More Signs of Anemic Growth

Stocks and Mortgage Bonds are both higher so far this morning. The latest economic data has been showing more signs of anemic growth and a potential recession, if we are not already in one. Remember, the silver lining of a recession or recession like conditions is that the economy slows, inflation falls, and mortgage rates always decline.

Existing Home Sales, which measures closings on existing homes, was weaker than expected and showed a decline in activity. Things like Realtor commissions are directly plugged into GDP and is another item that would point to flat or negative growth.

Existing Home Sales

Existing Home Sales fell 5.9% in March at a 4.02M unit annualized pace, which was worse than the -3% expected. The previous report for February was revised slightly higher from +4.2% to +4.4%, but today’s report was a miss.

This report likely measures people shopping for homes in January and February, when rates were higher. Sales in the West fell the most, due to the fires, which likely postponed closings. The homes there are relatively higher in price, which impacted the median home price a bit.

According to Diana Olick, you would have thought prices declined, as she said the drop in the pace of sales and increase in inventory is causing a “chill” to home prices.

Yet the Median Home Price rose 1.7% in March to $403,700, and also happened to be the highest March on record. Year over year median prices rose 2.7%. It’s also important to note that this measures the middle priced home sold, not appreciation.

Another component that Olick made a big deal about was inventory, which rose 8.1% last month to 1.33M units. It’s also up 20% from last year, which sounds like a lot. For perspective, take a look at the chart on today’s update video. Inventory levels are still near there lowest point in the last 26 years, well below the pre-pandemic years of 2015 to 2020, and is almost 3M less than the oversupply during the housing bubble.

Putting together the pace of sales and inventory, there is a 4-months’ supply of homes, which was higher than 3.5% in February, but less than a more balanced market at 4.6 months.

Homes remained on the market for 36 days on average, down from 42 days in February. 21% of home sold above the list price, which was down from 29% last year.

First-time home buyers made up 32% of transactions, up from 31% in February and unchanged from last March. Cash buyers accounted for 26%, while Investors made up 15%...both in line with levels seen last year.

Durable Goods Orders

Durable Goods Orders, which measures larger durable purchases in the US, rose a whopping 9.2% in March, which was much stronger than the 2% rise expected. This figure was anticipated to come in hot because of orders frontrunning the tariffs.

The headline jump of 9.2% was all due to a 139% rise in ‘nondefense aircraft’ orders. But when you strip out transportation, the reading was 0%, which was weaker than the 0.3% expected and is another sign of anemic growth.

Core Durable Goods was reported at 0.1%, lower than the 0.2% expected. Core Shipments, which gets directly plugged into GDP, came in at -0.9% and should cause further downward revisions.

Fed Commentary

Cleveland Fed President, Beth Hammack, spoke on CNBC this morning and made some interesting comments. She said that uncertainty over the tariffs is weighing on businesses and their planning. She said that the Fed does not yet know what trade policy will do to the economy and thinks it is a good moment to take time and ensure we are moving in the right direction.

On rate cuts, she said that she enters every meeting with an open mind, which likely means she is open to cutting rates any time if it makes sense. Hammack explained that the Fed can be preemptive in cutting rates ahead of a recession once the economy’s direction is more clear. She also emphasized that the Fed can move quickly if it needs to.

She said there may be scenarios where the Fed would need to add temporary liquidity. Nothing would prevent them from using their tools of buying Treasuries.

The Fed's Beige Book was also released and captured the impact of the tariffs based on the timing of the conversations. Of the 12 Fed Districts, 5 saw little growth, 3 experienced flat growth, and 4 reported modest declines in growth. This sounds like a flatline GDP figure to us, which is in line with what the Atlanta Fed is predicting.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose 6,000 to 222,000.

Continuing Claims, or those who continue to receive benefits after their initial claim, fell 37,000 to 1.84M.

Technical Analysis

Mortgage Bonds are once again challenging their 100-day Moving Average. If this level is broken convincingly, there is a lot of room to the upside until reaching the 25, 50, and 200-day Moving Averages. Momentum has swung back to the upside looking at the Stochastic chart, which is a positive.

The 10-year is right at 4.33%, dead on the important Fibonacci level and 50-day Moving Average. If this level is broken to the downside, the next stop is the 25-day, followed by the 200-day Moving Average at 4.23%.