Morning Report: Fed Day

Vital Statistics:

 

Last Change
S&P futures 3139 3.25
Oil (WTI) 58.99 -0.24
10 year government bond yield 1.84%
30 year fixed rate mortgage 3.98%

 

Stocks are flattish as we await the FOMC decision. Bonds and MBS are flat as well.

 

Mortgage applications increased 3.8% from a week earlier, according to the MBA. The purchase index dropped 0.4%, while the refi index rose 9%. Interest rates rose one basis point.

 

The FOMC decision is set for 2:00 pm EST. Given that the Fed is on the sidelines for a while, there shouldn’t be anything market moving in it.

 

Consumer prices rose 0.3% in November, according to the BLS. Higher shelter and energy prices drove the increase. The index was up 2.1% on an annualized basis. Ex-food and energy, the index was up 0.2%. These numbers were a hair higher than street expectations.

 

The first time homebuyer is returning, according to the Genworth First Time Buyer report.  The rebound in the third quarter was driven primarily by falling interest rates and increasing home affordability. Supply constraints, particularly at the affordable price points have been the issue. “The first-time homebuyer market rebounded this quarter and although the rebound was modest compared with the number of first-time homebuyers a year ago, and a quarter behind the broad rebound, it was a strong rebound from the previous quarter allowing first-time homebuyers to make up some lost ground,” said Tian Liu, Genworth Mortgage Insurance Chief Economist.

 

The report noted that repeat buyers (read move-up buyers) have increased as well. The lack of move-up buyers has depressed housing mobility, which may have been driven by lack of home equity from purchases made during the bubble years. Given the change in the house price indices over the past 10 years, negative equity is less of an issue than it was a few years ago.

 

Interestingly,  the number of first-time homebuyers this quarter was comparable to the peak of the last housing boom in 2005 and 2006, and only modestly below the peak levels of 1999 and 2000. Still, the Millennial generation is bigger than Gen X by a large margin, so there should be more room to run here.

 

quarterly sales to first time homebuyers

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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