Thursday, June 18, 2020

The housing market is alive and well

30-yr fixed-rate mortgage rates are back down to record-low levels: a bit less than 3.4%, according to the nationwide average calculated by the Mortgage Bankers Association (see Chart #1). And they could fall further, given that the spread between current yields and the 10-yr Treasury yield are are exceptionally wide. If past norms were to return, 30-yr fixed rate mortgages could be trading at 2.4-2.7% (see Chart #2, which shows mortgage rates and 10-yr yields on the top portion, and the spread between the two on the bottom portion).

Chart #1

Chart #2

After a sharp drop in sales in March and early April, applications for new home mortgages have surged to levels last seen almost 12 years ago (see Chart #3). The housing market is responding to incentives in a healthy fashion. The economy is still weak, but home prices needn't fall much if at all, thanks to the positive impact of low and falling mortgage rates, and given the reasonable expectation that the economy will eventually return to normal.

Chart #3

As further evidence of the housing market's resilience, the Bloomberg index of home builders' stocks is now up year-to-date, though still about 14% below its February high (see Chart #4).

Chart #4


Needelman said...

Low mortgage rates are certainly a good thing for the housing market and consumers in general. However, I'm still concerned about a rise in delinquencies the coming quarters. Heading into the crisis delinquency rates were at all-time lows -- as one might expect, they have recently ticked upward.

Lower mortgage rates notwithstanding, delinquencies track closely with the job market. While we've rebounded from jaw-dropping payroll & claims numbers, they remain historically horrific. To keep delinquencies at bay and preserve housing prices, many more people must return to work, or crisis benefits will have to extend past July, or perhaps some combination of the two. Foreclosure moratoriums and forbearance periods can only persist for so long.

Looking forward to others' views.

Richard H. said...

Scott, I think it is really irresponsible for you to say that Covid in yesterday's news. The current antibody tests tell us very little as to who has actually had the disease.
Your reference (here - ) to support your thesis of yesterday's news is from a mathematician who knows very little about medicine, and is apparently relying on the veracity of antibody tests to make his mathematical models (I really could not believe that you used this article as a reference. It undermines your credibility. The article is so hypothetical, I almost thought it was a joke, except that such ridiculous things are now being promulgated on both sides that is is very disturbing. To explain that Germany has had a much lower death rate than the UK because of some genetic unknown, as opposed to social discipline, is preposterous.)
Again, there are no reliable commercial antibody tests that tell us much of anything so far, as noted here in this article (but which does point to a new test that hopefully eventually will):

Benjamin Cole said...

I agree with this post, but actually housing production has then a slow-building catastrophe in the US for decades. Tight property zoning has restricted new supply resulting in chronic economic rents being extracted from a largely employee class.

Benjamin Cole said...

I agree with this post, but actually housing production has then a slow-building catastrophe in the US for decades. Tight property zoning has restricted new supply resulting in chronic economic rents being extracted from a largely employee class.

Fred said...

It appears your comment that Covid-19 was old news may have been premature. Hope things improve but if folks start holding back again because they are afraid to come out I think we're in for a rough ride.

cbt696 said...

Until very recently the Washington Post, on the first page of its website, tracked, using a bar graph, the daily number of U.S. covid deaths. It has stopped doing so. Now it tracks, on its front page, daily new covid cases.

I have no idea what motivated the WaPo‘s decision to shift from prominently tracking daily covid deaths to tracking, instead, daily new covid cases. But because the former – daily deaths – continues to fall while the latter – daily new cases – is rising, this shift in reporting serves to keep covid fears higher than these would likely be had the WaPocontinued to prominently report the daily number of covid deaths.

This biased impression is further worsened by the WaPo‘s practice of reporting, in addition to daily new covid cases nationally, also daily new covid cases of a handful of states – those states that are experiencing especially large increases, relative to other states, in daily covid cases.

Johnny Bee Dawg said...

