacing income growth likely helped drive the share of consumers citing high home prices as a primary reason for a bad time to buy a home to a survey high.” The net number of people who think it is a good time to buy fell from 23% to 11%. The net number of people who think home prices will rise fell slightly, but nothing as dramatic as the good time to buy statistic. Note that there was no major moves in the personal economics numbers either – the net number of people not concerned about losing their job hit 79%, a series high.

 

The Washington Post summarized the 2019 housing forecasts from the MBA, NAR, and more. The MBA is forecasting that the 30 year fixed rate mortgage will hit 5.1%. (Zillow is even more bearish – they are forecasting 5.8%) While those forecasts are certainly a possibility, they seem unlikely if the Fed is indeed done with this tightening cycle.  Despite that rate forecast the MBA does see purchase origination increasing, while refis will decline. The NAHB is predicting new home sales will be flat with 2018, around 618,000.

26 Responses

  1. Interesting piece:

    “Sotomayor and Gorsuch Resume Their Fight for the Future of the Sixth Amendment

    By Mark Joseph Stern
    Jan 07, 20194:28 PM”

    https://slate.com/news-and-politics/2019/01/sotomayor-gorsuch-supreme-court-dissent-criminal-restitution.html

    Like

  2. “The Shutdown And Congress
    Shutdown Ripples Across Nation, Affecting Farmers, Homeowners, Even Craft Brewers”

    God, not the craft brewers. Oh the humanity.

    Liked by 1 person

    • what’s the record? feels like we are going to break it.

      Like

      • 21 days apparently.

        Article had some useful reminders. I had forgotten about the 2018 shutdown that the Democrats did over the DREAMers.

        Like

      • HHS is funded, so I haven’t even noticed.
        just socially with some friends/neighbors.

        Like

        • It’s either amusing or sad to see all the ignorant memes floating around the Internet with pictures of the military and captions along the lines of “If they aren’t getting paid, either should Trump/Congress, etc”.

          Little realizing that the military is funded.

          Ditto with the memes about missing Social Security checks, etc.

          Like

  3. Worth nothing:

    “NBC and MSNBC Blamed Russia for Using “Sophisticated Microwaves” to Cause “Brain Injuries” in U.S. “Diplomats” in Cuba. The Culprits Were Likely Crickets.

    Glenn Greenwald
    January 7 2019, 11:53 a.m.

    In 2017, Associated Press obtained and published recordings of the sounds the embassy personnel complained of hearing. Rather than being the by-product of some sort of Bond-villain weapon cooked up in Kremlin laboratories, the scientists concluded that the sounds match those made by a specific species of Caribbean crickets during mating season”

    https://theintercept.com/2019/01/07/nbc-and-msnbc-blamed-russia-for-using-sophisticated-microwaves-to-cause-brain-injuries-in-u-s-diplomats-in-cuba-the-culprits-were-likely-crickets/

    So much bullshit about Russia.

    Liked by 1 person

  4. Weird re-watching The Sopranos 20 years later. James Gandolfini/Tony Soprano was younger than I am now when the series ended.

    For those who haven’t read it, the definitive proof of the ending that Tony was shot.

    https://masterofsopranos.wordpress.com/the-sopranos-definitive-explanation-of-the-end/

    Liked by 1 person

  5. Backpedaling. This is probably the worst outcome possible

    “The U.S. military is drafting plans to withdraw a few thousand troops from Afghanistan while continuing all major missions in the longest war in American history, U.S. officials said, three weeks after President Trump sought options for a more drastic pullout.”

    https://www.washingtonpost.com/world/national-security/new-plans-for-afghanistan-would-have-trump-withdrawing-fewer-troops/2019/01/08/ddf2858e-12a0-11e9-a896-f104373c7ffd_story.html

    Like

    • once you’ve lost the appetite for total war, it’s a series of ineffective and on-going missions that will just get people killed.

      Like

  6. “MSNBC to Air Obama’s 2004 Convention Speech During Trump’s Address to Nation

    By Andy Borowitz

    NEW YORK (The Borowitz Report)—MSNBC will preëmpt Donald Trump’s national address on Tuesday night by airing Barack Obama’s keynote address at the 2004 Democratic National Convention, network officials have confirmed.

    Harland Dorrinson, an MSNBC spokesperson, said that the network elected to air the Obama speech “in order to best serve our audience.””

    https://www.newyorker.com/humor/borowitz-report/msnbc-to-air-obamas-2004-convention-speech-during-trumps-address-to-nation

    Like

  7. where was the discussion on the SF hospital and vox
    either way:
    http://reason.com/blog/2019/01/08/zuckerberg-hospital-bill-san-francisco

    Like

    • I loved this part from the Vox piece:

      “A spokesperson for the hospital confirmed that ZSFG does not accept any private health insurance, describing this as a normal billing practice. He said the hospital’s focus is on serving those with public health coverage — even if that means offsetting those costs with high bills for the privately insured.

      “It’s a pretty common thing,” said Brent Andrew, the hospital spokesperson. “We’re the trauma center for the whole city. Our mission is to serve people who are underserved because of their financial needs. We have to be attuned to that population.

      “For us, the challenge is we don’t want to become just another hospital,” he said. “Our mission is to serve people who are underserved because of their financial needs. We feel like we have to recoup what we’re able to from people who are insured because we’re supporting people who don’t have insurance.””

      https://www.vox.com/policy-and-politics/2019/1/7/18137967/er-bills-zuckerberg-san-francisco-general-hospital

      See? It’s just redistribution to help the poor. All those people with private insurance should just check their privilege.

      Like

  8. The horror:

    “The shutdown has cut off the farm bailouts meant to offset the trade war with China”

    https://www.washingtonpost.com/business/economy/shutdown-stalls-trump-farm-bailout-created-in-response-to-trade-war/2019/01/08/288dc730-137c-11e9-803c-4ef28312c8b9_story.html

    Why does the media keep running pro-shutdown stories?

    Like

  9. So then we can keep the govt shutdown for longer then.

    Like

  10. I can’t unsee this.

    Like

  11. I laugh whenever Molly says or writes “Orange man ______”.

    Like

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