Morning Report: Home prices rose 19% in Q1

Vital Statistics:

S&P futures4,143-10.25
Oil (WTI)119.233.94
10 year government bond yield 2.83%
30 year fixed rate mortgage 5.27%

Stocks are lower this morning as oil continues to climb. Bonds and MBS are down.

The upcoming week is packed with data, with the jobs report on Friday, ISM numbers and productivity. The jobs report will be the most impactful on the markets, however the consensus is that the Fed will hike by 50 basis points at the June meeting and another 50 at the July meeting.

House prices rose 18.7% YOY in the first quarter, according to the FHFA House Price Index. “High appreciation rates continued across housing markets during the first quarter of 2022,” said William Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “Strong demand coupled with tight supply have kept prices climbing.  Through the end of March, higher mortgage rates have not yet translated into slower ​​price gains, but new home sales have dropped during the last few months, with a significant falloff in April.”

The fastest growing states were Florida (up 30%), Arizona (up 28%), Utah (up 27%), Tennessee (up 26%) and Idaho (up 26%). The slowest MSA was Washington DC (up 7%). You can see the rapid rise in home prices in the chart below which looks at Q1 appreciation since 2011 when home prices bottomed after the bubble.

Though there is disagreement amongst economists whether money printing causes asset inflation, the above chart certainly correlates with the increase in the money supply.

Mortgage backed securities have been unpopular this year ahead of the Fed’s plan to increase rates and sell some of its portfolio. The additional yield required by MBS investors has risen to 1.2% compared to 0.70% at the beginning of the year. Annaly Capital, a major mortgage REIT has raised capital to start increasing its portfolio of mortgage backed securities. The mREIT stocks have been sold off hard over the past year, but the feared dividend cuts have not materialized. Annaly currently yields over 13%, and AGNC Investment yields 12%

The increase in MBS spreads has also been driven by extreme volatility in the bond market. Since borrowers have the option to prepay the mortgage early, MBS investors are “short” that option. This means that as volatility increases, the value of that option increases, which increases the difference between the yield on Treasuries and mortgage backed securities. The TBA market is trading at extremely wide bid-ask spreads which demonstrates some of the fear in the market.

Bond market volatility seems to be calming down, which will naturally pull MBS yields closer to Treasury yields. In addition, we are seeing relative value investors like the mortgage REITs begin to put in a floor on MBS. If Treasuries stabilize, I would expect to see mortgage rates work lower. We might have already seen the highs of the year in mortgage rates.

Sun Belt cities are the fastest-growing, with 1/3 of them in Arizona. Florida is also seeing a big increase. Where are they coming from? The biggest cities in the US – New York City (which lost 305k people in 2021), Los Angeles, Chicago, San Francisco. 8 of the 10 largest cities in the US lost population in 2021.

41 Responses

  1. There is a mega-shit-ton of irony going on here it’s hard to even paraphrase. Do they realize that their continued losses are because of their ideas?

    No, to a large degree he’s right. Going for a Canadian-style ban on handguns and “assault weapons” will feed America to the fascists.
    But we can do background checks (70%+ approval among all voters), red-line laws that keep guns out of the hands of criminals, abusers, and stalkers. Rules about mass purchases of weapons and ammo. POPULAR gun safety regulation.

    But of we go in with “Get Rid of the Guns” we won’t see a Democrat elected across America, the GOP will have a veto proof majority in both houses and every state house and America becomes Nazi Germany of Hitler had won WWII. Swiftly followed by WWIII when any possible GOP president takes the White House in 2024.


    Seriously, the GOP figured this shit out. They didn’t go for Roe until they had packed the SCOTUS. They didn’t try to eliminate voting rights until they had seeded the ground with the Big Lie about 2020 and packed the state houses. They went slow and steady and kept their eye on the ball.

    When they tried to get out over their skis, they got slapped back and we got a few years of sanity here and there. If we try to do too much this year and in 2024, America is dead. no matter how much you really, really want your favorite pretty pony. Politics is the art of the possible, not a trip to Santa Claus’ grotto.

    We need solid Democratic representation in 26+ state houses and a serious majority in the courts and Congress to enact a real progressive agenda. We’re not going to do that with a far left agenda under the current state of brink of fascism America.

