Morning Report: Job creation rebounds

Vital Statistics:

 LastChange
S&P futures4,69420.2
Oil (WTI)79.720.63
10 year government bond yield 1.52%
30 year fixed rate mortgage 3.25%

Stocks are higher after the payrolls number came in above expectations. Bonds and MBS are up.

The economy added 531,000 jobs in October, according to the BLS. The unemployment rate fell 0.1% to 4.6% and the employment-population ratio increased by 0.1%. The labor force participation rate was flat at 61.6%. Average hourly earnings increased at a 4.9% clip. Interestingly, the average workweek fell by 0.1 hours, so that sort of jives with the drop in productivity we saw yesterday.

The end of mortgage forbearance has increased the number of affordable homes on the market, according to Redfin. “The end of forbearance has forced many lower-income Americans to put their homes up for sale and become renters,” said Redfin Chief Economist Daryl Fairweather. “This has caused the number of affordable homes on the market to surge, helping replenish inventory amid an acute housing shortage. It’s a rain storm after a long drought, but the drought isn’t over yet.”

On the other side of the coin, luxury home sales are beginning to slip after spiking during COVID. Home prices are still up mid-teens.

Zillow’s exit out of iBuying caused competitor Opendoor to rally 19% yesterday. I guess it is one less competitor, but do they really have a better real estate price forecasting model than Zillow?

Analyzing repeat sales and comps is complex, but it isn’t splitting the atom or anything. And market movements (like what happened with Zillow) are impossible to predict. The bottom line is that investing in real estate is a highly leveraged business, and leverage and volatility don’t mix.

Author: Brent Nyitray

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

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