Morning Report: New Home Sales soar

Vital Statistics:

  Last Change
S&P futures 3225 -12.6
Oil (WTI) 39.87 -0.16
10 year government bond yield   0.66%
30 year fixed rate mortgage   2.94%

Stocks are lower this morning on no real news. Bonds and MBS are flat.

New Home sales topped the 1 million seasonally adjusted annual rate in August, according to Census. This is the highest number since June 2006. There are only 282,000 new homes for sale at the moment, which translates into a 3.3 month supply.

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The rise in new home sales should hopefully trigger a similar increase in housing starts. Housing has been the missing piece of the puzzle in the US economy since the bust of 12 years ago.

Loan Depot filed to go public yesterday. That makes Rocket, United Wholesale, and Loan Depot as big mortgage banking IPOs in 2020. Loan Depot planned to go public about 5 years ago, and scrapped the plan at the last minute. Initial estimates would value the company at somewhere between $12 and $15 billion. While the mortgage origination business is certainly hot, stock market valuations are not. Quicken is trading at a 2020 P/E of about 6, and PennyMac is trading with a 2020 P/E of about 3.5. Like Quicken, it looks like Loan Depot is going public with a dual voting class structure.

Durable Goods orders rose 0.4% last month, which was a bit below expectations. The core capital goods orders number, which is a proxy for capital expenditures, rose 1.8%.

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