Yin Yang Economics

Building Permits rose 11.8% and Housing Permits sank 11.1%.  The yin-yang numeration is uncanny.  I ‘d like a little more balance in my personal numeration since I lost my wallet yesterday.  While the credit cards and driver license will all be magically replaced with just a little bit of effort, the cash that was in there (which was more than I usually carry since I was out of town for the weekend) remains out of balance.  I throw that out there for the universe to note.  But if I don’t see the cash again, oh well, worse things have happened.

And speaking of looking for cash and worse things happening, the debt crisis in Greece may be coming to a head over the next few weeks.  If the country defaults on its debt, they would cause significant economic unrest in the European Union.  On the plus side, interest rates would come back down.

Back on our shores, the two day FOMC meeting starts up again today, with their eight-times-per-year statement about the Fed’s monetary policy being released at mid-day tomorrow.

Home Ownership Percentages Down

This graph is both interesting and alarming at the same time.  It shows that across the country, there are roughly 5% more households now than there were almost 20 years ago.  Don’t strain your brain just yet; that’s not the alarming part. Since 2005, home ownership has declined about a percent while at the same time, the percentage of renter households has risen over 16%.  Perhaps this is a reflection on our non-committal society as a whole.  It could be that people are scared to invest in a house after the market crashed, or another possibility is that with all of the increased regulation, a growing percentage of our countrymen just can’t qualify for financing, regardless of low interest rates.

New Home Sales Up Big.

New Home Sales come in at 504,000 annualized units, way above the 435,000 expected by Wall Street. New Sales jumped 18% in August (the largest increase in over 22 years), and have increased 33% from a year ago!  The median price of said new home is now at $276,600, and increase of 8% over this time in 2013.  So far this morning the markets don’t know which way to react; stocks and bonds have whip-sawed back and forth in early trading. Thirty year FHA loans are at 3.5% and Conventional loans are at 4.125%. Fifteen year rates are way lower at 3.0% (APR will be higher, depending on the loan and down payment amounts, and amortization term–as closing costs and the presence of mortgage insurance affect each loan differently.)

GDP a Bust

Fickle? Unpredictable?  Uneducated?  Looking for words to describe the market’s reaction to a negative GDP reading for the first quarter of 2014.  Gross Domestic Product is the mack daddy of economic reports because it says encompasses about every other report’s reach.  Under normal circumstances you’d see stocks and rates plummet on news that our economy actually contracted  over the last three months.  Today, the inverse is true. Why?  Is certainly is not because Pending Home Sales also contracted from 3.4% in March to only 0.4% in April.  Crazy stuff.

Pooh Pooh Prognosticators

Existing Home Sales are up marginally for the April reporting period from 4.59M to 4.65M annualized units sold.  These are an increasingly number of bonafide buy/sells and not distressed properties.  A report out from Black Knight (not sure who that is) today shows that foreclosure starts have dropped 40% since April 2013.  From someone who originates mortgages, this a great step in the right direction. On the side of the coin, yesterday Fannie Mae said that “the housing picture remains worrisome” in its release of the May 2014 Economic and Housing Outlook, citing year-over-year volumes declining with Existing and New Home Sales.  They went on to say that they anticipate a “modest uptick” in housing as the spring/summer buying season progresses. Continuing the dour outlook, the Fed expressed concern about the employment prospects of those who continue to be unemployed. These pooh-pooh prognosticators are keeping the demand for mortgages high and interest rates low.

Low Prices Ahead

Case Shiller confirms that home prices across the country rose 11.3% in 2013 and anticipates that number to shrink in half for the 2014 year (don’t shoot the messenger). Speaking of lower prices: Retail Sales rose by just 0.1% in April, way under the 1.2% increase in March.  So it’s a great time to go stock up on lots of stuff that you don’t need. The S&P Index just hit 1,900 for the first time ever before slinking back down under that mark.

Rent V. Own

RealtyTrac just published this chart showing the monthly cost of renting versus owning a home across the country.  As of today, rents in Salt Lake County are more expensive than the average mortgage payment by about $30.  As a result of the gigantic student populations at either end of University Parkway, Utah County’s rents are $200 less expensive than in Salt Lake County.  The average mortgage payment is $133 higher that the average rent in Happy Valley.  With an average appreciation rate of 5% on a $229,900 median sales price home, you stand to gain $11,500 is just the first year of home ownership, or roughly 1000% return on your $133 investment into your future.  Don’t be a renter.

Job Openings are Up

The cost of gasoline is down $0.20 from a month ago.  On seemingly unrelated news, Job Openings rose 1.5% during the same period.  This brings up two points: 1) Domino’s should look into better ways to expend the revenues saved by cheaper fuel and 2) I need a part time job.

Stocks are down and Bonds are flat at the moment.  The technical picture points toward higher rates in the future, but analysts are increasingly grumbling about stagnant growth, which lends itself (pun intended) to lower interest rates.  Fundamentals will win over technical al day long, but don’t hold your breath…

Fame of the Fed

CoreLogic reports this morning that due to rising home prices, another 4 million American homes are no longer under water compared to this time last year.

Weekly Jobless claims fall to 323K, the lowest since November. Planned layoffs in the US fell 7.3% from January to February and are down 24% from Feb 2013.

Several Fed Governors have spoken out today against continuing to curtail Bond purchases “in light of soft economic indicators” lately–or perhaps they just want the Fed to remain in the spotlight as long as possible?