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Market Matters

We saw significant economic releases this week, although the focus has been the coronavirus outbreak in China. Currently, the virus has killed 213 people and the reported cases of the virus is at 9,800 people. This has caused a sell-off in stocks and a rally for lower bond yields. The Fed had a two-day meeting which ended with their statement and President Powell’s press conference on Wednesday, they did keep rates unchanged. Until there is significant progress in containing and treating the virus, expect mortgage backs to be flat or rally. Any headwind on a cure for the virus would most likely cause a sell-off in mortgage backs.

 

New Home Sales

New Homes Sales for December fell by -.4% to a 694k unit selling rate compared to the revised 697k rate back in November (orig. 719k). Although December’s data is somewhat disappointing, as expectations for today’s print were around 730k, new home sales are still up by +23% YoY. The regional results showed a fairly wide range with gains of +31% in the West (+57k to 241k) and +10.1% in the Midwest (+7k to 76k), vs. a -15.4% drop in the South (-63k to 347k) and
a -11.8% decline in the Northeast (-4k to 30k). The median price rose +.5% to $331,400 in December from a year ago, while prices below $200,000, which are the most in-demand, accounted for only 10% of sales. Inventories ticked up from 322k in November to 327k in December, increasing the monthly supply from 5.5 months to 5.7 months.

 

Durable Goods Orders

Durable Goods Orders in December jumped by +2.4% vs. market consensus of a +.4% increase. We are seeing some downward revisions back on the November print, now at -3.1% from originally -2.1%. Moving back to the December data, civilian aircraft orders were down once again, now at their lowest level since December 2009, while the headline increase was primarily driven by a +168.3% rise in defense aircraft orders. Looking at the core and stripping out transportation, it’s not all that exciting with orders down -.1%, while core capital goods orders ex-aircraft fell by -.9%. Overall orders on an annualized basis are down -3.7% on headline, core at -1%, and core capex at +1%. Shipments are down -.2%, and -3.2% YoY, while inventories were up +.5%, and +4.8% YoY. The ratio of inventories/shipments rose +.012 to 1.741, the highest now in roughly four years.

 

S&P Case-Shiller HPI

The S&P Case-Shiller 20-City Home Price Index rose +.5% in November, posting a YoY rise of +2.6%. MoM increases were recorded in all 20 cities within the index on a seasonally adjusted basis. The largest gains were in Charlotte +.9%, Boston +.8%, Seattle +.8%, Las Vegas +.7%, Phoenix +.7%, and San Diego +.7%. Looking at some of the smaller city gains, we see Minneapolis +.1%, Chicago +.2%, Miami +.2%, New York +.3%, San Francisco +.3%, and Tampa +.3%.

 

Pending Home Sales

Pending Homes Sales for December fell by -4.9%, now the largest decline since May 2010. Looking YoY, sales are still up +4.6%. Broken down by region, we see sales dropped
by -5.5% in the South, down -5.4% in the West, -4% in the Northeast, and down -3.6% in the Midwest. “The state of housing in 2020 will depend on whether home builders bring more affordable homes to the market," NAR chief economist Lawrence Yun said in a statement. "Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains."