Morning Report: Productivity revised upward

Vital Statistics:

 LastChange
S&P futures3,924-20.25
Oil (WTI)74.87-0.69
10 year government bond yield 3.53%
30 year fixed rate mortgage 6.43%

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

Third quarter productivity was revised upward from 0.3% to 0.8%, according to the BLS. This was due to a revised 0.5% increase in output and a 0.1% increase in hours worked. Unit labor costs were revised downward from 3.5% to 2.4%. They are up 5.3% over the past four quarters.

Mortgage applications fell 2% last week as purchases fell 3% and refis rose 5%. Refis are still 86% lower than they were last year at this time. “Mortgage applications decreased 2 percent compared to the Thanksgiving holiday-adjusted results from the previous week, even as mortgage rates continued to trend lower,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “Rates decreased for most loan products, with the 30-year fixed declining 8 basis points to 6.41 percent after reaching 7.16 percent in October. The 30-year fixed rate was 73 basis points lower than a month ago – but was still more than three percentage points higher than in December 2021. Additionally, the pace of refinancing remained around 80 percent lower than a year ago.”

Home prices rose 10% in October, according to CoreLogic. This is half the pace of late spring / early summer.

“Following the recent mortgage rate surge above 7%, real estate activity and consumer sentiment regarding the housing market took a nosedive,” said Selma Hepp, interim lead of the Office of the Chief Economist at CoreLogic. “Home price growth continued to approach single digits in October, and it will move in that direction for the rest of the year and into 2023. However,” Hepp continued, “while some housing markets have seen significant recalibration since the spring price peak and are likely to post losses in 2023, further deteriorating for-sale inventory, some relief in mortgage rate increases and relatively positive economic news may help eventually stabilize home prices.” CoreLogic sees home prices rising about 4% next year, although some of the hottest MSAs during COVID will probably see significant declines.

The decline in home prices will take some of the pressure off the inflation numbers, since housing is a key component to the inflation numbers. Rental inflation is coming down, and is probably past the peak, at least according to some market observers.

Author: Brent Nyitray

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

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