Morning Report: Rental inflation hits a 14 year high

Vital Statistics:

S&P futures4,084-38.8
Oil (WTI)64.17-1.37
10 year government bond yield 1.66%
30 year fixed rate mortgage 3.18%

Stocks are lower this morning on COVID and inflation fears. Bonds and MBS are down.

The FOMC minutes from the April meeting are scheduled to be released at 2:00 pm. I doubt we will get anything market-moving out of the release, but you should be aware.

Mortgage Applications rose by 1.2% last week as refinances rose by 4% and purchases fell by 4%. “Mortgage rates increased last week, with all loan types hitting their highest levels in two weeks. Rates  were still lower than levels reported in late March and early April, providing additional opportunity for borrowers to refinance,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Despite the 30-year fixed rate rising to 3.15 percent, applications for conventional and VA refinances increased. Ongoing volatility in refinance applications is likely if rates continue to oscillate around current levels.”

Rising lumber prices drove the disappointing housing starts number yesterday. It looks like lumber is starting to head back down again.

Single-family rents increased 4.3% in March, according to CoreLogic. The increase was the biggest in 14 years and was driven by the growth at the high end. There was a marked divergence between growth for SFR and attached units.

There was a wide divergence in metro areas as well, with Boston reporting a 11% decline in rents versus Phoenix which grew 11%. I wonder if the eviction moratorium is introducing noise into the data however.

The anticipated increase in housing inventory failed to materialize in April, according to the latest research by Zillow. Inventory fell 1.4% compared to March and is down 30% from a year ago. This drove prices to increase 11.6% on a YOY basis, which was the fastest increase in the history of the Zillow Home Price Index, which goes back 25 years. The typical home was on the market for only 7 days before accepting an offer. Zillow economists are forecasting another big year for home price growth, expecting to see 11.6% growth through April 2022.

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