Morning Report: Freddie Mac introduces new forecasts

Vital Statistics:

S&P futures4,14224.4
Oil (WTI)62.74-0.44
10 year government bond yield 1.60%
30 year fixed rate mortgage 3.20%

Stocks are higher this morning after a strong retail sales number. Bonds and MBS are up.

Freddie Mac released its quarterly forecast yesterday. Freddie sees the 30 year fixed rate will average 3.2% in 2021, while rising throughout the year. It sees a 3.4% fixed rate in the fourth quarter of 2021, and it hitting 3.8% in the fourth quarter of 2022. This will drive refi volumes to $1.8 trillion in 2021 and $800 billion in 2022.

Freddie sees home price appreciation to decrease in 2021, falling to 6.6% from 11% in 2020.

March was the hottest month in housing history, according to Redfin. The median house price rose 17% YOY to $353,000. Housing inventory fell 29% and homes sold in 25 days, with 42% trading above list. I suspect all of the housing data for the next few months should have an asterisk next to it since we are comparing to lockdown months. Still, the rise in prices is undeniable.

Retail Sales rose 9.8% in March, driven by stimulus payments and an easy comparison to February which had a lot of bad weather.

Initial Jobless Claims fell to 576k last week. Nice to see a drop, but we need to get back below 300k to have some semblance of normalcy.

Wells reported first quarter earnings yesterday. Mortgage originations were $51.8 billion, which was up 8% YOY and down about 4% compared to the fourth quarter. Retail originations were 65% of total volumes as Wells seemed to be pulling back from correspondent. That said, revenues did increase on a MOM and YOY basis, driven by higher gain on sale margins and a heavier retail mix.

New Home purchase applications rose 7% MOM and 12% YOY, according to the MBA. That said, new home sales are estimated to fall in March, driven by exceptionally low inventory and higher price / borrowing costs.

Industrial Production rose 1.4% in March, while manufacturing production rose 2.7%. Capacity Utilization increased to 74.4%. These numbers were all below expectations.


Author: Brent Nyitray

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

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