Morning Report: Home Price Appreciation still strong

Vital Statistics:

 LastChange
S&P futures4,520-4.2
Oil (WTI)68.44-0.85
10 year government bond yield 1.29%
30 year fixed rate mortgage 3.05%

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

Home prices rose 1.6% MOM and 17.4% YOY, according to the FHFA House Price Index. We saw torrid price appreciation in several MSAs including Boise, Austin, and Salt Lake City. As we saw from the latest FOMC minutes, the Fed is focusing on home price appreciation and how its MBS purchases affect it. Separately, the Case-Shiller Home Price Index rose 2.2% MOM and 18.6% YOY.

Home Price appreciation is driving up asking rents for single family homes. They are up 13% YOY for SFR, while up only 8.3% for apartments. We have seen all sorts of institutional money flood into the SFR space over the past year, as high cap rates and home price appreciation create returns that are hard to replicate elsewhere. While eviction moratoriums have been an issue, many investors are targeting higher-income renters who have been less affected by COVID job losses.

The share of loans in forbearance was unchanged last week at 3.25% or about 1.6 million homeowners. “The share of loans in forbearance changed little once again this week, as both new requests and exits remained at a slow pace,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “We expect a sharp increase in forbearance exits over the next month as many borrowers reach the 18-month mark and see their forbearance plans end. For those borrowers who have exited in August, the majority either enter deferral plans or obtain modifications.”

While the Federal Government’s eviction ban was shot down by SCOTUS, several states still have eviction moratoriums in place, including California, New Jersey, and DC.

Latest from Fannie Mae regarding homeowners affected by Hurricane Ida. “We urge everyone in the path of the storm to focus on their safety,” said Cyndi Danko, Vice President, Single-Family Risk Management, Fannie Mae. “Fannie Mae is committed to ensuring assistance is available to homeowners and renters in need and we encourage residents impacted by this storm to seek assistance as soon as possible.”  

Consumer confidence slipped in July, according to the Conference Board. While the employment situation remains strong, consumers were less optimistic about present and future business conditions.

Author: Brent Nyitray

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

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