All Things in Moderation

Vital Statistics:

Stocks are up on trade hopes. Bonds and MBS are flat.

Construction spending fell 0.6% in December, but was up 1.2% on a year-over-year basis. While the government shutdown may have had an effect on public construction spending, private construction spending was down the same amount. Housing continues to punch under its weight class, falling 1.4% MOM and 1.5% YOY. Public housing construction was even worse, falling 5% MOM and 20% YOY.

Now that more people are shopping for real estate online at sites like Zillow, Redfin and Realtor.com, the photos you use to show your property take on greater importance. Certainly it pays to have someone who knows what they are doing to photograph your home to put it in the best light, as opposed to simply posting photos from your phone. Now, with photo editing software getting cheaper and cheaper, more people are using edited photos to show their place. Some of this is innocuous: like photoshopping out your personal stuff in the kitchen and some of it is not: adding a pool or removing a wall. Given that 20% of homes are bought sight unseen, this is no longer a trivial, theoretical issue. It takes on even more importance given the move towards computer-generated appraisals.

Mortgage rates tend to vary across states. For example, the cheapest state to borrow in is California, where the average rate is 4.74%. The most expensive is NY, where the average rate is 4.96%. The US average is 4.84%. You would think that judicial versus non-judicial foreclosure laws would explain the difference (you can live in your foreclosed house for years in NY), but maybe there is more going on here. Guess what the second-lowest rate state is: New Jersey, which has a pretty similar foreclosure legal structure.

Yesterday I mentioned that strategists and the Atlanta Fed are extremely bearish on Q1 GDP growth, figuring that it will come in under 1%. A couple of points: First, Q1 GDP has been weak for the past several years. It might be a measurement issue or something spurious, but that is one reason economists might be cheating down the number a tad. Second, if Q1 GDP comes in around 1%, you can probably forget about any rate hikes this year. For what its worth, the Fed Funds futures are predicting a 94% chance of no hikes this year and a 6% chance of 1 hike.

HUD Secretary Ben Carson plans to leave the Administration at the end of Trump’s term, where he will return to the private sector.

Filed under: Economy, Morning Report |