Morning Report: Home prices soar.

Vital Statistics:

S&P futures385910.3
Oil (WTI)52.900.14
10 year government bond yield 1.04%
30 year fixed rate mortgage 2.83%

Stocks are slightly higher on no real news. Bonds and MBS are up small.

The FOMC begins its two-day meeting today. The announcement is scheduled for 2:00 pm tomorrow.

Chuck Schumer said that negotiations for the stimulus may take a while. He is aiming for mid-March, when extended unemployment begins to run out. Meanwhile, the priority seems to be impeaching a guy who is no longer in office.

With stimulus looking further away, and Schumer signaling that negotiations should be tough, I wouldn’t be surprised to see bond yields drift lower. Bond markets are a global phenomenon, and while the US bond yield has been drifting upward, the German Bund (which is a proxy for Europe) has been stuck in a very narrow band around -0.54%.

Home prices rose 11% in November, according to the FHFA House Price Index. “House prices have risen by at least one percent for six consecutive months,” said Dr. Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics. “The acceleration has been slowing but annual gains now outpace the prior housing boom. Current conditions can be explained by fundamentals, including low rates and tight housing supply, which have been intensified by the pandemic.”

The Case-Shiller Home price index reported a smaller nationwide gain of about 9%. The difference is explained by the indices. FHFA only looks at loans which are guaranteed by the US government, so it excludes jumbos and distressed. Affordable homes are in the most demand, and that is where we are seeing the biggest price increases.

The FHFA announced that it will limit cash window purchases for mortgage banks to $1.5 billion per year in order to ensure that smaller banks continue to get access.

The letter agreements codify FHFA conservatorship directives that require the GSEs to purchase loans for cash consideration, and to operate this cash window with non-discriminatory pricing. Additionally, to ensure that the cash window is for the benefit of community lenders, each GSE will limit volume purchased through the cash window to $1.5 billion per lender during any period comprising four calendar quarters.


Author: Brent Nyitray

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

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