Morning Report: New home sales fall

Vital Statistics:

 LastChange
S&P futures4,135-5.50
Oil (WTI)91.87-0.67
10 year government bond yield 3.07%
30 year fixed rate mortgage 5.68%

Stocks are lower this morning as the sell-off continues based on fear of the Fed. Bonds and MBS are down.

New home sales came in at 511,000 in July, which was weaker than expected. This is down 13% MOM and 30% YOY. It is astounding that building is so weak during a shortage. Yes, rates matter but historically the current rate environment is still quite low.

The second quarter of 2022 was brutal for mortgage bankers, with companies losing about 5 basis points on average (or about $82 per loan). Given that the second and third quarters are usually the most profitable for the industry, this is an issue. This was the first second quarter loss since 2008. The industry is in the famine part of the cycle.

Multifamily construction hit a record high in the second quarter, as apartment builders react to soaring rental prices. The biggest driver of rising home prices has been a lack of supply. Rising rents are a function of rising home prices, so this should put at least some downward pressure on rising home prices.

96% of these units were built for rent. This share fell to 47% during the condo-building boom of 2005.

Rising rates are beginning to be felt in the economy, at least according to the S&P Composite flash PMI. Respondents reported softening demand and slowing price increases. This is also easing the labor issue as firms scale back hiring plans.

Since monetary policy generally affects the economy with a 6- 9 month lag, we are only beginning to feel the impact of rising rates. The big increases over the past few months will start to impact late Q4 numbers.

Interestingly, the Atlanta Fed GDP Now Index shows a rebound in expected growth for Q3, after two negative prints in Q1 and Q2. According to this chart at least, that looks optimistic.

12 Responses

    • the left is the king of situational ethics.

      Like

    • “These are the first cases brought by the state’s new election police force — and a clear effort to deter legitimate voting.”

      How is prosecuting election fraud a “clear” effort to deter legitimate voting, unless you think illegal voting is legitimized by your side winning.

      “Mr. DeSantis’s broader goal is clear: to deter voting.”

      I’m detecting a theme here.

      “Given the political-rally feel to last week’s announcement, it was also troubling that Mr. DeSantis was flanked by uniformed police officers.”

      82k new IRS officers? Nothing troubling there. DOJ conspiring with school boards to treat parents concerned over sexual assaults in the schools like they are terrorists … nothing troubling there! DeSantis appearing with police officers? It’s FASCISM, y’all!

      Then he complains Desantis controlled who could center the courtroom the event was held in—which is literally something the Democrats do, all the time.

      Like

  1. ugh. i have to put down one my hounds today. it’s the worst.

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    • That’s awful Nova. Godspeed to your noble dog. I think most of us have been there and when I think about my dogs that have passed this thought resonates with me:

      “My dog died this year and I was caught off guard by the depth of pain I felt. We lose them and we lose our ritual. Perhaps because these wonderful creatures bear witness to our lives, without judgement.”

      So sorry about having to lose one of them.

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    • That sucks NoVA. Sorry that you have to do that and for the loss of your canine companion.

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    • Yes, so sorry to hear that. Dogs are the best.

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    • thanks everyone.
      if you ever have to go through this, you know.
      highly recommend a vet who will do it at home. she was comfortable and happy on her bed — not stressed out in an office exam room.

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      • nova:

        highly recommend a vet who will do it at home.

        That is the way we did it, too. As difficult as it was, it was infinitely better than the sterile environment of the vets office.

        Like

  2. As someone who’s seen their electricity bill almost double this summer, I’m curious as to what will happen.

    https://www.zerohedge.com/markets/tsunami-shutoffs-20-million-us-homes-are-behind-energy-bills

    Like

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