Morning Report: Home prices continue to soar

Vital Statistics:

S&P futures4,2800.8
Oil (WTI)73.250.32
10 year government bond yield 1.5%
30 year fixed rate mortgage 3.20%

Stocks are taking a breather this morning after hitting record levels. Bonds and MBS are flat.

Home prices rose 15.7% in April, according to the FHFA House Price Index. On a month-over-month basis, prices rose 1.8%. In some MSAs like Boise, prices are up 28%. Austin is up 23%. Note that in April of 2020, the entire US was in lockdown, and there were very few transactions. This will exaggerate the year-over-year price increases. The supply / demand imbalance will hopefully get some relief as lumber prices fall, and the foreclosure / eviction moratoriums expire. Until then, it is slim pickings if you are a buyer.

The Case-Shiller Home Price Index reported similar gains to FHFA, rising 2.1% MOM and 14% YOY. Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P had this to say about the pace of home price growth:

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. April’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.”

The change in housing preferences is an interesting idea, however Occam’s Razor says that we have underbuilt for years, and have not kept pace with population growth and obsolescence. That said, COVID probably did affect preferences at the margin, but even before the pandemic we had a supply problem. If anything, COVID just exacerbated it.

The number of loans in forbearance fell another 2 basis points last week to 3.91%, according to the MBA. Re-entries accounted for 6.2% of those in forbearance, so it looks like some borrowers are not really launching yet.

Despite the seemingly never-ending foreclosure moratoriums, the government did make a few tweaks to its policy. Foreclosure proceedings are permitted to begin if (a) the home is abandoned, (b) the borrower has not responded to any messages for 90 days, (c) the borrower has been evaluated for a modification and none are viable or (d) the borrower was 120 days down before March 2020.

Consumer confidence increased in June, according to the Conference Board. “Consumer confidence increased in June and is currently at its highest level since the onset of the pandemic’s first surge in March 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved again, suggesting economic growth has strengthened further in Q2. Consumers’ short-term optimism rebounded, buoyed by expectations that business conditions and their own financial prospects will continue improving in the months ahead. While short-term inflation expectations increased, this had little impact on consumers’ confidence or purchasing intentions. In fact, the proportion of consumers planning to purchase homes, automobiles, and major appliances all rose—a sign that consumer spending will continue to support economic growth in the short-term. Vacation intentions also rose, reflecting a continued increase in spending on services.”

43 Responses

  1. PennEast Pipeline Co. v. New Jersey

    One of the historic precursors to Kelo was the designation of a private right to eminent domain for pipelines.

    Here they deal with the interplay of eminent domain for a pipeline co. authorized by FERC, against a state government.

    Holding: A certificate of public convenience and necessity issued by the Federal Energy Regulatory Commission pursuant to Section 717f(h) of the Natural Gas Act authorizes a private company to condemn all necessary rights-of-way, whether owned by private parties or states.

    This reversed the Circuit ruling.

    5-4: Dissent was Gorsuch, Thomas, Barrett, and Kagan.
    Five were Roberts, Breyer, Kavanaugh, Alito, and Sotomayor.

    These lineups are very interesting.


    • Mark, I thought that railroad companies were the precursor of private right to eminent domain?


      • Yes, George, RRs were first, then pipelines, then “urban renewal”, then sports stadiums.

        4 precursors. Pipelines were one of them, the second one.


        • Thanks Mark. In what way did the court ruling change from RR’s to Pipelines? I’m sure it was expand
          Dec but for a layman it doesn’t make sense that a takings change would be required for pipelines vs railroads.


        • Lol!




        • So. Utterly. Full. Of. Shit.

          Also: ”if you love Democracy and freedoms believe what I tell you, make my priorities your priorities, and do what I say! Or you hate freedom. And puppies.”


        • If I understand you correctly, when the private takings were RRs it was analogized to highway RsOW, a public use. It was when it got to mining easements and pipeline easements that we were in the era of “public purpose” which is much broader than the text “public use” So slum clearance and stadiums have all been public purpose takings by private interests, and that led almost inevitably to Kelo.

