Morning Report: Home prices rise 16%

Vital Statistics:

  Last Change
S&P futures 3559 -6.6
Oil (WTI) 41.73 0.31
10 year government bond yield   0.86%
30 year fixed rate mortgage   2.82%

Stocks are lower this morning as COVID cases continue to rise. Bonds and MBS are up.

Initial Jobless Claims ticked up to 740,000 last week.

Existing home sales rose 4.3% MOM to a seasonally-adjusted annual rate of 6.85 million in October. This number is up 27% from a year ago. The median home price came in at 313,000 an increase of 16% from a year ago. This huge jump in prices means that the luxury end of the market is recovering. Housing inventory remains tight at 1 42 million units, which represents a 2.5 month supply at current rates. “Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year,” said Lawrence Yun, NAR’s chief economist.

The FHFA issued its final capital rule for the GSEs. Fan and Fred will have to hold Tier 1 capital in excess of 4% to avoid restrictions on capital distributions and discretionary bonuses. The government would like to end conservatorship, however I think there is a meaningful risk that a Biden Administration will re-instate the profit sweep to pay for the advance relief that servicers are getting as a part of the CARES Act. The left really has little appetite to privatize the GSEs in the first place, and divided Congress makes anything legislative difficult.

New Home Purchase applications rose 5% MOM and 33% YOY according to the MBA. “New home sales activity was robust in October,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “October is usually when home buying activity slows as the weather turns colder. However, this fall has been a different story, with delayed activity from the spring, and more households seeking larger homes with more indoor and outdoor space, driving demand.”

Global debt is set to hit $277 trillion by the end of the year. That is a quarter of a quadrillion in debt. Despite all of that debt, interest rates are negative in much of the world. Meanwhile, the Fed is committed to lower rates, and has absolutely no intention to reduce the size of its balance sheet. In fact, it may extend its liquidity facilities for corporate and municipal debt into 2021.

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