A Good House is Hard to Find. Stocks and Mortgage Bonds are both lower so far this morning. Yesterday’s alert to lock appears to have been prudent.
Pending Home Sales, which measures signed contracts on existing homes, were flat in December…but it was the highest December reading ever. Normally there is a slowdown. Year over year Pending sales are still up 21%, which is amazing in the face of record low inventory levels, which are down 23% from last year. Larry Yun, the NAR’s chief economist, thinks we will see a 15% increase in sales in 2021. He also forecasts 6.6% appreciation, which is in line with our estimates.
The Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE), showed that headline inflation was up 0.4% in December, which was hotter than expectations of 0.3%. Year over year the index increased from 1.1% to 1.3% as expected.
The Core rate, which strips out food and energy prices and is the real focus of the Fed, was up 0.3% in December, which was hotter than the 0.1% rise anticipated. Year over year, the core rate increased from 1.4% to 1.5%, higher than market expectations of 1.3%. Even with the slightly hotter reading, inflation is still at very tame levels.
Mortgage Bonds opened up beneath their 25 and 100-day Moving Averages and are now in the middle of a new range, with the aforementioned levels acting as a ceiling and support at the 103.053 Fibonacci level. The 103.053 Fibonacci floor was tested earlier this morning, but has held for the time being. The 10-year is trading at 1.08%, breaking back above 1.073, which is a negative. After locking in yesterday and protecting ourselves, we can start the day floating.