Vital Statistics:
| Last | Change | |
| S&P futures | 4,339 | -65.2 |
| Oil (WTI) | 83.75 | 0.43 |
| 10 year government bond yield | 1.76% | |
| 30 year fixed rate mortgage | 3.73% |
Stocks are lower this morning as the January FOMC meeting starts. Bonds and MBS are up small.
Yesterday looked like it would be a big down day on the markets, however it reversed around midday and ended up on the day. We have a similar situation this morning. Earnings season begins in earnest this week, and it seems like expectations are sky-high.
Home prices rose 1.1% in November, and are up 17.5% YOY, according to the FHFA House Price Index. It looks like the torrid pace of home price appreciation is beginning to cool off.
“House price levels remained elevated in November, but the data indicate a pivot,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The last four months reflect average gains of 1.0 percentage point, down from the larger prior changes during the spring and summer months. This new trend is a welcome shift but still twice the monthly average we have seen in the last 20 years, which echoes concerns about access and affordability in housing markets.”
Separately, the Case-Shiller home price index showed an 18.8% gain for the year in November. They also see a deceleration in home price appreciation, and expect to see further deceleration as mortgage rates rise:
“We have previously suggested that the strength in the U.S. housing market is being driven in part by a change in locational preferences as households react to the COVID pandemic. More data will be required to understand whether this demand surge represents an acceleration of purchases that would have occurred over the next several years or reflects a more permanent secular change. In the short term, meanwhile, we should soon begin to see the impact of increasing mortgage rates on home prices
Freddie Mac also anticipates that home price appreciation will slow this year, falling to 6.5% from 15.9% in 2021. Interestingly, it raised its forecast for originations to 3.27 trillion from the 3.1 trillion it was forecasting in September. This is a 30% drop however from their estimate of 4.65 trillion in 2021.
“As mortgage rates rise, we do expect some moderation in housing demand, causing house price growth to temper,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “However, the combination of a large number of entry-level homebuyers facing a shortage of entry-level inventory of homes for sale should keep the housing market competitive.” Below is a top-level summary of the Freddie’s forecast:
The Daily Tearsheet 