Morning Report - 3Q GDP boosted by government spending

Vital Statistics:

	Last	Change	Percent
S&P Futures	2070.9	3.4	0.16%
Eurostoxx Index	3242.9	31.2	0.97%
Oil (WTI)	76.14	0.4	0.48%
LIBOR	0.233	0.000	-0.02%
US Dollar Index (DXY)	88.24	0.085	0.10%
10 Year Govt Bond Yield	2.31%	0.00%
Current Coupon Ginnie Mae TBA	104.7	0.1
Current Coupon Fannie Mae TBA	103.7	0.0
BankRate 30 Year Fixed Rate Mortgage	3.99

Stocks are higher after a strong GDP report. Bonds and MBS are flat

The second revision to Q3 GDP came in at +3.9%, an increase from the initial estimate of +3.5%. Personal consumption rose 2.2%. The core PCE index (which is the inflation measure the Fed prefers to use) came in at 1.4%, so inflation is still well below what the Fed would like to see. The big contributing factor to GDP was government spending, which increased 9.9%. 

Home price appreciation seems to be flattening, however, as the FHFA home price index was flat on a month-over-month basis. Case-Shiller rose .34%, however. The CoreLogic home price index noted that price appreciation was slowing at the high end, however prices were still rising pretty quickly at the low end (9.4% vs. 4.5%).  

Chart: Case-Shiller Home Price Index

The big institutional investors are slowing down their purchases of distressed properties, as they have yet to show the huge profits they promised to their own investors. They have a big backlog of homes to renovate and rent, and skilled construction labor is hard to come by these days. I always suspected that the execution of this trade was going to be more difficult and expensive than people were figuring it would be. 

The Supreme Court will hear oral arguments on the FHA disparate impact case on Jan 21. This is an important fair lending issue, as the Obama Administration moved to make proving lending discrimination as strictly a numbers game - in other words, the CFPB does not have to prove intent to discriminate. If your numbers don't line up with the population, you are guilty, no questions asked. This one has wended its ways through the lower courts and has made it to the Supreme Court.