Morning Report: Personal incomes come in lower than expected

Vital Statistics:

  Last Change
S&P futures 4,698 12.2
Oil (WTI) 72.87 0.18
10 year government bond yield   1.46%
30 year fixed rate mortgage   3.33%

Stocks are flattish this morning on the last trading day before a long weekend. Bonds and MBS are flat as well.


Personal incomes rose 0.5% in November, and personal consumption expenditures rose 0.6%. Both numbers were a decrease from October and came in below expectations.

The PCE Price index rose 5.7% on a headline basis and 4.7% if you strip out food and energy. The PCE inflation index is the Fed’s preferred measure of inflation, so it is running hot.


The MBA is out with their latest forecast for 2022. Here are the main highlights:

  • Purchase originations will rise from $1.6T to $1.7T
  • Refinance originations will fall from $2.3T to $.9T
  • 30 year fixed rate mortgage will rise from 3.1% to 4%
  • Home price appreciation will fall form 16% to 5%
  • Housing starts will rise from 1.6MM to 1.7MM


Initial Jobless Claims came in at 205k. We are back more or less to pre-pandemic levels.


New Home Sales rose to an annualized pace of 744k last month, according to Census. This was a touch below expectations, although this number is historically quite volatile with large sampling errors.

Regarding new home sales, I find the MBA’s forecast of housing starts maintaining current levels to be pessimistic. Historically, housing starts have been around 1.5 to 1.6 million, however we have seen starts spike well above 2 million several times. Given the supply and demand imbalance, I wouldn’t be surprised to to see starts hit those sorts of levels in the next few years, especially if commodity prices decline and more younger workers enter the skilled trades.

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