Morning Report - median house price up 12.8% in October

Vital Statistics:

	Last	Change	Percent
S&P Futures	1788.5	3.3	0.18%
Eurostoxx Index	3043.7	-5.5	-0.18%
Oil (WTI)	93.71	0.4	0.40%
LIBOR	0.238	-0.001	-0.42%
US Dollar Index (DXY)	80.64	-0.066	-0.08%
10 Year Govt Bond Yield	2.73%	0.02%
Current Coupon Ginnie Mae TBA	105.6	-0.1
Current Coupon Fannie Mae TBA	104.8	0.0
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.3

Markets are higher after retail sales came in a bit better than expected. Bonds and MBS are down small. Later on today, we will get the minutes from the October FOMC meeting. It will be interesting to see if the credibility argument is still being made.

Existing Home Sales dropped to an annualized pace of 5.12 million in October according to the National Association of Realtors. The median house price rose 12.8% from a year ago to $199.500. Days on market increased to 54 and months of supply increased to 5. Inventory on the West Coast is still tight. 

Mortgage applications fell 2.3% during the holiday-shortened week. Purchases jumped 5.8%, while refis dropped 6.5%. Not sure what drove the jump in purchases. Refis as a percent of total number of loans fell to 64.3%. 

Chart: MBA Purchase Index

The Consumer Price Index came in as expected, with a .1% decrease month-over-month and a 1% increase year over year. Ex food and energy, prices rose .2% month-over-month and 1.7% year-over-year. Certainly not enough of an increase to get the Fed worked up about inflation. If anything, they probably think it is too low. 

Retail Sales came in at +.4% for October, which is yet another sign that the consumer (and the economy) basically yawned at the government shutdown. For all the sturm and drang out of guys like Mark Zandi saying the shutdown would lop 1.4% off of 4Q GDP growth, we have yet to see any tangible evidence it so far. Payroll was par for the post-recession course, retail sales were above average.

Housing-related expenditures make up about 17.6% of GDP, according to CoreLogic. This is up slightly from a year ago, but well below the peak of 20.6% in 2005. Part of the reason why this recovery has been so maddeningly tepid has been the absence of housing spending, particularly housing starts. Housing starts used to average around 1.5 million units a year from the sixties to the bubble years. Since then, we have been averaged under half of that. Since housing construction usually leads us out of a recovery, it absence has meant this slog of 1% - 2% GDP growth. Note that the homebuilders were noting mid teens increases in average selling prices amidst a drop in traffic. At some point, they are going to have to pump up the volume in order to meet achieve further growth. And that could be what we have been waiting for. 

I went on Louis Amaya's show yesterday and talked about the mortgage originators, servicers, and some of the REITs. I also discussed the origination business in general and trends going forward. The link is here.