Morning Report: Record home price appreciation

Vital Statistics:

 LastChange
S&P futures4,1856.8
Oil (WTI)62.440.57
10 year government bond yield 1.58%
30 year fixed rate mortgage 3.14%

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are flat.

Home prices rose 0.9% MOM and 12.2% YOY in February, according to the FHFA. “Annual house price growth achieved a new record high in February” said Dr. Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics. “The 12.2 percent gain represents an increase of $35,000 for a median-priced home that sold a year ago at $290,000 in the Enterprises’ data.” Every geographic division reported double-digit annual gains.

The number of loans in forbearance ticked down to 4.49%, according to the MBA. “After two weeks of large declines, the share of loans in forbearance decreased for the eighth straight week,” said MBA Chief Economist Mike Fratantoni. “New forbearance requests increased, and the rate of exits declined. More than 40 percent of borrowers in forbearance extensions have now exceeded the 12-month mark.”

The Biden Administration is aware of the disruptions caused by the 7% cap on investment and second homes. The Administration has not yet formed an opinion on this, but it is at least aware. Bharat Ramamurti, the Deputy Director of the National Economic Council told the MBA: “We’re looking forward to working across the Administration with Congress to grapple with those issues,” Ramamurti said. “And we recognize that the issues you raised with second homes is a shorter-term issue, and all I can say on that is we are aware of it; we will continue to engage on it; and we are happy to work with you and your members on it going forward, and having a conversation with FHFA about it…we appreciate you flagging it for us and we recognize that.” Not a lot to hang your hat on here, and it certainly doesn’t seem to be any sort of front-burner issue.

The market for homes this Spring is the most competitive in years, with the National Association of Realtors announcing an average of 4.8 bids per property. Buyers are reacting by increasing the number of cash offers on a property, and are making larger down payments.

The April FOMC meeting starts today amid concerns that the economy is overheating. A survey of economists reveals the market anticipates no changes to policy this year. IMO, that is probably the case.

Concerns about an overheating economy are overblown IMO, although the inflation data will be giving off some wonky readings as COVID lockdowns last year distort the historical data. COVID-19 also created all sorts of supply chain issues that created shortages. While those price increases are real, they are also temporary. As they say in the commodity markets (which is the driver here) the cure for high prices is high prices. This means that prices increase, commodity producers like miners, farmers, and loggers increase production to take advantage of it, which increases supply and causes prices to fall.

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