    You build a house from the foundation up, not by shoving the roof into the air and hoping it will stay up there until you get something under it.

    Captain Frogbert May 31 · 11:12:57 AM



      When has that ever stopped them and why should I believe they care?

      They didn’t try to eliminate voting rights

      I love the Internet. Everybody (I do it myself) just says shit offering no evidence or justification for what they just said. Nobody is eliminating voting rights.

      They went slow and steady and kept their eye on the ball.

      Again, what evidence–any, anywhere–is there that Republicans can do this? That they ever have? They stuck with the INSANELY SUCCESSFUL Contract With America for, what, 4 months? Then forgot they ever did it?

      Also, it’s a fantasy that it’s all what politicians are saying. That’s a big part of it but when inflation is high and the economy ain’t great and crime is up and so on and so forth, you’re going to be losing power all over the place. That’s how it works.


    • You can pick any name you want and you come up with Captain Frogbert?


  2. But we can do background checks (70%+ approval among all voters), red-line laws that keep guns out of the hands of criminals, abusers, and stalkers.

    My pet peeve: democrats arguing for shit they already have.


  3. The Washington Post finally gets around to doing some investigative reporting on the Bidens.


    • The left wants Kamala to be the nom in 2024.


    • I love that the Post grants anonymity for this sort of quote now:

      “A source close to Biden, who spoke on the condition of anonymity to discuss sensitive matters, declined to comment on several specific questions about his legal issues, saying only that “Jim Biden has always maintained that he conducted himself ethically and honorably in all his business dealings.””


  4. I haven’t followed what you guys have said here about gun ownership and violence. It’s depressing honestly. But I will put a link up if you want to read about what we’ve done in the Hyper Liberal State of CA over the last decade or two to curb gun violence.

    “The grotesque toll of gun violence is again being debated in Congress. As Luis Ferré-Sadurní and I reported over the long weekend, states are not holding their breath.

    Particularly this state: In ways that have tended to be underreported, California has significantly lowered gun deaths, Dr. Garen J. Wintemute, an emergency room doctor and longtime firearm violence researcher, told me this week.

    “For the last 20, maybe even 25 years — except for the two years of the pandemic, which have increased homicides and suicides across the country — our rates of firearm violence have trended downward,” said Dr. Wintemute, who directs the Violence Prevention Research Program at the University of California, Davis, Medical Center in Sacramento. “And this has been at a time when most of the rates in the rest of the country have gone up.”

    California’s rate of firearm mortality is among the nation’s lowest, with 8.5 gun deaths per 100,000 people in 2020, compared with 13.7 per 100,000 nationally and 14.2 per 100,000 in Texas, the Centers for Disease Control and Prevention has reported. And Californians are about 25 percent less likely to die in mass shootings, compared with residents of other states, according to a recent Public Policy Institute of California analysis.

    I asked Dr. Wintemute how California is different. Here’s a lightly edited excerpt from our conversation, which took place on Memorial Day after his emergency room shift:

    Just a couple of weeks ago, California had a mass shooting. By what measures are our policies a success?

    You have to look at it on a population basis. We do have more mass shootings in California, but we’re also by far the largest state. I looked a while ago at the rates of firearm violence across the 21st century — homicide and suicide together — and the rest of the country was up, but California’s rates were so far down that the average was flat.

    We always hear that nothing works, that even California’s strict gun laws are ineffective.

    That’s because we evaluate policies one at a time, in isolation. The results for one policy might be mixed or even negative. But what California has done over a number of decades has been to enact a whole bundle of policies that I think work in synergy, to measurable effect.

    It sounds like the “Swiss cheese model” public health experts have used to address Covid.

    Yes. The idea is to prevent the holes in the policies from lining up. But if we rank the states, California’s rate of firearm violence ranks 29th out of 50 states for homicides and 44th for suicides.

    Can you share some examples?

    California has done a lot to prevent high-risk people from purchasing firearms. We’ve broadened the criteria for keeping guns out of the hands of people who pose a danger to themselves or others due to mental illness. If you’re convicted of a violent misdemeanor in California, you can’t have a gun for the next 10 years; that offense has to be a felony in most states.

    We require background checks, and not just from licensed retailers; in most states, purchases from private parties require no background checks or record keeping of any kind. We have a system, that we’re evaluating now, for getting guns back from “prohibited persons” — people who have been convicted of violent crimes or who are facing domestic violence restraining orders. And we enforce these policies, unlike a lot of other states.

