Vital Statistics:
Stocks are lower this morning on no real news. Bonds and MBS are flat.
Existing home sales rose 4.2% MOM, according to NAR. “Home buyers are slowly entering the market,” said NAR Chief Economist Lawrence Yun. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.”
Home prices remain high, which is an issue for sales, at least for the first time homebuyer. “Each one percentage point gain in home price translates into an approximately $350 billion increase in housing equity for American property owners,” Yun said. “That means a gain of nearly $1.3 trillion in home value appreciation at a time when the current stock market is undergoing a correction. Moreover, the ongoing housing shortage, coupled with historically low mortgage default rates, implies a solid foundation for home values.”
First time homebuyers accounted for 31% of sales, up from 28% in January and 26% last year. The first time homebuyer accounted for 24% of sales in 2024, which was a record low. Blame affordability and a dearth of starter homes on the market due primarily to the rate lock-in effect.
The Index of Leading Economic Indicators fell in February, according to the Conference Board. “The US LEI fell again in February and continues to point to headwinds ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Consumers’ expectations of future business conditions turned more pessimistic. That was the component that weighed down most heavily on the Index in February. Manufacturing new orders, which improved in January, retreated and were the second largest negative contributor to the Index’s monthly decline. On a positive note, the LEI’s six-month and annual growth rates, while still negative, have remained on an upward trend since the end of 2023, suggesting that headwinds in the economy as of February may have moderated compared to last year. However, given substantial policy uncertainty and the notable pullback in consumer sentiment and spending since the beginning of the year, we currently forecast that real GDP growth in the US will slow to around 2.0% in 2025.”
This combination of a dour consumer outlook combined with generally robust economic data, means that the “vibecession” that has been around for a while continues. I suspect that the labor market is weaker than the numbers suggest, and people who have jobs may feel less secure than they have in the past. I also suspect that the effects of the gig economy (generally less secure) are masked in the employment numbers, and that partially accounts for the vibecession.
The 6 month average continues to work its way upward, however we did see the average touch the warning signal in February:
As a housekeeping note, I will be on vacation for the next two weeks, and will attempt to keep the Morning Report going for that period, but hopefully I don’t run into technical difficulties.