COVID-19 is old news.

regular people don't GAS about COVID.
Elderly & terminal people should shelter in place. As before.

Scott Grannis said...

cbt696 makes an important point. Yes, new Covid cases are rising, but Covid deaths have yet to rise by anything even remotely close to the rise in new cases. In many, if not most states, Covid deaths remain in a flat to declining trend. Deaths are by far the more important thing to follow. Cases will likely rise by an order of magnitude in the coming year.

New York continues to lead the world in number of cases per capita and number of deaths per capita.
Thanks, mainly, to Gov. Cuomo's mandate that nursing homes must accept known Covid cases. Yet only 2% of New York's population has been infected, and only 0.13% of New York's population has died of Covid (although it is highly likely that this number is inflated).

Since the virus is quite unlikely to disappear anytime soon, the global infection rate is likely to rise by orders of magnitude in the next year or so. Meanwhile, the infection mortality rate has been trending down and is variously estimated to be only modestly higher than the typical seasonal flu. Since we now know that only the elderly and the sick elderly are at a great risk of dying, those most vulnerable to the virus are being protected by a variety of measures. It is thus likely that the infection mortality rate will continue to decline even as the number of new cases soars.

This is what you should be hearing from the press, but no. Instead, as a society we are still trembling in fear of a seasonal flue that the vast, vast majority of us will eventually contract but not succumb to.

Johnny Bee Dawg said...

Spot-on comment from Scott.

According to the Harvard epidemiologist back in March, most people on the planet will get it eventually, and almost nobody (percentage-wise) will even know they ever had it. Almost everyone who gets it has mild to no symptoms. People under 65 years old have a 0.00006% chance of dying from it.

It would be almost funny to watch the extent of fake panic the media tries to stir, if it wasn't so sad.
The disinformation is astounding, and getting worse as they report a new "surge in cases in irresponsible states".
I would rather think they are pretending to panic to slow the economy, create fear, and remove the President in November. If they actually believe the stuff they say, they are psychologically damaged souls. I often wonder how many folks actually believe their stuff, or just tune it out.

I dare anyone to try and watch one of those CNBC "MARKETS IN TURMOIL!!!!" shows at night with that Wapner guy hosting.
Recently, the man almost broke down in tears. Literally shrieking on-air, in the most panicked voice.
Rewound the DVR and called my wife in to see it. It's hard to explain it without seeing it yourself.
Surely that kind of mental state is a put-on. Does anybody in management monitor that show? Is that message on purpose??
The stuff I've heard on there is so dire, and so extreme and fact-free, its jaw-dropping.

I miss the old days when Larry Kudlow had a great market show on there every night. Ahhh, simpler times!

That Gottlieb guy is on TV every morning, live from his back yard, with the most amazing double-speak and parsing.
He is America's expert. His assignment is to push Big Pharma pills and a vaccine, and to discredit 5-cent hydoxychloroquine.
And of course, Fauci has finally admitted to lying to the public & the President, early on.
But please believe him, now.

Race riots, statues of abolitionists being toppled, grievances based on fake police data, Marxist organizations masquerading as moral arbiters, ginned up pandemic fear.
And corporate America is donating HUNDREDS of millions to promote it all, and to fund DEM super-PACs, using BLM as the conduit.

Its almost as if the Swamp don't want to be drained. Who'd a thunk it??

We have horrible people trying to manufacture the Zeitgeist of this age.
This stuff is exactly the kind of thing the CIA does to destabilize foreign administrations.
This time its all coincidence and organic, and has nothing to do with an election year.

Yet, the markets see thru it all. America's 401-Ks were at all-time highs just 2 days ago.
America adapts, and gets back in the game, bay-bee.

God Bless America. God Bless Donald. God Bless Scott and his blog!

Fred said...

