Markets Obsessed With Quantitative Easing

The markets have been obsessing about the Fed tapering. There have been huge swings in each direction whenever the topic is in the headlines. So, Wednesday’s Fed Statement will undoubtedly create volatility. Among the many questions traders have for the Fed, some are: when will the Fed begin tapering? By how much? And will the Fed taper just Mortgage Backed Securities (MBS) or Treasuries or a mix? It’s unlikely we will get clear answers, so there will be a lot of reading between the lines to search for clues. Adding to the drama are the quarterly Fed Forecasts, which will also be a part of this meeting. The forecasts have been far from accurate in the past.

So why the obsession with tapering Quantitative Easing? A look at the chart below shows the amazing correlation between QE and the move in the Stock market. It’s no wonder why the markets are hanging on every word.

 

 



BLS February Jobs Number

Bureau of Labor Statistics released the february jobs number and 236K jobs were created, much better than the 170K expected. The unemployment number also dropped to 7.7% and Bonds are taking it on the chin down 50bps. Looking inside the numbers we see that the drop in rate is due to the significant drop in the participation rate. The chart above shows that while there are 300K less unemployed virtually all of that is because 296K people left the work force. We will leave it to you as to why people are leaving the work force but the ranks of those on disability and food stamps has exploded higher.

January Housing Starts

 

Homestead Mortgage, L.C.

January Housing Starts
After hitting a four-month high in December of 973,000 units on an annualized basis, Housing Starts dropped by 8.5% in January from December after jumping nearly 16% from November to December. The Housing Starts repor...t measures the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing.

 

 

 

 

Stocks are modestly higher and Mortgage Bonds are struggling. The President gave his State of the Union address last night and promoted policies that some in the Bond market are viewing as inflationary. Specifically, a 20% + rise in the minimum wage, bringing it to a federally mandated $9 per hour. The Bond market is always concerned with inflation, and inflation from wages is a cost that typically gets passed onto the consumer. Retail Sales were up just 0.1%, and while this was in line with expectations, it’s still lackluster. Bond prices have crashed right through the floor of support at 102.875 this morning. The next support level is at 102.375 - about 30 BP beneath present levels (see chart below). Until Stocks show signs of weakness, the trend in Mortgage Bond pricing should remain lower.

January Job Creation

Homestead Mortgage, L.C. 
January Job Creation - The Labor Department reported on February 1 that employers added 157,000 new jobs in January, below the 180,000 that was expected. As seen in the chart below, the 157,000 jobs created in January of 2013 was well below the 275,000 in January of 2012. Still convinced everything is fine and moving in the right direction?

What Signals Are We Getting From The Federal Reserve

What is the Federal Reserve trying to do with all of the comments and news conferences by the governors? Haven't we been hearing that they will continue to keep rates low into 2015? Well, knowing how the Fed works I would say that they are ...trying to soften the market and not have to look like the bad guys by putting the brakes on an already slow economy. So much for 2015 - last week the Fed meeting minutes had several dissenting and saying that rates may be low only until the end of 2013 - WHAT! After they state MULTIPLE times that 2015 was the magic date they drop this on the economy and the markets react immediately to change their positions (see chart January 3) and uncertainty is once again taking over the markets. Interest rates rose 1/4% immediately.

Third Quarter 2012 Revised GDP

Third Quarter GDP Revised Higher. From July to September, the economy grew faster than previously thought increasing from 2.7% in the second reading to 3.1% in the final GDP reading. This is the fastest growth since the fourth quarter of 2011 when the economy grew at a 4.1% rate. Gross Domestic Product is a measure of the total production and consumption of goods and services in the U.S. GDP components like consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's behavior.

Home Prices Up Again In Most Markets

 

 

Home prices in the September Case Shiller 20-city composite increased 3.0% from September 2011. From August to September, the 20-city composite was also up, posting a gain of 0.3%. The national composite was up 3.6% in the third quarter from 2011 and was up 2.2% from the second quarter of 2012. The S&P/Case-Shiller Home Price Indices are published on the last Tuesday of each month at 9:00 am ET. They are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided. Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length sales data.

October Unemployment State By State

 

         
                               
For October, 37 states and the District of Columbia saw unemployment rate declines, 7 states had increases, while 6 had no change. Year-over-year, 42 states plus the District of Columbia recorded unemployment decreases. Because Housing and ...

Jobs are so closely related, it is important to watch for changing trends in the Unemployment level. The chart below displays current levels of Unemployment by state. This information will be updated monthly.

Huge Jump In Unemployment Claims

For the week ending Novemeber 10, Initial Jobless Claims jumped 78,000 to an 18-month high of 439,000. In the aftermath of Hurricane Sandy, the one-week increase in jobless claims was the largest since 2005, when Hurricane Katrina hit the Gulf Coast.

Initial jobless claims measure the number of people (non industry-specific) filing first-time claims for state unemployment insurance. This report provides a timely, but often misleading, indicator of the direction of the economy, with changes in claims potentially signaling changes in job growth. It is assumed the stronger the job market, the greater the spending power, the healthier the economy. Weekly claims are volatile and data can be skewed by holidays; therefore, many analysts track a four week moving average of data to get a better sense of the underlying trend in claims.

September JOLTS

 

The September Job Openings and Labor Turnover report (JOLTS) came in at 3561K, down from the upwardly revised number of 3661K for August. This was also below the expectations of 3653K and marks the lowest reading since April.

