Morning Report: Existing Home Sales jump

Vital Statistics:


Last Change
S&P futures 3285 5.1
Oil (WTI) 41.84 -0.22
10 year government bond yield 0.59%
30 year fixed rate mortgage 3.02%


Stocks are flattish as earnings continue to pile in. Bonds and MBS are flat.


Initial Jobless Claims increased last week as we saw a wave of new COVID-10 cases. New claims increased from 1.3MM to 1.4MM


Despite the new COVID fears, the housing recovery is in full swing. Existing home sales rose 21% in June, to an annualized pace of 4.72 million. according to NAR. This is still down 11% on a YOY basis, but we are getting a lot of data points that show a meaningful recovery.

“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

The median home price rose 3.5% YOY to $295,300, while inventory is at 4 months’ worth. The first time homebuyer percentage is approaching normalcy, at 35%. Historically it has been closer to 40%.


Speaking of housing, homebuilder Meritage Homes reported second quarter numbers yesterday. Orders increased 32% year-over-year. May and June were record selling months for the company, which focuses on entry-level homebuyers.

“Demand for new homes is being driven by historically low mortgage interest rates, a shortage of used homes for sale, and an increased need for homes that can accommodate entire families working from home more than ever before. Many of those families are choosing safe suburban communities rather than crowded urban centers and many often prefer to purchase a home virtually rather than physically,” he explained. “That is exactly what Meritage offers. 100% of our communities are open for both in-person and virtual sales, and our virtual selling capabilities have been very beneficial. More than half of our communities are designed for the entry-level market with a wide selection of affordable homes ready for quick move-in, while our streamlined design selection process in Studio M  allows first move-up customers to move quickly into a new home.”

The company took up guidance for full year earnings to about $9 bucks a share, when the Street was looking for about $6.


A record number of people are leaving the expensive urban areas to move to cheaper locations with more outdoor space and better weather. Phoenix, Sacramento, Austin, and Las Vegas are growing, while buyers flee New York City, Los Angeles and Sacramento. The subtext to all of this is remote working, which is a game-changer. From one realtor:

“We’re seeing tons of interest from clients moving to Austin from major cities on both coasts, particularly tech workers,” Vallejo said. “Buyers who have discovered they don’t love being quarantined in an apartment building in San Francisco or New York and can work remotely are looking for a house, and they can afford that here in Austin. I have a client moving from the Bay Area who just closed on a home site unseen, and another client from Portland who is in the process of buying a home here.”


Democrats are promoting a bill that would prohibit the GSEs and Ginnie Mae from charging fees for forbearances. Fannie and Fred introduced the idea of adding big LLPAs for loans in forbearance. The unintended consequence of forbearance has been a tightening of credit, particularly for government lending. Part of this is due to low or even negative servicing values for FHA and VA loans.


Home sellers are reaping gains of almost $76k according to ATTOM Data Solutions. Taking into account time held, this represents a return of 36% compared to the original purchase price. Of course if you take into account the equity you actually contributed, it is probably much higher.

25 Responses

  1. Good piece:


  2. Yep:

    “Portland’s protests were supposed to be about black lives. Now, they’re white spectacle.

    Opinion by E.D. Mondainé
    July 23, 2020 at 1:51 p.m. EDT

    E.D. Mondainé is president of the Portland, Ore., branch of the NAACP.

    Early in his activism, Malcolm X was asked by a young white woman what she could do to help the cause of civil rights. He famously replied, “Nothing.” Years later, he regretted dismissing her so abruptly, because he came to believe there was much she could do to advance the cause of justice for black people in the United States. But I am quite certain that striking yoga poses nude on the streets of Portland, Ore., was not on his list of actionable items.”


    • Portland’s protests were supposed to be about black lives.

      I don’t think that is true. The protests are about undermining American culture and institutions. The “black lives” aspect is just a marketing strategy.


      • The initial ones were, especially in Minneapolis where it happened. It morphed pretty quickly.

        But the point of the piece is that what’s going on in Portland and Seattle has little connection to George Floyd at this point. It’s mostly now about woke white people doing their favorite cosplay – La Resistance fighting Trump’s fascist regime.

        I also appreciated the observation that in terms of actually pursuing police reforms, the street protests were becoming counterproductive.


        • jnc:

          I also appreciated the observation that in terms of actually pursuing police reforms, the street protests were becoming counterproductive.

          That is a dangerous thought to have these days!


      • I think this is correct, especially given the system was operating correctly in the case of Floyd’s death—that cop wasn’t getting a pass even before the protests exploded. Justice was being served so the protests were by definition about how equal justice isn’t good enough. Ergo, entire system needs to be brought down, period.


    • Interesting. A rift between those who want spectacle and those who want to continue the leftist/racialist long march through all the institutions.


  3. As of yesterday, face-diapers are now mandated by law in the UK for all shops and grocery stores. So I went to the store today and noticed that, while all the customers were wearing them, roughly 70% of the employees in the store were not wearing them. I asked why. Turns out that the legal mandate only applies to customers, not employees.

    So,,,masks are required to be worn by those people who will spend the least amount of time in the store and come into contact with the least number of other people, while they are not required for the very people who will spend the most amount of time in the store coming into contact with the most other people.

    Someone is going to have to explain the logic behind that to me.


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