Morning Report: Existing home sales flat

Vital Statistics:

Last Change
S&P futures 2926 11.5
Eurostoxx index 382.7 2.72
Oil (WTI) 71.58 0.46
10 year government bond yield 3.09%
30 year fixed rate mortgage 4.86%

Stocks are higher this morning after China agreed to cut some tariffs. Bonds and MBS are getting slammed.

Bond yields are up 27 basis points over the past month. Not sure what is driving that (at least nothing specific), but it is a worldwide phenomenon. Bunds and JGBs have also been selling off, though not as dramatically. The Fed funds futures have become more hawkish over the same period, raising the probability of a Dec hike from 63% to 87%. This has certainly stopped the flood of hand-wringing stories in the business press about the flattening yield curve.

Initial Jobless Claims hit a 50 year low, and are within striking distance of the 200,000 level. Meanwhile, the Index of Leading Economic Indicators took a step back in August, rising 0.4% after July’s torrid 0.6% growth. Still strong numbers, however.

Consumer comfort rose to a 17 year high, according to the Bloomberg Consumer Comfort Index (highest since Jan 2001).

One reason why consumption has been strong is growing home equity, which rose almost a trillion YOY in the second quarter. This is an increase of 12.3%. The number of homes with negative equity fell by half a million to 2.2 million, or about 4.3% of all mortgaged homes. On average, the typical homeowner saw a $16,200 increase in housing wealth. Only 3 states: North Dakota, Connecticut, and Louisiana saw declines.

Existing home sales remained flat in August, according to NAR.  Lawrence Yun, NAR chief economist, says the decline in existing home sales appears to have hit a plateau with robust regional sales. “Strong gains in the Northeast and a moderate uptick in the Midwest helped to balance out any losses in the South and West, halting months of downward momentum,” he said. “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.” The median house price was $264,800, up 4.6% YOY. Inventory is still tight, at 4.1 month’s worth, and days on market ticked up slightly to 29 days. First time homebuyers accounted for 31% of sales. Historically, that number has been closer to 40%.

Closing rates jumped across the board to 71.7%, according to Ellie Mae’s Origination Insight Report. Average FICOs were 724, and average LTV was 79%. Both those numbers are more or less unchanged YOY. It typically took 43 days to close a loan.

When is the best time of year to buy a home? It depends. Prices do decline however during the winter, with purchases in January and February 8.5% cheaper than the peak summer months. Even in Autumn, they fall 3%. So, don’t get too depressed about your Z-scores during the winter months. It could be just seasonality.

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

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