    What else?

    In the early 1990s, cheap handguns — “Saturday Night Specials” — were almost entirely manufactured around Los Angeles. It was a few companies making upward of 800,000 cheap handguns a year. So the state imposed standards for design and safety. One of the companies has since gone to Nevada. The rest went belly-up and no one else has come in to fill the gap.

    What about gaps?

    Every time California sets a new standard, the gun industry tries to outwit it. Unregulated ghost guns have become immensely popular here, precisely because we’re such a tightly regulated market. And the state program to recover guns from prohibited people has never had the level of funding it needs to do the whole job — there are only about 40 trained agents for the whole state and a backlog of at least 10,000 people whose guns need to be taken.

    Overall, what could the rest of the country learn from California?

    The lower the prevalence of ownership, the lower the rate of firearm violence — that’s been one of the most robust research findings for decades. Rates of gun ownership are lower here, in part because of this bundle of state measures. In the United States overall, something like 25 percent to 30 percent of individuals own guns. In California, it’s about 15 percent to 18 percent.

    Not sure this link will work but you can try……………….it’s from the NYTimes but whatever! LOL


    • Not a hot-button issue for me either way.


      • I’m actually glad to hear that!


      • Just wondering if you would then support some reforms re gun ownership I guess?


        • i support a ban on recreational nukes


        • Sure so do I…………..but how is that relevant to Uvalde? Seems cynical to me when there are actual issues we should be discussing. Not trying to make my view of guns more relevant than anyone else’s but it seems to me there is a time and place for cynicism or sarcasm. I have a 4 year old grandson heading to public school next year in CO so I think questioning gun policy is consequential!


        • I’m all for any law passed regarding firearms should Apply to voting as well. Universal Backgound checks, Red Flag laws, mandatory training, etc.


        • lms:

          I have a 4 year old grandson heading to public school next year in CO so I think questioning gun policy is consequential!

          So far this year there have been 27 K-12 shooting incidents (excluding suicides) resulting in 27 deaths and 56 injuries. The most number of annual deaths/injuries in such shootings came in 2018, with 35 deaths and 79 injuries, and the year with the most incidents was 2019 with 34.

          There are roughly 77 million students enrolled in approximately 131,000 total K-12 schools.

          If we take the largest number of shooting incidents in any given year (34) as the norm, there is a .026% chance of your grandson’s school being involved in a school shooting in any given year.

          If we take the largest number of victims in any given year (83) as the norm, there is a .00011% chance of him being a victim in a school shooting.

          To put this in a bigger perspective, deaths due to all causes in 5-9yr olds is extremely rare to start with, and homocide of any sort whatsoever, much less just those in school shooting incidents, doesn’t even crack the top 3 of leading causes of death for 5-9yr olds.


        • Well McWing I guess suppressing the vote is up your alley but keeping assault rifles out of the hands of 18 year olds, crazy people or anyone with a grudge isn’t. Good to know. Walter (my husband) is an Army Veteran and he told me the other night that guns similar to that (but with less deadly force built in), were monitored extensively. As in who was using it, number of bullets spent, how it was stored and cleaned etc. In other words there were rules. What happened to that?


        • I don’t find the argument re: voting compelling. We have different ages for all sorts of things.

          Again, the practical difference it will make isn’t that much, I don’t think. And we’re going to be using it as a substitute for enforcing red flag laws and other laws where the system isn’t doing what it’s already supposed to be doing it.


        • Why does the military keep track of their assets? That’s really your question?

          Do I want to make it harder to vote? Yup, always have.

          Do I want to make it easier to buy guns? Seems what we have now is ok, though I’d probably lift the sawed-off shot gut ban as well has the restriction on owning post ‘86 automatic weapons.

          We live in a free society and there is a certain amount of risk in life and I do not trust the government to mitigate that risk any farther than they have. In many ways I want to roll back much of the existing mitigation.

          I suspect our First Principles are very different. Yours are workable and so are mine and in the end I prefer mine.


