Morning Report: Homebuilding is back

Vital Statistics:

 

Last Change
S&P futures 3141 74.1
Oil (WTI) 38.34 1.39
10 year government bond yield 0.78%
30 year fixed rate mortgage 3.16%

 

Green on the screen this morning as Jerome Powell heads to Capitol Hill for Humprey-Hawkins testimony. Bonds and MBS are down.

 

Retail Sales came in way better than expected, rising 17.7% versus expectations of a 8% gain. Last month was revised from -16.4% to -14.7%. The control group, which excludes gas, autos, and building materials rose 11% versus expectations of a 4.7% increase.

 

Industrial production rose 1.4% in May, a little better than expected. Capacity Utilization rose to 64.8% and manufacturing output rose 3.8%.

 

Lennar reported second quarter earnings yesterday, with a 27% increase in earnings per share. Lennar is on a November fiscal year, so the quarter included both March and April, the worst months of the economic pandemic. That said, everything turned around in May, with CEO Stuart Miller saying this in the press release: “Business rebounded significantly in May, and by quarter’s end, our total new orders declined by only 10%, and deliveries ended flat year-over-year. In sync with the market rebound, we resumed starts and land spend to match the improving market conditions, and this rebound has continued into the first two weeks of June.” He also mentioned the effect COVID has had on demand: “While unemployment increased throughout the quarter due to impacts from the COVID-19 pandemic, customers moved from rental apartments and from densely populated areas to purchase homes, and home sales grew steadily, as record-low interest rates and low inventory levels drove a favorable rebound in the homebuilding industry.” Finally, the company re-instituted its 2020 guidance.

 

The MBA reported that new home purchase applications increased 26% MOM in May and 11% on YOY basis. “The solid increase in new home purchase applications in May is another indication of a recovery in the housing market,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “MBA estimates that new home sales rebounded 26 percent last month – a healthy turnaround after three months of declines. Homebuyer traffic is rising, and homebuilders are continuing to ramp up production following the COVID-19 pandemic-related restrictions. We expect to see additional near-term strength in the coming months from the resumption of delayed sales activity caused by the social distancing and stay-at-home orders during March and April.”

 

The MBA reported that the share of mortgages in forbearance has leveled out at 8.55%. “Results from the first week of June showed a slight uptick in the overall share of loans in forbearance, but this increase was primarily driven by a larger share of portfolio and PLS loans in forbearance,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Half of the servicers in our sample saw the forbearance share decline for at least one investor category. Although there continues to be layoffs, the job market does appear to be improving, and this is likely leading to many borrowers in forbearance deciding to opt out of their plan.” Given the way the CARES Act was drafted, there was almost no penalty for taking forbearance, and it sounds like many took it pre-emptively. Ginnie loans was flat at 11.8%, while GSE loans came in at 6.4% and private label mortgages were 10.2%.

 

The housing market outside New York City is booming. Local builders are getting slammed with inquiries and are selling homes at a rapid pace. “People who are now in the Hudson Valley looking for homes, many of them have never been to the Hudson Valley before,” Mr. Petersheim said. “That’s new to the marketplace, that urgency.” I guess being cooped up for 3 months in an 800 square foot studio that costs 5 grand a month will wear on anyone.

 

Fed Head Robert Kaplan says the economy will experience a historic contraction before rebounding in the second half of the year. From the sound of it, the economy is already bouncing back.

 

I will be doing a podcast for the Information Management Network this morning. I will be discussing economics, housing, and the markets. I will leave a link once I get one.

9 Responses

  1. How to get Republicans on board with antitrust actions against large tech companies:

    “Google bans two websites from its ad platform over protest articles
    The two sites, ZeroHedge and The Federalist, will no longer be able to generate revenue from any advertisements served by Google Ads.

    June 16, 2020, 6:24 PM UTC
    By Adele-Momoko Fraser

    Google has banned two far-right websites from its advertising platform after research revealed the tech giant was profiting from articles pushing unsubstantiated claims about the Black Lives Matter protests.”

    https://www.nbcnews.com/tech/tech-news/google-bans-two-websites-its-ad-platform-over-protest-articles-n1231176

    Like

    • as if the federalist is stormfront or something

      Like

    • so, it’s over right?
      the idea of free expression and association being values worthy of protection.

      Like

      • the totalitarian left in action…

        Like

      • It gets worse:

        Clearly this means comment sections need to go.

        Also, Google should be held legally liable for any illegal activity that comes up in it’s search results.

        For consistency.

        Like

        • And apparently NBC News is reporting on a story that they caused by complaining to Google about the Federalist and ZeroHedge in the first place.

          NBC is the one trying to get them banned.

          Like

        • Comment sections could be used in a lot of places–just keep spamming the comments with l33t-speak that gets through the filters then immediate narc on them for the comments.

          All comment sections can get removed or reduced to unusability as every comment you make is held for moderation and there’s never dialog.

          Eh, just a strategy. They want to get rid of all the big conservative outlets and YouTubers and so forth the best they can.

          Like

      • Not until the burn the constitution after having created the DC Autonomous Zone.

        Like

    • could you make a collusion argument between Comcast and Google to eliminate competitors from the market place?

      Like

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