Morning Report: Existing home sales disappoint, but internals are better

Vital Statistics:


Last Change
S&P futures 2999 -8.5
Oil (WTI) 56.94 0.14
10 year government bond yield 2.05%
30 year fixed rate mortgage 4.06%


Stocks are lower this morning as earnings continue to come in. Bonds and MBS are flat.


Today is a big day for earnings, with numbers coming out for Ford, Boeing, Caterpillar, Facebook, and Tesla.


House prices rose 0.1% in May, according to the FHFA House Price Index. They were up 5% on a YOY basis. Home price appreciation has been decelerating across the board, but it is most pronounced in the Pacific and Mountain regions.


FHFA regional


Mortgage Applications fell by 2% last week as purchases and refis fell by the same amount. This was despite a 4 basis point drop in rates.


Existing Home Sales fell 1.7% in June, according to NAR. “Home sales are running at a pace similar to 2015 levels – even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country,” said Lawrence Yun, NAR’s chief economist. Yun says the nation is in the midst of a housing shortage and much more inventory is needed. “Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices,” he said.


Inventory was 1.93 million units, which represents a 4.4 month supply. Historically a balanced market had 6 – 6.5 months’ worth of supply. As Yun notes above, there is a big mismatch in inventory, with a complete dearth of properties at the low / mid price points. McMansions abound, however. Despite these issues, the first time homebuyer accounted for 35% of sales in June, which is approaching the historical norm of 40%. The first time homebuyer had been largely MIA for most of the post-crisis timeframe, accounting for 30% of sales (or even less). On the flip side, investors (represented by all cash sales) fell to 10%. With home price appreciation leveling out, we may start to see some funds who raised capital for the REO-to-Rental trade in the aftermath of the crisis ring the register and sell some of these properties as the funds wind down. Certainly cap rates are not what they were 10 years ago.


The median home price reached an all-time high of 285,700. Sentier Research has the median income at $63,400 as of May 2019. This puts the median house price to median income rate at just about 4.5x. Historically this is a very high number, however it is important to note that interest rates will influence this number. If you look at other metrics besides incomes and prices, homes are not that expensive on a historical basis.



18 Responses

  1. Anyone watch Mueller today? I’m hearing his performance was pretty bad, that he looked old and confused. Wondering if that is just spin or true.


  2. Rep Ratcliffe is exactly right on this.


    • Yup. Amazing to me he didn’t just stick to “innocent until and unless actually proven guilty”–and I like Ratcliffe’s pulling in of the policy, because otherwise it could reasonably seem like he was just doing what a “special counsel” does, being somehow different than an actual court of law. Mueller tried to eat his cake and have it, too.


  3. Mueller stuck closely to the Report. It was what a good witness does. Thus, as a practical matter, neither side learned anything new.

    For those who did not read the Report, if they watched closely, they got enough of the gist to make the testimony worthwhile for them.

    He defended the integrity of the Report. And he stressed the continuing danger of foreign, especially Russian, interference in the American electoral process.


    • Mark:

      He defended the integrity of the Report.

      Chris Wallace had exactly the opposite reaction:

      Frankly…This has been a disaster for the Democrats and I think it has been a disaster for the reputation of Robert Mueller. He has seemed very uncertain with his brief. He doesn’t seem to know things that are in the report. He has been attacked a number of times and you would think that almost anybody else would have defended his own integrity and the integrity of the investigation, and over and over Mueller just sits silent and allows the attacks from the Republicans to sweep over him and says nothing. I think it does raise questions about the degree to which he actually was in charge and in control of this report because he doesn’t seem very much in control or in charge of what the final report was.

      And it sounds like Mueller’s performance was panned pretty much across the ideological spectrum. Even the hardcore NeverTrumpers of the right are saying that he had a bad day, and they generally love Mueller.


      • I did not listen to every minute of two hearings. So I heard him defend the Report. Wallace probably heard some other questioning that I missed. I know that he refused to respond to one R who went on about the Steele memo beyond saying that was not in his Report. Then the R said it should have been because Steele himself might have been a conduit of Russian interference and that should have been in his investigation. But there was no question at the end of the congressman’s critique so Mueller did not respond. As I said, good witness technique.

