Morning Report: New lows on rates.

Vital Statistics:

 

Last Change
S&P futures 2926 -29.25
Oil (WTI) 45.47 -1.79
10 year government bond yield 1.18%
30 year fixed rate mortgage 3.51%

 

Another day in paradise, with the stock market indices down a percent and bond yields at new lows. Stocks are on pace to have the worst week since 2008 as coronavirus fears infect the global markets. Oil is getting slammed as well.

 

Mortgage backed securities have lagged this move in a big way, so don’t be disappointed when you run a scenario. Rate sheets are not driven by the 10 year.

 

St. Louis Fed Governor James Bullard cautioned the market to not get ahead of itself regarding coronavirus. “Further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time.” That said, ever since 2008, the markets have been the dog and the Fed has been the tail.

 

Personal incomes rose 0.6% in January, which was way more than expected. Personal spending rose 0.2%, which was below expectation, and inflation remained well below the Fed’s 2% target rate.

 

Pending Home Sales rose 5.2% in January according to NAR. “This month’s solid activity – the second-highest monthly figure in over two years – is due to the good economic backdrop and exceptionally low mortgage rates,” said Lawrence Yun, NAR’s chief economist. We are still lacking in inventory.” Supply is the lowest since 1999.

 

Where is iBuying (selling your home directly to Zillow or Opendoor) most popular? Turns out Phoenix and Raleigh. “It’s no surprise Raleigh and Phoenix led the nation in iBuyer share because those housing markets are iBuyer sweet spots and are poised for price growth in 2020,” said Redfin Chief Economist Daryl Fairweather. “These markets work well for iBuyers which tend to purchase homes that are relatively affordable, were built within the last few decades and are easy to price accurately because they are located in tract neighborhoods with largely homogenous housing stock.” Selling your home directly to Zillow (for example) isn’t necessarily cheap. Zillow charges anywhere from 7% to 9.7% to buy your home, so it isn’t like you are escaping the realtor commissions. This process probably appeals most in a competitive housing market, where a non-contingent offer can carry the day if everyone is close.

 

 

Author: Brent Nyitray

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

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