Morning Report: Home prices rise 15% in April

Vital Statistics:

S&P futures4,2313.8
Oil (WTI)69.43-0.17
10 year government bond yield 1.57%
30 year fixed rate mortgage 3.17%

Stocks are flattish this morning on no real news. Bonds and MBS are up.

The upcoming week will be relatively data-light, however we will get some inflation data with the consumer price index. Year-over-year comparisons will be noisy given the lockdown of a year ago.

Home prices rose 14.8% in April, according to Black Knight Financial Services. There is just two months of inventory available for sale, which is the lowest since Black Knight started keeping records. Higher prices are driving down affordability, and the company estimates that it costs 20.5% of median income to make monthly payments on the median home price. This is high compare to the past decade, but below the historical average of 23.6%. The number of listings in April was down 60% compared to the 2017-2019 average. Note that Redfin says that asking prices are beginning to fall.

Lumber was limit down on Friday, as supply is finally catching up with demand.

The Fed is thinking about talking about considering the concept of reducing bond purchases, according to the Wall Street Journal. It wants to avoid the “taper tantrum” of 2013. “We’re going to have discussions about our stance of policy overall, including our asset-purchase programs, and including our interest rates,” Cleveland Fed President Loretta Mester said Friday on CNBC shortly after the Labor Department released what she described as “a solid employment report.” Note the Fed is planning on selling its holdings of corporate bonds and ETFs which it purchased last year to stabilize the credit markets.

June might be the pivot point for the economy’s second-half acceleration. Baseball stadiums will be back to full capacity, and the rest of California’s draconian COVID restrictions will end on June 15. The expanded COVID-19 unemployment benefits will lapse in September, which should be a catalyst for people to get back to work.


Author: Brent Nyitray

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

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