Sunday Night Futures

An interesting article from Nick Timiraos at the WSJ: Housing Prices Are on a Tear, Thanks to the Fed

Prices of existing homes rose 10% in February nationally from a year ago. They have been rising during the seasonally slow winter months—and they show signs of jumping further as the spring buying season gets under way. What’s going on?

First, inventories of homes available to buy have fallen to 20-year lows. Home builders have added little in the way of new construction since 2008. Banks are selling fewer foreclosures. Investors have scooped up more homes, converting them to rentals.

Many borrowers, meanwhile, aren’t willing or able to sell at prices that are down sharply from their 2006 highs, despite a greater inclination among banks to approve short sales. Tight lending standards mean some owners will hold back from selling because they aren’t sure they would qualify for a mortgage on their next home.

Demand has also revved up, first from investors … and later as rising rents and falling interest rates encouraged more first-time buyers to purchase homes …

Improving home-price expectations have also unleashed pent up demand. The U.S. added around 1.3 million households a year for the 10-year period ending in 2007, after which household formation fell to more than half that level. Household formation was lower in the five years following the housing bust than any period since the 1960s, according to Altos Research, an analytics firm in Mountain View, Calif.

But the population never stopped growing. Households simply doubled up. Between 2008 and 2010, the country had around two million households that “couldn’t wait to launch on their own,” says Mike Simonsen, chief executive of Altos Research. Many of those new households have been renters, but more are opting to buy.

I’m not sure about the source of the household formation data, but there has definitely been a strong increase in demand.

Weekend:
• Summary for Week Ending April 5th
• Schedule for Week of April 7th

The Asian markets are mixed with the Nikkei up sharply, but the Shanghai composite down.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 2 and Dow futures are down 20 (fair value).

Oil prices are down over the last week with WTI futures at $92.76 per barrel and Brent at $104.43 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are down about 16 cents over the last six weeks after increasing more than 50 cents per gallon from the low last December.

If you click on “show crude oil prices”, the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.