I agree with all the posts here but the media does have influence over people and their willingness to engage in the economy, even if it's pure panic porn. We've got to follow silly directional signs and wear masks on my floor in our office building even though there are only 6 of us allowed to in for 20,000 square feet! People just don't want to come back to this. Also, my daughter works with children in the cancer center at Texas Children's Hospital in Houston, and they are now forced to take adult patients because of capacity issues elsewhere and her bosses are telling them not to go out after work because of the uptick in cases. If these cities scale back the openings, it will have a negative effect on the economy. As always, I appreciate the blog and hope JBD's optimism prevails!

cbt696 said...

Ivor Cummins on Twitter: "Does Lockdown give a great bang for the buck? Or is #coronavirus seasonal by nature, with its own dynamics? Find out in 2 minutes flat... 😉 #HopeSimpson #Covid19" / Twitter

cbt696 said...

“We are seeing desperate attempts by politicians, public health officials, and media commentators somehow to make sense of why the United States pursued the course it did with the closures, stay-home orders, travel bans, and near-universal quarantine, in violation of every principle that America has celebrated in its civic culture.

With the evidence coming in that the lockdowns were neither economically nor medically effective, it is going to be increasingly difficult for lockdown partisans to marshal the evidence to convince the public that isolating people, destroying businesses, and destroying social institutions was worth it.“

Data at link:

cbt696 said...

Here’s The Good COVID-19 News That’s Being Buried By The Press

“Once again, the U.S. is undergoing a media-driven COVID-19 scare after a “spike” in infections. But as we noted earlier this week, the number of cases depends on the amount of testing. The key gauge to watch is deaths. They’ve been falling since April, and there’s strong reason to believe they’re lower than the official count suggests.

The dreaded Wuhan virus is no doubt a nasty bug, worthy of our vigilance and ongoing concern. That said, its virulence, as measured by the daily number of deaths, appears to be waning, as the chart with this piece, courtesy of the COVID-19 Tracking Project of the Atlantic, clearly shows.

The average number of daily COVID-19 deaths on a weekly basis has fallen from a peak of just over 2,000 to 700 or so. That’s a roughly 65% decline. And it’s no fluke. The figure has been dropping steadily since April.

Hold on. That last number for June 23 on the chart shows a huge jump. Should we be worried? Is this the much-dreaded surge some have been talking up?

Apparently not. A big part of that one-time gain came from a revision by one state: Delaware.

As Youyang Gu, an MIT data scientist who created the COVID site, tweeted: “To put the increase in deaths in context, Delaware added 69 deaths today: ‘The revision came from identifying 67 deaths dating back to April.’ So if you take out those 67 deaths, the week-over-week deaths have not changed.

Goldman Sachs’ state-level tracker shows similar trends. The volume of coronavirus tests has risen 23% in the past two weeks, but positive results have increased just 1.3 percentage points to 6.2%. Meanwhile, deaths have fallen over the past two weeks by 12%.

This is bad news for those who, for a variety of reasons, seek to plunge us back into lockdowns and social isolation, despite the proven devastating economic impacts that would have. If COVID-19 deaths aren’t rising, and they aren’t, the rationale for shutdowns evaporates.“

In full:

Fred said...

Some of the states are doing partial lockdowns in response to growing hospitalizations. I agree we're not seeing a spike in deaths and hopefully won't, but if people start holding back again with the economy whether forced to or not by their governments, I don't see how any of the good arguments made here will matter. As Scott has said many times over the years, it all comes down to confidence vs. fear.

cbt696 said...

The links below might add some perspective to the current avalanche of “cover my @ss” stories being pushed out by NYT, WaPo, Anthony Fauci and a host of other experts who have mishandled the Covid 19 epidemic:

Johnny Bee Dawg said...

Tony Heller has been doing the Lord's Work for years.
Always excellent fact-based vids.

Anonymous said...

I respect 2 bloggers. Scott and Calculated Risk.

Calculated Risk is pessimistic overall due to thining Covid is being mishandled and wants more government intervention.

Scott optimistic that Covid is passed and priced in.

Seems we are at a turning point where there will either be a Covid II VIX spike in Scotts charts or maybe not.

