Morning Report: Fed Day

Vital Statistics:

 

  Last Change
S&P futures 3686 2.3
Oil (WTI) 47.57 0.24
10 year government bond yield   0.93%
30 year fixed rate mortgage   2.78%

Stocks are flat as we await the Fed decision. Bonds and MBS are down small.

 

The Fed announcement is expected to announce its decision at 2:00 pm this afternoon. The market will focus most closely on the economic forecasts and any changes in Treasury / MBS purchases.

 

Retail sales fell 1.1% in November, which was well below expectations. Ex vehicles and gasoline, they fell 0.8%.

 

Mortgage applications increased 1.1% last week as mortgage rates continued to fall. Purchases increased 2%, while refis rose 1%. “U.S. Treasury rates stayed low last week, in part due to uncertainty over the prospects of additional pandemic-related government stimulus, as well as concerns about the continued rise in COVID-19 cases across the country. Mortgage rates as a result fell to another survey low, with the 30-year fixed mortgage rate dropping five basis points to 2.85 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Homeowners once again acted on the decline in rates, with refinance activity rising for the second straight week and up 105 percent from a year ago.”

 

14.5 million people will leave the cities for the suburbs, according to an analysis by RedFin. They also anticipate that many will move to cheaper cities as well, which will benefit places like Buffalo, Cleveland, and Pittsburgh. 2021 should see a massive relocation in general. Second, they anticipate the homeownership rate will hit 70% next year, which will be the highest number since 2005. They also see mortgage rates staying low, with the 30 year fixed rate mortgage finishing the year around 3%.

 

The NAHB Homebuilder Index slipped in December, with the index falling to 86 from recent record highs. If the Redfin study is correct, housing starts will be the highest since 2006 next year.

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