        I also heard him ask various committee members to repeat what they alleged were quotes from the Report before he would reply as to whether the quote was in the Report. I did not think he was halting, just carefully sticking to the course. Since any good cross examiner might have stuck something outside the Report in a question that broadened the Report scope to elicit a desired answer, Mueller had to be very careful, and he was.

        I don’t know what any of them were expecting other than what they got. I, for example, decided from reading the Report that a non-POTUS could have been indicted for OoJ if McGahn’s statements to the team were true. I still think that. DJT’s supporters were comforted that no criminal act of conspiracy was detailed in the Report or in the testimony.

        So if you had not read the Report, the hearing was useful for you. For partisan purposes inside the Beltway, not so much. Will Hurd asked the best question, as far as I was concerned, and got the most important answer.


        • I should add that I think the line about “not exonerated” is a zero. That is not a legal conclusion a prosecutor would ever draw. They are not charged with finding “innocence”. “Not guilty” is not the same as “innocent”. Npthing in the mandate to Mueller called for finding innocence. It is just not a legal matter.

          It would have been a political opinion to say DJT was exonerated, not a legal one. So it is a throwaway.


        • Mark:

          That is not a legal conclusion a prosecutor would ever draw.

          And yet Mueller did exactly that. Why do you suppose that is?


        • And yet Mueller did exactly that.

          I did not take it that way. Asked if the POTUS was exonerated he said “no.” Limit answers to the questions asked. First rule of proper testifying.


        • Mark:

          I did not take it that way. Asked if the POTUS was exonerated he said “no.”

          The only reason the question came up in his testimony was because when he stepped down after presenting the report to Barr, he held a press conference in which he made it a point of noting that the report did not determine that Trump was innocent. It was not a response to a question. He made the statement entirely umprompted as part of his prepared remarks. He said:

          “If we had confidence that the president clearly did not commit a crime, we would have said that.”

          That is just using different words to proclaim that the report does not exonerate him. It was a point of quite some controversy at the time, given that it was well beyond what a prosecutor would normally say, which was, I thought, your point above, ie that this is simply not something that a prosecutor does. So, again, if you are correct, the question I have is why do you think Mueller did exactly that?


        • Mark:

          Will Hurd asked the best question, as far as I was concerned

          This guy agrees with you.

          I suspect the reason that Hurd was a lone voice in this regard is because everyone else was focused on what Mueller’s investigation was actually about, which wasn’t what Russia did, but was instead what Trump did. I doubt it would be very difficult to get bi-partisan support behind a genuine effort to protect our election infrastructure from Russian infiltration.


        • And yet Mueller did exactly that. Why do you suppose that is?

          He was too old for that particular task? He has social considerations? Looking forward to the book he’ll put his name on after it’s ghost-written? A personal antipathy towards Trump that he couldn’t quite moderate, despite his professional obligations?


      • This has been a disaster for the Democrats

        I wonder about that. Is that going to have any real impact on the Democrats or Mueller? The disaster for the Democrats, right now, looks like their own party schisms and the horrible bench they are fielding for the 2020 elections. To Chris Wallace, who pays attention to this stuff in detail, it might look like a disaster but I doubt it will have any permanent relevance or any effect on the outcome of the 2020 elections.


      • I definitely disagree with that. The contextless and vague allusions to past and future Russian “interference” is compassionate McCarthyism, at best. His implication that there was any “there” there, or any more “there” than previous presidential elections, or that all the “interference” (Facebook ads) were sponsored by Russia rather than independent actors . . . remains, IMO, nonsensical.

        But then I’ve found almost no public discussion of this stuff to be better than nonsensical. The media is simply derelict in their reporting on the issue, and their lack of any kind of deep knowledge on the topics they report on . . . some days it’s mind-blowing. And irresponsible. And misunderstands the nature of cyber-threats, what “hacking” is, what constitutes an “attack”, etc., etc. Ah, well.


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