Morning Report: Appraisals not keeping up with prices

Vital Statistics:

	Last	Change
S&P Futures	2262.0	-1.8
Eurostoxx Index	364.8	0.7
Oil (WTI)	51.1	0.3
US dollar index	93.0	0.3
10 Year Govt Bond Yield	2.37%
Current Coupon Fannie Mae TBA	103
Current Coupon Ginnie Mae TBA	104
30 Year Fixed Rate Mortgage	4.11

Markets are flat ahead of Donald Trump's news conference. Bonds and MBS are flat.

Mortgage Applications rose 5.8% last week as purchases rose 6% and refis rose 4%. 

Secretary of State nominee Rex Tillerson will face Congress today. Jeff Sessions had his time in the box yesterday.

Home sales are falling through at a faster pace than last year, according to Trulia, and it is the starter home price points that are seeing it the most. 4.3% of all sales failed in the fourth quarter, compared to 1.4% two years ago. This may have to do with the increase in the number of first time homebuyers and the drop in professional investors which makes this probably a credit story. We are also seeing people who had foreclosures and bankruptcies during the bubble years re-approach the housing market as those events fall off their credit reports. 

Part of this phenomenon could in fact be the divergence between the opinions of buyers / sellers and appraisers. According to Quicken loans, appraised values came in about 1.3% lower than owner expectations in November. Interestingly, appraised values fell in November, while house prices (at least according to the home price indices) have been rising. That said, appraisal values did increase almost 4% YOY, however that is much lower than the 6% or so home price appreciation we have been seeing in the other indices. That said, since appraisals use historical comparisons, some lag is to be expected. 

Bob Shiller says the animal spirits are stirring in the housing market. Of course tight credit for both buyers and builders as well as increasing interest rates will offset that somewhat, but confidence plays a huge role in economic growth. That said, demographic headwinds are going to be an issue.

In keeping with the demographic headwinds issue, the Bipartisan Policy Center Senior Health and Housing Task Force has some advice for Ben Carson and helping the Baby Boom generation age in their homes.