Morning Report: The homeownership rate falls again

Vital Statistics:

	Last	Change	Percent
S&P Futures	2066.5	-5.9	-0.28%
Eurostoxx Index	3055.8	-69.6	-2.23%
Oil (WTI)	46.51	0.5	1.04%
LIBOR	0.638	0.004	0.63%
US Dollar Index (DXY)	93.18	-0.583	-0.62%
10 Year Govt Bond Yield	1.86%	0.03%
Current Coupon Ginnie Mae TBA	105.4
Current Coupon Fannie Mae TBA	104.7
BankRate 30 Year Fixed Rate Mortgage	3.65

Markets are lower after yesterday's bloodbath. Bonds and MBS are down.

Personal incomes rose 0.4% in March, while spending rose 0.1%. The savings rate rose to 5.4%, this highest since late 2012. The Great American De-Leveraging continues..

The PCE Core Index (which is the inflation measure preferred by the Fed) rose 0.1% in march and is up 1.6% YOY. This is still below the Fed's 2% target rate. We simply aren't going to see much in the way of inflation until we see wage growth. 

Speaking of wage growth, the employment cost index rose 0.6% in the first quarter as wages and salaries increased by 0.7% and benefits increased by 0.5%. On an unadjusted YOY basis, compensation increased 1.9% as salaries increased 2% and benefits increased 1.7%. 

Consumer sentiment fell in April, according to the University of Michigan Consumer Sentiment Survey. 

The homeownership rate fell to 63.5% in the first quarter, which is back below the levels of the mid 80s through the mid 90s. The gains in homeownership that started with the Clinton Administration's social engineering via the housing market in 1995 have been given back. 

As the Millennial generation ages, that number should increase, and does represent pent-up demand for housing. Affordability remains a big issue, along with high DTI ratios due to student debt. The homeownership rate for Gen Xers was 59%. 

Worried about the increase in the price of oil? Don't be. It is due to a massive short squeeze. For every barrel of oil being bought by a long speculator, there are 9 shorts exiting their position. 

Morning Report: New Home Sales drop, but prices up 13.5%.

Vital Statistics:

	Last	Change	Percent
S&P Futures	2066.8	0.8	0.04%
Eurostoxx Index	3417.5	-8.3	-0.24%
Oil (WTI)	44.45	-0.1	-0.34%
LIBOR	0.323	0.003	0.94%
US Dollar Index (DXY)	96.97	-0.157	-0.16%
10 Year Govt Bond Yield	2.06%	-0.02%
Current Coupon Ginnie Mae TBA	104.9
Current Coupon Fannie Mae TBA	104.5
BankRate 30 Year Fixed Rate Mortgage	3.79

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

New Home Sales fell in September to a seasonally-adjusted annual rate of 468,000, down from 529,000 in August. The median home price rose 13.5% however to $296,000. So, inventory is tight, and the builders continue to raise prices but aren't really ramping up production. Builder sentiment is at a 10 year high, but building permits continue to disappoint. Strange state of affairs. 

The FOMC meets this Tuesday and Wednesday. The decision will be out around 2:00 on Wednesday. The markets are handicapping a very low probability of a move at this meeting (something under 10%). Mohammed El-Arian lays out the no-action case. 

We will get some important economic data this week with Durable Goods tomorrow and Case-Shiller. On Wed we will get the FOMC decision, and on Thursday, the first estimate of third quarter GDP. Finally, on Friday we get personal income and personal spending. GDP, the FOMC statement, and personal income / personal spending are the biggest chances of volatility in the bond markets. 

Deutsche Bank is predicting a good holiday season this year for retailers. The average consumer intends to spend about $812 on gifts this year, which is about the same level in 2007. Punch line: "U.S. consumers don’t seem to worry about the risk of a hard landing in China, the widening of high yield credit spreads, a potential government shutdown, Brazilian corporate debt levels or low bond market liquidity."  We will get personal income and personal spending data on Friday. FedEx confirmed they expect record shipments this holiday season.

House prices rose 0.3% last month and are up 5.5% from a year ago, according to Black Knight Financial Services. The index came in at $253,000, which is off 5.3% from its June 2006 peak of $268,000. 

Morning Report - Personal Spending increases .2%

Vital Statistics:

	Last	Change	Percent
S&P Futures	1581.5	5.0	0.32%
Eurostoxx Index	2697.4	13.9	0.52%
Oil (WTI)	93.36	0.4	0.39%
LIBOR	0.274	-0.002	-0.54%
US Dollar Index (DXY)	82.12	-0.387	-0.47%
10 Year Govt Bond Yield	1.65%	-0.01%
Current Coupon Ginnie Mae TBA	106.3	0.1
Current Coupon Fannie Mae TBA	104.6	0.1
RPX Composite Real Estate Index	191	0.5
BankRate 30 Year Fixed Rate Mortgage	3.43

Markets are higher this morning after better-than-expected consumer spending data. Personal Income data was lower than expected. Bonds and MBS are up small

Personal Spending was projected to be flat, but actually rose .2%. The Bureau of Economic Analysis is claiming that it was primarily due to weather - a cooler than normal spring brought higher utility spending. Personal Income was forecast to rise .4%, and ended up at .2%. The PCE deflator showed inflation remains subdued.

Pending Home Sales increased 1.5% in March, according to the National Association of Realtors. Economists had forecast a 1% increase. Pending home sales are up 5.8% year-over-year.

Lender Processing Services reported that home prices increased 1% in February and rose 7.3% year-over-year. The West is experiencing the biggest gains, while the Northeast and Mid Atlantic continue to languish. This has been borne out by the earnings reports of the homebuilders as well - the ones primarily focused on California have knocked the cover off the ball, while those with an East-Coast / Midwest focus have reported gains, but nowhere near what the West Coast builders are reporting.

Lots of data this week, but the big driver will be the FOMC meeting. We will get the rate announcement on Wed. Investors will be looking for information concerning the end of QE. We will get the jobs report on Friday, which will have the biggest potential to move interest rates.

Lots of homebuilders reported earnings last week - pretty much everyone except NVR beat estimates. Anyone with exposure to the West Coast did well and backlog is up nicely at all of the builders. We will hear from Standard Pacific and Beazer Homes this week. The Homebuilder ETF (XHB) is on a tear and sitting right at resistance.

U.S. News and World Report has a good piece on the state of the first time homebuyer.