        • This is one of those areas where I’m okay with yours or hers. I suppose whatever the electorate supports/votes for. I would prefer the positive aspects of 50s culture where kids took their rifles to school and kept them in their lockers and there weren’t much in the way of school shootings, but I also am nostalgic for the days new cars came with 7 ashtrays and grocery carts at the store had ashtrays attached to them. Time marches forward!

          I certainly don’t want it to be any easier to vote, I’ll tell you that. And frankly between guns and votes, I think ultimately votes carry much longer potential for deadly consequences so if we’re going to raise the age on buying guns to 21 and voting to 21–I’m okay with that. Age of the draft to 21? I’m okay with that too—or age of serving in combat to 21. No reason 18 year olds can’t be maintaining depots and cleaning up building and painting shit when they are 18.

          But I feel people delude themselves into thinking the problem is one thing. It’s not one thing. It’s a lot of factors. In schools shootings I expect SSRIs play a role. The lack of enforcement of existing laws also plays a role. Response to active shooter clearly played a role recently. Press coverage plays a role. Lack of church participation (or other community participation, 4H clubs, Boy Scouts) plays a role. Porn everywhere plays a role, social media plays a role, cancel culture plays a role, the elimination of positive male role models from culture plays a role. Lots of pieces in this jigsaw puzzle.


        • Also I would argue generally the left feels we live in a free society … and that’s the problem. That is a mistake calling out for a remedy. And we’re not nearly as free as we could be theoretically. And I think that’s what a lot of recent arguments are about, from gun control to abortion to COVID to trans rights—essentially, the only freedom that is a self-evident good is gender expression. And other freedoms that ultimately end with self-destruction. Apparently. All other freedoms are dangerous and undesirable, like freedom to self defense, free speech, or more generally living your life the way you choose (except when it comes to abortion, and potentially smoking meth, those might be okay).

          They also want freedom from knowingly incurred education debt for the upper-middle class. So they do value some freedoms I suppose.


        • lms:

          keeping assault rifles out of the hands of 18 year olds, crazy people or anyone with a grudge…

          If you have a plan for how to keep rifles out of the hands of crazy people, please do present it. It is actually quite a difficult thing to do without abridging lots of other freedoms.


        • Sure. I don’t expect anything useful to come out of DC in that regard and I don’t think many pols are serious—they want the issue to score points but solutions aren’t interesting to most of them, especially if they involve compromising on anything.


        • FWIW, I don’t think more gun control legislation will have any effect, so I don’t really support restricting freedoms just so democrats can feel like they are doing something.


  5. Also, just in case it rings a bell here……………..I saw an interview with a life long NRA member and gun owner tonight from San Antonio, who turned in his gun like the shooter used in Uvalde and resigned his membership to the NRA. He took his wife to the memorial for the victims (she lost a child at a young age from illness) and suddenly realized that the gun he bought as a novelty to add to his gun collection was really nothing more than a military weapon he really had no use for.

    We have friends and family who own guns…………………responsibly, and while I would never own one, I respect their decision. If any of them ever owned a weapon like that, I’d start to wonder about their mental state.


    • I’d think there’s be special licensing and training for those kinds of guns. That would make sense.

      I don’t own any guns. Gun regs seem like they would fall under the auspices of the state. But I think the states have broad authority to regulate—including arbitrary age limits and and capacity limits and models sold.

      I think most of the arguments are emotional and not fact-based. I don’t think any gun laws we get will make a big difference. But I don’t have any problem with states doing as they please. Or lots of stop-and-frisk to get illegal guns.


    • “If any of them ever owned a weapon like that, I’d start to wonder about their mental state.”

      Do you remember Shrink from PL? He posted a few times that he has an AR.


    • lms:

      He took his wife to the memorial for the victims (she lost a child at a young age from illness) and suddenly realized that the gun he bought as a novelty to add to his gun collection was really nothing more than a military weapon…

      He was wrong. It doesn’t even appear on the list of obsolete rifles once used or tried by the US military, much less among those rifles currently used.


  6. Just when you think the optics couldn’t get worse.

    Don’t worry residents of Uvalde – you’re in the best of hands!


  7. FYI I’d like to respond to some of this but I have Covid again and not sure I would make much sense tonight………………some things seem obvious to me but I’m too sick tonight to rebut your thoughts……………I know I keep disappearing when you challenge me but it’s not because I don’t want to engage………………my life is just too ugggghhhh ……………….


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