Today stocks are still climbing the proverbial wall of worry even with Covid cases increasing (but deaths decreasing as Scott points out).

cbt696 said...

“Supposedly [the renewed lockdown is] a response to 27 states reporting big rises in new coronavirus cases.

But those spikes have two main causes: One, more testing finds more infections. So cases are naturally “spiking”. Two, recent demonstrations, riots and other non-socially distanced activities led to an increase — with nary a peep from the Democratic “progressive” left, which cynically hopes to ride the wave of coronavirus cases into the White House and a congressional majority.

In fact, the data are clear. The lockdowns had no real impact on the virus’ spread. But they did have a devastating impact on the economies where they were introduced.

“Residents and business owners in states under a COVID shutdown mandate from their governors are suffering far more job loss,” according to data crunched by the Kansas Policy Institute. “May private-sector employment in those 43 states was 13.1% lower than a year ago, but the states not shut down by their governors only lost 7.7% of their private job base.””


“ One widely reported forecast by Cambridge University’s business school provided a best-case five-year lockdown cost estimate of $550 billion for the U.S., or about 0.4% of GDP. The worst-case: a $19.9 trillion GDP loss, or a whopping 13.6% of GDP over five years. Even if you split the difference between worst and best cases, you get a loss of about $10 trillion, or roughly 7% of GDP.

This month, meanwhile, the International Monetary Fund forecast an 8% drop in real U.S. GDP in 2020, representing a decline of roughly $1.5 trillion in just a year, by far the biggest dollar drop in U.S. history. By our calculation, that’s roughly a $4,600 loss in income for every man, woman and child in the country.”

cbt696 said...

“[T]he AAP strongly advocates that all policy considerations for the coming school year should start with a goal of having students physically present in school.”

American Academy of Pediatrics:

DownSouth said...

We didn’t mean to follow the Swedish ‘herd immunity’ model, but we ended up at the same point…

Johnny Bee Dawg said...

Sweden is down to zero deaths

cbt696 said...

We had a choice, but we picked Fauci...better luck next time.


cbt696 said...

“Taken alone, the “number of cases” statistic is useful for little other than propaganda...
The meaningful statistic is the death rate, which is plummeting.”

No Correlation Between COVID Cases And Deaths; text and graphics at link...

Fred said...

With regard to the plummeting death rates, I believe the media's response is "just wait two weeks" (or 30 days if that doesn't work).

Johnny Bee Dawg said...

Best quarterly Dow performance since 1987.
Best quarterly S&P performance since 1998.
Best quarterly NASDAQ performance since 1999.

Best quarterly performance for me, ever in my 3 decade+ career.

The market is seeing through all this virus and mask and Marxism BS, and knows America will get on with it.
Also knows the "BIDEN IS WINNING!!" mantra from pollsters and MSM is BS.
That old senile plagiarizing criminal isn't wining anything.
Oh, and Retail Sales had best increase in US history.

Meanwhile ADP private sector jobs were up 2.37 million in June.
May ADP jobs were revised from DOWN 2.76 million, to UP 3 million.

Its ALMOST as if markets looked ahead and expected good economic news.
Closer and closer to index targets, yet $4.7 trillion sits in cash on the sidelines....earning ZERO.
Massive equity ETF outflows.
Where will that cash go? Hmmmm.

Anonymous said...

Looks like Scott did accurately call the equity bottom. Might pull back but probably not below last bottom. Headline Covid stuff horrible especially states re-closing but market not reacting negatively at the moment.

Johnny Bee Dawg said...

Gubmint says payrolls up 4.8 million. Estimate was 2.9 million.
13th straight week in a row of DECLINES in initial jobless claims.
Unemployment rate falls to 11.1%. That is already below some analyst forecasts for 2022.

All-time record high number of new Black and Latino jobs increases in June.
Previous all-time record in US history was May.
Almost 900,000 for Blacks. Over 1.5 million for Latinos over past 2 months.

