Morning Report: Home prices rise 3.7%

Vital Statistics:

 

Last Change
S&P futures 2914 -17
Oil (WTI) 61.64 -0.64
10 year government bond yield 2.48%
30 year fixed rate mortgage 4.22%

 

Stocks are lower this morning on trade fears. Bonds and MBS are flat.

 

The Fed noted that asset prices are high, along with corporate debt levels in its latest Financial Stability Report. Debt to asset ratios at publicly traded firms are near 20 year highs. Part of that is simply interest rates: when rates fall dramatically and the cost of borrowing decreases, firms will swap equity for debt, often issuing debt and using the proceeds to buy back stock.

 

Home Prices rose 3.7% YOY in March, according to CoreLogic. Below is a map of the overvalued and undervalued areas of the US. Interestingly, most of California is considered to be fairly valued to undervalued despite the torrid price appreciation of the past 7 years. This is largely due to CoreLogic’s methodology, which compares home prices to disposable income. Incomes have been rising in California, while they have been stagnant in the Deep South. Which is why “cheap” real estate like the Florida panhandle is considered overvalued, while San Diego is not.

 

Corelogic overvalued

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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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