Morning Report: Existing home sales rise

Vital Statistics:

	Last	Change
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Eurostoxx Index	387.7	-1.5
Oil (WTI)	43.3	-0.9
US dollar index	88.9	-0.1
10 Year Govt Bond Yield	2.17%
Current Coupon Fannie Mae TBA	103.31
Current Coupon Ginnie Mae TBA	104.375
30 Year Fixed Rate Mortgage	3.92

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

Mortgage applications rose 0.6% last week as purchases fell 1% and refis rose 2%. The average 30 year fixed rate mortgage was flat at 4.13%. The share of refis rose to 46.6% from 45.4%. 

Existing home sales rose 1.1% MOM and 2.7% YOY, according to NAR. Lawrence Yun, NAR chief economist, says sales activity expanded in May as more buyers overcame the increasingly challenging market conditions prevalent in many areas. "The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level," he said. "Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."

Chicago FRB President Charles Evans said the Fed can wait until December to hike rates, and that it could begin to start shrinking its balance sheet earlier than that. Note the Fed Funds futures are predicting the Fed will stand pat at the July and September FOMC meetings. The median house price was up 5.8% to $252,800. Unsold inventory is at 4.2 months' worth and days on market fell to 27 days. The first time homebuyer accounted for 33% of sales, down a percentage point from April but up 3 from a year ago. 

On this day, 10 years ago the financial crisis began as creditors began to auction off collateral at two Bear Stearns hedge funds. 

Is the high price of housing in the Bay Area bringing back the 19th century concept of the company town? Google has been buying apartments for temporary housing for its employees. Interesting issue, where builders won't take the risk on building new housing, but companies need the housing for their employees. 

The government is looking to tackle GSE reform again, Johnson - Crapo from 2014 was simply too complicated, and affordable housing types were against it as well. Sen Mike Warner said: "We have consensus on the importance of the 30-year loan, we have consensus that there needs to be more capital on the front end so in the event of a catastrophic event where the government guarantee kicks in, you'll have private capital at risk. We're also thinking of using Ginnie Mae as the wrap. And we're trying to maintain an active TBA market so there is liquidity and the ability of borrowers to lock in their mortgage rates." Warner went on to say that GSE reform could happen before financial reform as there is more bipartisan consensus on that.