Morning Report: Big jump in existing home sales

Vital Statistics:

S&P futures34558.6
Oil (WTI)40.75-0.29
10 year government bond yield 0.87%
30 year fixed rate mortgage 2.90%

Stocks are up this morning as earnings continue to come in better than expected. Bonds and MBS are down.

Existing home sales rose 9.4% to a seasonally adjusted annual pace of 6.5 million in August. This is up over 21% from a year ago. The inventory of about 1.5 million units represents a 2.7 month supply, which is a record low. 71% of homes were on the market for less than a month.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said Lawrence Yun, NAR’s chief economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

The median home price rose 14.8% (!) to $311,800. Properties stayed on market 21 days, which is a record low. First time homebuyers accounted for about 31% of sales, which is still well below pre-Great Recession levels of around 40%.

The index for leading economic indicators rose in September, according to the Conference Board. “The US LEI increased in September, driven primarily by declining unemployment claims and rising housing permits. However, the decelerating pace of improvement suggests the US economy could be losing momentum heading into the final quarter of 2020,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The US economy is projected to expand in Q4, but at a substantially slower rate of 1.5 percent (annual rate) according to The Conference Board’s GDP forecast. Furthermore, downside risks to the recovery may be increasing amid rising new cases of COVID-19 and continued labor market weakness.”

The National Multifamily Housing Council reported that 90.6% of all tenants made a full or partial rent payment by October 20. This is an increase from the 90.1% who did the same by September 20. We are still below historical averages however. By October 20, 2019 92.4% of renters had made a full or partial payment. “The importance of the initial support provided to apartment residents by the CARES Act is becoming increasingly clear,” said Doug Bibby, NMHC President. “However, that support has now long since expired and the savings households were able to build are evaporating quickly. NMHC continues to urge lawmakers to come together and pass meaningful assistance to support renters and keep America’s rental housing sector stable.”

Black Knight Financial reported that mortgage delinquencies declined in September for the first time since the pandemic began. The national delinquency rate fell to 6.66% from 6.88% in August. We are seeing the biggest improvement in the early stage delinquencies


Author: Brent Nyitray

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

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