Morning Report - The McMansion is back

Vital Statistics:

	Last	Change	Percent
S&P Futures	2109.9	-0.3	-0.01%
Eurostoxx Index	3553.7	11.9	0.34%
Oil (WTI)	49.73	-1.3	-2.47%
LIBOR	0.261	-0.001	-0.19%
US Dollar Index (DXY)	94.61	0.399	0.42%
10 Year Govt Bond Yield	1.97%	0.00%
Current Coupon Ginnie Mae TBA	102.8	0.1
Current Coupon Fannie Mae TBA	101.9	0.0
BankRate 30 Year Fixed Rate Mortgage	3.91

Markets are flat this morning on no real news. Global bonds continue to rally, but Treasuries are not really participating. 

Inflation remains largely muted, with the Consumer Price Index falling .7% in January. Ex-food and energy, it rose .2, a little higher than expectations. On a year over year basis, inflation ex food and energy increased 1.6%. 

Durable Goods orders rose 2.8% in January, rebounding smartly after a very weak December. Capital Goods (a proxy for business capital expenditures) rose .6%. 

Initial Jobless Claims rose to 313k last week from 282k the week before. The Bloomberg Consumer Comfort Index fell from 44.6 to 42.7 last week. 

Home Prices rose .8% in December, according to the FHFA. Home Prices are now about 4% from peak levels. The report has been expanded to include all sorts of additional data. The growth continues to be on the West Coast, while the Northeast lags. 

Delinquencies and foreclosure rates dropped in Q4, according to the MBA. For the most part, we are back at pre-2007 (or pre-crisis) levels. Judicial states still have 3x the foreclosure rate as non-judicial states.

The McMansion is back. The median square footage of new homes topped 2,400 square feet last year. Builders are chasing the affluent because the first time homebuyer is still largely out of the market. That said, some builders, like D.R. Horton, are introducing new brands that are in the first time homebuyer price points.  

How much slack is there really in the labor market? Are wages rising because of a shortage of labor in some areas? If so, then that means (a) the speed limit of the economy is lower, because more people working = higher output, and (b) the Fed will have to move earlier than they may want to in order to quell inflation. If these discouraged workers return to the labor force, downward pressure on wages will continue, however in the long run, output will be higher. This issue was discussed in the June 2014 FOMC minutes, but it hasn't been brought up since.