Morning Report: Existing Home Sales highest in 10 years

Vital Statistics:

	Last	Change
S&P Futures	2355.0	3.0
Eurostoxx Index	378.8	0.7
Oil (WTI)	50.6	-0.1
US dollar index	89.8
10 Year Govt Bond Yield	2.23%
Current Coupon Fannie Mae TBA	102.97
Current Coupon Ginnie Mae TBA	104
30 Year Fixed Rate Mortgage	3.98

Stocks are up this morning on no real news. Bonds and MBS are flat. 

Existing Home Sales rose to their fastest pace in 10 years, according to the NAR. Existing Home Sales increased at a 5.79 million annual rate, which was the fastest since January 2007. Lawrence Yun, Chief Economist of NAR said: The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month," he said. "Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does." The median existing home sale price was $236,400, up 6.8% from a year ago. Inventory increased, however it remains at about 3.8 months' worth. Days on market dropped to 34, a huge decrease from a year ago, when it was in the mid-high 40s. Inventory remains the biggest problem as homebuilders have yet to pump out the required supply to meet demand. 

More Millennials (ages 18-34) live with their parents than with a spouse. Of course we have seen a general trend of waiting until later in life to get married and have kids, so this is somewhat just the extension of a trend. How many of these young adults would like to move out of their parent's home but find rents / house prices too expensive? 

The next big issue for the bond market (and markets in general) is the debt ceiling debate. The government will run out of money by the end of the month, although it can play some accounting games to keep the lights on until a new CR is passed. If not, we could see a partial government shutdown on April 29. It appears that Trump will need some Democrats to pass a CR, and they are demanding that funds be appropriated to shore up the Obamacare exchanges. Trump wants more money for a wall, immigration enforcement and defense spending, which the Democrats oppose. So far, the markets view this as so much theater, but we will see how far the brinkmanship goes. 

Delinquencies have hit an 11 year low, according to Black Knight Financial Services. Total non-current inventory (30 days down +) is at 2.3 million. Prepay speeds increased however, as rates fell. Foreclosure starts ticked up slightly MOM, but are down 18% YOY. 

Why the exurbs are the new high growth area, and what that means for urban living (and politics). Technology is lowering the cost of transportation (basically lowering the cost of distance), and more manufacturing does not need to be near the big cities, and it looks like the exurbs will take up the slack. This has enormous implications for politics, as Democrats dominate the cities and Republicans dominate the suburbs. 

More problems for Backwards Newco. North Carolina is prohibiting them from acquiring new servicing until it fixes defects in how it handles escrow accounts. Separately, the CFPB is going after them as well. The stock was down over 50% yesterday on about 20x normal volume. 

Legendary macro trader Paul Tudor Jones is sending a warning about the stock market. You are seeing more and more strategists fretting about valuations as the Trump reflation trade deflates. If the stock market takes a swoon, that will not be lost on the Fed. Yet another reason why we may have seen the highs for mortgage rates and the 10 year already. 

That said, Treasury Secretary Steve Mnuchin says the Administration is "pretty close" to bringing major tax reform. It will probably be an end-of-year event, as the previous August deadline is not going to happen. The Administration has a narrow window to get things done, as politicians will turn to the 2018 midterms soon after the new year.