Donald Trump is truly the President for ALL Americans.

Buy the rumor, sell the news???
We will have to see.

Fred said...

My daughter works at Texas Children's Hospital in Houston. They are taking adult non-covid patients due to lack of beds elsewhere. She is getting emails from administrators that ICU bed shortage is a real problem in Houston and media panic is working to scare people. Florida also reported an increase in deaths today. I think new lockdowns are coming whether warranted or not.

randy said...

M.D. Anderson Cancer Hospital is also taking overflow patients from other hospitals. I have two nieces in the university that now have Covid, and many of their friends. Young people taking little precaution. It's probably inevitable anyway unless we get a vaccine. I'd bet Fred's prognostication is going to be right.

derick said...

Good read. Great tips!

Johnny Bee Dawg said...

Hospital cases are far less deadly than before. Deaths are down 84% from the April peak.
And hospitals are FINALLY back open for their normal business.
Regular procedures are back. Hospitals are busy because of THAT...not because of COVID cases.

Despite the media Panic Porn over "new cases", according to CDC: thru Friday, July 3, only 6% of America's hospital beds are occupied with COVID patients and suspected COVID patients.

Only 12.1% of Texas hospital beds are occupied with COVID patients.
Georgia 10.6%
Florida 11.2%
Arizona is worst in nation at 20%
These numbers will be updated tomorrow.
The US Healthcare system is NOT being overwhelmed, and never has been...even in NY in April.

"New Cases" are up....except the infection rate is NOT rising. We are testing nearly a million people per day.
Herd immunity is building, and ending this "epidemic".
CDC even says the epidemic ending.
Gottlieb is panicked like never before. He has millions to earn from a vaccine, and its fading away.

If we gave out a million IQ tests per day, we would discover a lot of "new cases" of geniuses.
It doesn't mean people are getting smarter. It isn't spreading, either.
It just means we tested for it.

LINK: Use this link to check your state's COVID occupancy at CDC

Fred said...

The % of patients "with covid" (we don't know if they are there due to covid) in the ICUs in the big cities in Texas are closer to 40% and capacity is almost full. Death rates are still low in Texas and here in Atlanta. Meanwhile, the cops aren't responding to multiple shootings because they know they are likely to be indicted and beautiful children are dying. Where are the protests for these killings?

Johnny Bee Dawg said...

Texas ICU beds are 68% full, according to CDC, as of Friday. That is from ALL patients, not just COVID.
Presumably, gunshot wounds occupy a bigger percent in the bigger urban areas.

Head of the Texas state health agency recently said It is common for ICU's to remain at least 85% full at busy hospitals, and Texas can easily bring on more ICU capacity in big cities, as needed. Said he was not concerned whatsoever about COVID cases overwhelming their hospitals.

Meanwhile, more Black children were shot to death this weekend in Chicago by other blacks, than unarmed black men killed by police ALL LAST YEAR in the entire country.
To the Marxist BLM organization receiving hundreds of millions of dollars from Corporate America, not ALL black lives matter, after all. Corporate America donating cash, hand over fist, to an organization who's stated goal is to end Capitalism.
All to try and remove a sitting President. Let that sink in.

Meanwhile, only 28% of stocks are trading above their 200 day moving average. Nice re-grouping, and plenty of room to run.

Anonymous said...

States partly re-closing is new but old news. I'd think that would matter negatively but it has not so far. Markets are saying the re-closings are a non issue so far. I'd of thought with the re-closings we'd have a covid II VIX spike but no, I've been wrong. Or is there a big second stimulus package coming?

Fred said...

It will be interesting to see if July economic indicators fall again with the spike in cases recently. I've seen some restaurants in our neighborhood close for several weeks due to employees testing positive. Also, a good friend's 20 year old daughter had Covid in May with loss of taste and smell. Minor symptoms you'd say, but her sense of taste is still not back after 30 days and this has prompted friends and family to avoid bars and restaurants. Perhaps not enough to stall the V but we shall see.