Morning Report: Housing inventory at a record low

Vital Statistics:


  Last Change
S&P futures 3839 5.3
Oil (WTI) 52.10 0.14
10 year government bond yield   1.07%
30 year fixed rate mortgage   2.83%

Stocks are flattish this morning as earnings continue to come in. Bonds and MBS are up.


We have a big week of data coming up, along with the FOMC meeting. In terms of data, we will get home prices tomorrow, the FOMC decision on Wednesday, fourth quarter GDP on Thursday, and personal incomes / spending on Friday. The Fed meeting should be uneventful given Jerome Powell’s “now is not the time” language, referring to scaling back bond purchases.


Existing Home Sales rose 0.7% in December to a seasonally-adjusted annual rate of 5.64 million, according to the National Association of Realtors. This is the fastest pace since 2006. “Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” said Lawrence Yun, NAR’s chief economist. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.” I think Yun is right there – all signs point to an exceptionally strong Spring Selling Season, which is right around the corner. FWIW, NAR sees mortgage rates hovering around 3% in 2021, which is low enough for the refinance party to continue.

Total inventory fell to 1.07 million units, which is a 23% drop from a year ago, and represents under a two month supply of homes. This is the lowest amount since 1982, when NAR first started compiling these statistics. Tight inventory means higher prices, and the median home price was up 13% YOY to $309,800. With home prices rising affordability remains a concern, and I think the Fed is going to take that into account and hold down rates as long as it can.

Housing starts are rising, which should help alleviate the shortage, however it will take a couple years at least to get back to some semblance of balance. Housing construction should be great for the economy, and we could be looking at some strong performance between the stimulus and housing once the COVID crisis is out of the way. That said, one in three small businesses have shut over the past year, and that will be a drag.


The mortgage IPOs keep coming. United Wholesale completed its merger with a SPAC, and now Home Point is filing to go public. Loan Depot is another candidate.


The regulatory state is mulling whether to extend the Community Reinvestment Act to non-banks.

13 Responses

  1. Brent…you may be interested in this article, if you haven’t dropped google already.


    • I’ve been changing over to DuckDuckGo. Google remains fine and even superior when searching for technical stuff or parts or products or specific people or movies, but anything political it just de-ranks anything from anything remotely conservative if there’s any other plausible option. Meaning I can go to duckduckgo and find what I’m looking for with a simple search, or I can find it at google if I search specifically, word for word, a specific headline or something I already know–then Gateway Pundit or Daily Wire will come up. Stupid Google.


  2. The fate of Buy American? A summary from The Economist:

    Steel yourself: Joe Biden’s “Buy American” push

    The flurry of executive orders from the Biden administration will continue today. One will attempt to deliver on a key campaign promise: to direct government spending towards American jobs. Donald Trump signed no fewer than ten executive orders on the topic while president. But he also faced similar constraints. Some products simply are not made in America; that takes more than a presidential signature to change. Much federal spending is covered by deals such as the Government Procurement Agreement, an international pact to open up government contracts, originally pioneered by America. If Mr Biden wants to backtrack on that commitment, other members will close off their own markets, too. The president could try to attach strings to federal spending at the state and local level, where most government procurement dollars end up. But that could prompt howls from trading partners, project delays and greater expense. A promise is a promise. But it won’t come cheap.


  3. Depressing fact of the day: Fauci is now the highest paid federal employee in the US.

    This got me to thinking about a few propositions:

    1) The term “public service” should never be used in regard to any government job that pays more than the average US salary.

    2) It should be federal law that the average salary across all federal employees cannot exceed the average salary of the nation as a whole in the previous year.

    3) All federal or state employees who imposed, voted for, or recommended business closures during the Corona pandemic should by law have to forgo their own salary for as long as the resulting closures are in place. It is a moral imperative that such people live under the same conditions that they are imposing on others.


Be kind, show respect, and all will be right with the world.

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