Saw this somewhere and just parking here
https://www.bloomberg.com/news/articles/2022-09-26/remote-work-drove-over-60-of-house-price-surge-fed-study-finds
MBA mortgage data just came out this morning.
MBA Mortgage Applications 23/SEP = -3.7% (prev 3.8%)
MBA 30-Year Mortgage Rate 23/SEP = 6.52% (prev 6.25%)
@Navi have you happened to notice that DRV has gone up a nice $30 since I mentioned it a few weeks ago?
Weekly mortgage came out this morning… Interest rate up to 6.75%, applications down -14.2%.
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There seems to be two competing viewpoints on where the housing/shelter related component of CPI will go.
On one hand, we have the Zillow Observed Rent Index suggesting rents will be coming down soon (HT @macromicrodick)
On the other hand, there’s research from Goldman that says, “not so fast!” This thread from the Fed Whisperer summarizes the arguments well. Reproducing prose and images below.
A lot of people are pointing to declines in new apartment rents as a reason to expect relief on inflation beyond the next few months.
A new note from Goldman Sachs offers some reasons to greet such optimism with skepticism.
Indeed, annualized growth for new residential leases decelerated notably to 3% last quarter, according to Goldman Sachs.
Rent growth for new leases could continue to run around 3% next year after declining somewhat in the months ahead, they say.
But overall shelter inflation could continue to run higher because rents on renewed leases could continue to outpace rents on new leases due to “catch-up” effects.
Goldman: “Our estimate of the speed of catch-up suggests that continuing lease rents will rise 6% in 2023.”
Goldman: The net of the two—deceleration in new leases but acceleration for renewals—suggests overall shelter inflation will increase to 7.5% next spring from 6.8% currently before gradually decelerating to 5.9% at the end of next year, up from a prior forecast of 4.9%.
Goldman says this “ongoing firmness” in shelter inflation measures could make the Fed more likely to raise rates beyond the current terminal rate projection of 4.6%.
“For that reason … we see the risks to our peak funds rate forecasts as tilted to the upside.”
@Kryptek and @RefirgerateMyESSCash , please chime in as I wouldn’t do justice to what you shared no the TF.
Excellent video looking at the big picture. I’m on the road right now explains the interactions between interest rates, orders, manufacturing and construction and employment.
Hello money making family…with the crazy volatility we are seeing, I am looking towards the future with HD as a play. In my opinion think we have a week or two or bullishness, but longer term bearishness. With ER set for November 15 (after FOMC- Nov 1-2, mid terms-Nov 8, CPI-Nov 10, and Veterans Day-Nov 11), there will be catalysts that will impact the stock price of HD as well as others.
Here is the OI for Nov 18, Dec 16 and Jan 20
Would like to see a little be of a pull back before calls and above 290 for puts in Dec and Jan. Just my opinion on those.
Good morning! Given the current CPI release for October, I will dig in to see how I am playing HD for earnings next week. Considering housing data but this is HD quarterly so may have some guidance impacts etc. more to add, feel free to add as well! Cheers
Since I have a position in HD from 2005, I wanted to share that I scaled out some more of my shares today partly because of the looming recession fears for 2023, but also for some tax loss harvesting I was planning to offset before year-end. Sold about 13% of my current position in HD.
^^ This is from 7 months ago. Yet, looks like we’ve pretty much stuck to the same script. Median home prices have only gone higher, while sales of both new and existing homes are down and supply of both are up (though there does seem to be a slight downtick in Dec).
This is quite surprising, no? What is the missing link that explains apparent contradiction? Where supply seems to be abundant, while prices still go up and homebuilders are doing quite ok?
XHB, the homebuilder ETF, went up 33% in the last 3 months. There was a bit of a reprieve as 30Y mortgage rates fell from 7% to 6.3%, but with yields going up, this could go the other way again. And the spread is historically high, suggesting originators are pricing in additional risk.
Some interesting data points on the housing market. (Source)
Summary: market is super tight, demand and supply both down.
XHB - the homebuilder ETF - is showing weakness though. I wonder if some kind of new pivot is coming.
Keep it up Ni , the best work I’ve seen so far <:celebrationsprinkles:1033885438403948654> <:celebrationsprinkles:1033885438403948654> <:celebrationsprinkles:1033885438403948654>
That indeed is the question, <@803837945098141696> . I don’t see a clear play yet, as homebuilders will continue to do well as long as there is a seller’s strike. Just keeping track of this for now.
Thanks. I do agree with gunshy that long term wise HBs will be good. Fundstrat Tom Lee had a presentation a few years back predicting another real estate boom due to boomer’s transfer of wealth to the largest generation.
I’m looking short term, that likely the interest rate slows down HBs.
Prices continue to rise and home values are expected to keep increasing over the next few years. Supply is still low and demand keeping up, wonder if we continue to see home builders and suppliers do well in earnings or start to drop. Haven’t looked in a while but I know some home building companies smashed recent earnings or last earnings cycle. Will be reviewing this more over the next few months.
Might be a long term bullish sign for housing. This billionaire is buying a mortgage company hoping to streamline the process. Obviously he’s bullish on housing.