Morning Report: Homeownership rate increases in Q4

Vital Statistics:


Last Change
S&P futures 2814 6.75
Eurostoxx index 376.36 1.22
Oil (WTI) 56.49 0.7
10 year government bond yield 2.74%
30 year fixed rate mortgage 4.44%


Stocks are higher this morning on real news. Bonds and MBS are down.


The big data this week will be the jobs report on Friday. Jerome Powell said in his Humphrey-Hawkins testimony that he would like to see further wage increases, which should calm the bond markets if the average hourly earnings number comes in a bit hotter than expected. Other than that, we will get new home sales and the ISM data.


The homeownership rate ticked up to 64.8% in the fourth quarter, according to the census bureau. This is up from 64.4% in the third quarter and 64.2% a year ago. The homeownership rate has been slowly ticking back up after bottoming at 62.9% in 2016. Note that we are nowhere near the highs of around 69.2% during the bubble years. Bumping up that number by lending to Millennial borrowers is going to drive the mortgage business going forward, and will have to replace the rate / term refi business that drove earnings for years.


homeownership rate


28 organizations, including the MBA, NAR and a whole host of affordable housing advocates sent a letter to Acting FHFA Director Otting counseling him to go slow in GSE reform.  “A well-functioning housing finance system should provide consistent, affordable credit to borrowers across the nation and through all parts of the credit cycle without putting taxpayers at risk of a bailout,” the letter states. “We urge policymakers to take these principles into account to ensure that access and affordability are preserved under the current, and any future, housing regime.” FHFA had indicated it was willing to make some reforms without Congress, which prompted the letter. Any true GSE reform will require legislation.


Despite a strong Q4 GDP print of 2.6%, first quarter estimates are in the 0% to 1% range. Does the economy “feel” like it rapidly decelerated in the past couple of months? Some of the numbers suggest it – as in personal income and consumption.  I don’t sense it, but that’s what the pros are saying. As a general rule, people’s subjective assessment of the economy is often influenced by their personal partisan values. When Democrats are in charge, Republicans tend to feel the economy is worse off than it really is, and the same goes in reverse. During the Obama years, the professional economists (including the Fed) were consistently high on their GDP estimates. Now, during the Trump years, professional economists seem to be undershooting the numbers – i.e. actual growth numbers out of the BEA are much higher than forecast. I doubt there is any tampering going on, but it is something to keep in mind, especially when locking around big economic events.

5 Responses

  1. Also after the recession of ’08 economists would have counted a low base from which to predict an upturn, while after a long steady slow recovery they would be pulling in their horns. That is also human nature, I think.

    I suspect that the housing market is still the first indicator of direction, and that is followed distantly by automobile sales. What do you think?

    Would you rate business investment in productive assets as a leading or a following indicator?

    When I was practicing I used to track entity formations in Texas but it was not a reliable predictor.


  2. Recoveries after asset bubbles are invariably slower than recoveries after Fed-initiated recessions to subdue inflation. Presumably, the Fed should have taken that into account.

    I think most economists are academics and largely lean left, so they thought obama style reflation would work well, and deregulation / tax cuts wouldn’t do much. So over the past couple years they have been surprised to the upside when the actual numbers come out. In 2017, the Fed figured 2018 GDP would come in around 2%. It turned out to increase by 2.9%. In December of 2016, the Fed saw 2017 GDP growth coming in at 2.1% and it actually rose 2.6%.

    Conversely, at the December 2015 meeting, the Fed thought 2016 GDP growth would be 2.4%. it came in at 1.5%. I used to track the forecasts monthly, and they were always revising downward their GDP forecasts during the obama admin.

    As far as the first indicator of direction, housing has been in a weird place since the crisis. It never really rebounded in any meaningful way, so I can’t see it really turning down all that much. Best leading indicators of a recession? probably hiring plans / announced job cuts.

    Capital Expenditures are tricky…Early in a recovery, they are bullish, however late in expansions, companies begin making more and more marginal investments which are less likely to pan out.


  3. Once again, the KosKidz do not fail to amuse.


  4. Ironic:

    So much for “equal pay for equal work”:

    “Google seems to be advancing a “flawed and incomplete sense of equality” by making sure men and women receive similar salaries for similar work, said Joelle Emerson, chief executive of Paradigm, a consulting company that advises companies on strategies for increasing diversity.”


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