          As the dissenters in that case said it is as if the Takings clause now means govt can authorize a private taking so long as the govt entity expresses that it serves a public purpose.

          Of course the central issue in Penn Pipeline was the trampling of state sovereign immunity by a federally authorized private taking. Barrett’s dissent is pretty straightforward.


        • While I don’t consider The Hill a reliable source, there is this background to consider if they are correct.

          Apparently, FERC has been a rubber stamp for pipeline requests. A recent House investigation found that virtually all requests are granted and almost all appeals are denied.

          The Hill: “The committee found that in more than 99 percent of cases over the past 20 years, FERC has decided to give natural gas pipeline companies eminent domain; the move was approved 1,021 times and only rejected six times…. Over the past 12 years, when landowners have sought to appeal FERC’s decision to give companies eminent domain over their property, in every case the commission has issued an order extending its time frame to respond. The appeals were ultimately denied every time.”


  2. If the country splits up, I think this will be viewed as a harbinger of that in retrospect:


    • “unprecedented wave of bigotry”

      these people simply have no grasp on reality.

      I think every church in my town has a pride sign on its front lawn.

      Wonder if they do any business with countries in the middle east.


  3. “U.S. military commander in Afghanistan warns of possible civil war”

    As opposed to the current state of affairs.

    ““The security situation is not good,” Miller stated, citing the ongoing loss of territory, casualties and government forces withdrawing, while the Taliban have launched a “countrywide offensive” at the same time that peace talks are supposed to be taking place. “There are a lot of questions about why and how this is happening.””

    Can they really be this clueless? They are unaware of how the Vietnam War ended in the exact same way?


  4. Thank goodness Trump is gone and we have an honorable man in the White House who respects the media and free speech!


    • And I guarantee you the Washington Post, NY Times, CNN, and MSNBC won’t bat an eye.


      • Depends on if Tucker can actually produce some evidence.


        • He has a whistleblower, apparently.

          No amount of evidence will cause the party hacks at the MSM to denounce this.

          Welcome to the USSA.

          Liked by 1 person

        • Yeah, I want to see the evidence still.

          I also don’t rule out that someone may be trolling Tucker Borat style to embarrass him with assistance from someone inside Fox.


        • Won’t matter ultimately. They spy on sitting Senators for goodness sake. This will be denied until it’s no longer tenable then it will be justified as necessary.


        • I’d be interested in see evidence if there is any. Whistelblowers can be intentional disinformation agents to discredit the gullible. Needs hard evidence.

          That being said he could have all the evidence in the world and the media will spin and justify.


  5. Perfect:

    ““We find ourselves in a crisis,” Armstrong said at a news conference Monday. “We see clearly that crime is out of control in the city of Oakland and our response was for less police resources.”

    Yet another shooting was reported right before the press conference began, and a victim was in critical condition, Armstrong added. Then, just hours after the press conference, two armed robbers held up a television news crew that was interviewing Guillermo Cespedes, the head of the city’s Department of Violence Prevention, outside City Hall.”

    Liked by 1 person

  6. NoVA, I saw this and thought of you:

    “My Wife Wants Me to Stay With Her in the Normie Line Even Though I Have PreCheck

    Is it rude for me to leave her behind?”

    Liked by 1 person

    • “y money’s on the AMA lobbying $”
      fuck those guys. always wanting to change coalition letters at the last minute.


      • How have things been in your neck of the woods NoVA?


        • quietly busy. expecting some major new regs today or tomorrow.

          vaccine distribution was the big thing for a while. but that’s quieting down.

          they’re reopening the office next week. i’m not jazzed about it. but 2 days a week in-office isn’t horrible. i’ll try to stack as many meetings as possible those 2 days so i can do my actual work the rest of hte week from home.

          the hill is doing what they do. act busy, do nothing, and pass something at the last minute. we should just shut down DC until the last week of Dec. cut to the chase.

          how about you?


    • jnc:

      Again, more like guidelines.

      Kavanaugh says CDC has no power to do it, but he’ll leave it in place anyway. As I said the other day, completely demoralizing.

      Liked by 1 person

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