Market Matters
The main story of the week is Russia invading Ukraine. Bonds rallied while equities sold off Thursday morning, then rebounding in the afternoon, while the 10-year gave up some of its gains. The G7 announced sanctions against Russia, but baring U.S. military involvement, the biggest near-term risk to the economy is rising energy prices and reduced global growth due to the sanctions levied to Russia. At the same time, this may make the Fed not as hawkish with the potential headwinds to growth, and the market is waking up to the fact that the Fed will most likely not raised rates by 50 bps in March. With the lack of follow through with the move lower in rates, it is best to be defensive here until we see a shift lower in rates that holds.
Initial Jobless Claims
Initial Jobless Claims for the week ending February 19 fell from 249k to 232k, slightly better than the expected decline to 235k. Continuing claims declined from 1.588mln to 1.476mln, below expectations of 1.580mln and the lowest level since March 1970.
Mortgage Applications
The MBA weekly mortgage applications index declined -13.1% for the week ending February 18th. Purchase applications decreased by -10.0% and were -6.0% lower than the same week a year ago. Refinance applications declined by -16.0% and were -56% lower vs. the same week last year. "Mortgage applications dropped to their lowest level since December 2019 last week, as mortgage rates continued to inch higher. The 30-year fixed rate was 4.06 percent, almost a full percentage point higher than a year ago. Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022. Conventional refinances in particular saw a 17 percent decrease last week," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase applications, already constrained by elevated sales prices and tight inventory, have also been impacted by these higher rates and declined for the third straight week. While the average loan size did not increase this week, it remained close to the survey's record high."
S&P CoreLogic Case-Shiller HPI
The S&P CoreLogic Case-Shiller U.S. National Home Price Index reported an +18.8% annual gain in December. This is the highest calendar year increase in 34 years of data and is well beyond the gain in 2020 of +10.4%. The 10-City Composite annual increase came in at +17.0%, up from the prior +16.9%, while the 20-City Composite posted an +18.6% YoY again, up from +18.3% in the prior month. After seasonal adjustments, the National index posted a +1.3% monthly increase, while the 10-city and 20-city composites posted increases of +1.4% and +1.5%, respectively. Phoenix, Tampa, and Miami reported the highest y/y gains within the 20-city index in December, with 15 of the 20 cities reported higher price increases in the year ending December 2021 vs. the year ending November 2021.
FHFA House Price Index
According to the FHFA House Price Index, U.S. house prices rose +1.2% MoM in December. Prices were up +17.5% from Q4 2020 to Q4 2021, and up +3.3% compared to Q3 2021. While all nine census regions saw gains, the slowest advances came to the East South Central (+.7%), Middle Atlantic (.9%), and West South Central (+1.0). The quickest were seen in New England (+1.7%), the East North Central (+1.5%), and the Pacific and West North Central (both +1.4%). In YoY terms, gains were hottest in the Mountain (+23.2%) and South Atlantic (+20.7%), and slowest in the Middle Atlantic (+13.4%), West North Central (+14.0%), and East North Central (+14.1%).
