Morning Report: New Home sales rise, existing home sales fall

Vital Statistics:

	Last	Change
S&P Futures	2186.0	1.0
Eurostoxx Index	345.6	2.0
Oil (WTI)	46.8	-1.7
US dollar index	85.8	0.1
10 Year Govt Bond Yield	1.55%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.5

Stocks are flattish this morning on no real news. Bonds and MBS are flat as well.

Bonds have been in a tight trading range over the past couple of weeks. On Friday, Janet Yellen will speak in Jackson Hole.

Existing home sales dropped 3% YOY in July as tight inventory remains an issue. The median home price increased 5.3% YOY to 244k. Unsold inventory is at 4.7 months, an uptick from June. The first time homebuyer accounted for 32% of sales compared to 28% last year. Appraisal-related issues are increasing as demand is overwhelming the already reduced supply of appraisers. 

New home sales increased over 12% in July to a 654,000 annual rate. The median home price fell 5.1% month-over-month to $294,600. The median home price is down about half a percent YOY. Softness in the luxury space might be driving this as well as a move to focus more on starter homes. Supply is still tight at about 4.3 month's worth so you can't say it is a glut. Regardless of what is going on in pricing, the number is an encouraging sign for the economy. 

You aren't seeing softness in pricing at Toll Brothers. Their ASPs rose 16% in the third quarter YOY. Toll has been emphasizing luxury urban condo construction, which may explain part of the huge increase. Revenues increased 24% and net income rose 54%. Yet what are they doing with their capital? Buying back stock, to the tune of $97 million worth in the third quarter. If business is that good, why?

Mortgage Applications fell 2.1% last week as purchases fell .3% and refis fell 3%. 

The FHFA House Price Index rose 0.2% MOM and is up 5.6% YOY. Home prices rose in every state except for Vermont. The Pacific Northwest and mountain states had the highest price appreciation, while the Northeast and Mid Atlantic continue to bring up the rear. In fact, the worst MSA was the Stamford-Bridgeport MSA which saw prices decline 3%. The FHFA index only looks at houses with a conforming mortgage, so it excludes jumbos and cash sales. 

McMansions are not holding their resale value the way they used to. This may help explain the drop in the median sales price for new homes. The premiums are lower for new houses.

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