The data for the Job Openings and Labor Turnover Survey are collected and compiled monthly from a sample of business establishments by the Bureau of Labor Statistics (BLS). In a monthly survey of business establishments, data are collected for total employment, job openings, hires, quits, layoffs and discharges, and other separations. The JOLTS program covers all private nonfarm establishments such as factories, offices, and stores, as well as federal, state, and local government entities in the 50 states and the District of Columbia.

New Home Sales September

 

 

September new home sales jumped 5.7% to 389,000, up from the August level of 368,000. This marks the highest pace for new home sales since April 2010, during the first-time homebuyer tax credit. The new home supply dropped from 4.7 months i...

n August to 4.5 months for September.

The New Home Sales report shows the number of newly constructed homes with a committed sale during the month. It is compiled through nationwide survey of 10,000 builders/owners of 15,000 building projects and through sampling of permit-issuing offices, as well as land not covered by building permits. The data is timely and is used in conjunction with the existing home sales release from the National Association of Realtors. The level of new home sales indicates housing market trends, and economic momentum signaling consumer purchases of furniture and appliances. Simply, the volume of sales indicates housing demand.

September State By State Unemployment Rate

 

 

 

For September, 41 states plus the District of Columbia saw unemployment rate decreases. Year-over-year, 44 states plus the District of Columbia had decreases. Nevada reported the highest level of unemployment at 11.8%, with Rhode Island and California also in the top 3. Meanwhile, North Dakota posted the lowest rate at 3.0%.

Unemployment Sees Unexplained Big Drop?

Well, since it is election time, let's get your political juices flowing. How did the latest unemployment number drop SIGNIFICANTLY from 8.1% to 7.8%? So, there could be two answers to the question one of which is factual and one that has a flavor of conspiracy as stated by Jack Welsh, probably the greatest CEO in history. Welsh says that the numbers have been cooked by the administration prior to the election. If a minimum of 150K jobs must be created to keep pace with new people just entering the workforce how can a report indicating only 114K jobs created make the unemployment number go down? The factual answer is that the participation rate is the lowest it has been in 31 years and means more people have given up and stopped looking for work and then are no longer counted in the unemployment report. So, when you see that the unemployment rate dropped, keep in mind that it dropped for a VERY bad reason!

 

Former CEO Jack Welsh says white house manipulates jobs data.

Good News For Home Values

 

Home prices in the Case-Shiller 20-City Composite increased 1.6% from June to July. This is the third consecutive month that all 20 cities recorded increases. Year-over-year the 20-city composite index is up 1.2% and 16 of the 20 cities hav...

e seen yearly increases. See the chart to see how good your area is doing.

The S&P/Case-Shiller Home Price Indices are published on the last Tuesday of each month at 9:00 am ET. They are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided.

Unemployment State by State

 

Unemployment rates for August increased in 26 states, decreased in 12 states, and 12 states remained the same from July. Year-over-year 42 states and the District of Columbia posted unemployment rate decreases. From July, the national unemployment rate dropped to 8.1%, and was 1.0% lower than August 2011.

Because Housing and Jobs are so closely related, it is important to watch for changing trends in the Unemployment level.

Home Sales Volume And Prices Are Increasing

  

 

Great News! Existing home sales for August increased 7.8% to 4.82 million homes. This is up from 4.47 million homes in July. This represents the most homes sold since the homebuyer tax credit expired in 2010.

Existing Home Sales is a measu...

re of the selling rate of pre-owned single-family homes, collected by the National Association of Realtors from 650 realtor associations. The data is timely and is used in conjunction with the new home sales release from the Census Bureau. Sales of existing (or pre-owned) houses account for roughly 84% of all houses sold. Sales of new houses account for the other 16%. Simply, the volume of sales indicates housing demand.

 

Real Median Income

 

Real median income decreased 1.5% in 2011 to $50,054, down from $50,831 in 2010. The 2011 real median household income was 8.1 percent lower than in 2007, the year before the most recent recession, and was 8.9 percent lower than the median ...

household income peak that occurred in 1999.

Meanwhile, 46.2 million people were in poverty in 2011, a 15% poverty rate. Though down slightly from 15.1% in 2010, the poverty rate remains high.

Case-Shiller Up In 12 Of 20 Cities

 

Home prices in all 20 cities in the S&P/Case-Shiller home price index increased in the month of May. Combined, the index rose 2.2% from April. Year-over-year, 12 of the 20 cities have higher prices, though combined the index is down .7%. Le...

ading the way is Phoenix, up 11.5% from last year, while the largest decrease is in Atlanta where prices are down 14.5% from last May.

The Case-Shiller Indexes use the repeat sales method for index calculation, analyzing data on single-family properties that have two or more recorded sales transactions. Changes in housing types and sizes, or changes in the physical characteristics, of houses are specifically excluded from the calculations to avoid incorrectly affecting the index value. Home sales pairs are accumulated in rolling three-month periods to offset any delays in sales data recording and to keep sample sizes large enough to create accurate price change averages.

New Home Sales Up 15% Year Over Year

New Home Sales fall 8.4% in June to 350K units annualized down from the upward revision of 382K from 369K in May. The May revised mark was a two-year high for new home sales. Though down from May to June, new home sales are up 15.1% year-over-year.

The New Home Sales report shows the number of newly constructed homes with a committed sale during the month. It is compiled through a nationwide survey of 10,000 builders/owners of 15,000 building projects and through sampling of permit-issuing offices, as well as land not covered by building permits. The data is timely and is used in conjunction with the existing home sales release from the National Association of Realtors. The level of new home sales indicates housing market trends, and economic momentum signaling consumer purchases of furniture and appliances. Simply, the volume of sales indicates housing demand.