Morning Report: Ukraine Situation Escalates

Vital Statistics:

 LastChange
S&P futures4,338-5.2
Oil (WTI)93.752.63
10 year government bond yield 1.94%
30 year fixed rate mortgage 4.12%

Stocks are flattish this morning despite the escalation of hostilities in Ukraine. Bonds and MBS are up.

Russia has inserted troops into the breakaway Ukraine regions, and Germany has suspended approval for the Nord 2 gas pipeline. Overnight Asian stocks were down a couple of percent, but the European markets are more sanguine about the situation. Bonds remain well bid, with the 10 year trading at 1.94%.

Commodity markets have been well-bid on this situation, with North Sea Brent oil contracts pushing close to $100 a barrel. Natural gas prices in Europe are soaring as well.

Home prices rose 17.5% YOY, according to the FHFA House Price Index. The Mountain region remains the top performer with prices rising 23% YOY.

Existing Home Sales rose 6.7% in January, according to the National Association of Realtors. The median home price rose 15.4% YOY to reach $350,300. This increase was driven at least partially by low inventory, which fell to 860,000 units, or about 1.6 month’s worth of inventory. These stats are both record lows.

“Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers,” said Lawrence Yun, NAR’s chief economist. “Consequently, housing prices continue to move solidly higher.”

The inventory of starter homes (or homes below $500k) is “disappearing” while higher priced homes are seeing increased supply. This is depressing the first time homebuyer percent, which fell to 27%. Pre-2008, that number was typically closer to 40%. Investor purchases rose to 27% as well. We are starting to see some kvetching from liberal politicians about big money managers (i.e. Blackrock, American Homes 4 Rent) crowding out the first time homebuyer.

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