ADP Misses and “Affordability” is Up

Stocks are up this morning despite the ADP Jobs Report showing a miss of over 1.8M jobs created in July compared to the 2M prediction. However, the June jobs creation number was revised adding another 1.9M jobs to the 2.4M initial release. Additionally, Moderna, the biotech company that we have touched on a couple of times and one of the front runners in the COVID vaccine race with a drug in stage 3 of clinical testing, released estimates about how much it will cost consumers. Company execs estimated that the vaccine will cost $32-$37 per dose.

Yesterday, Black Knight Analytics claimed that housing affordability is the highest it has been since 2016. Housing affordability takes into consideration consumer income, housing prices and interest rates. We need to think about what may be influencing this. The date from this report was taken during a time when over 60% of the US was making more through economic stimulus than they did from their jobs. The date is also from a time when mortgage rates are the almost the lowest they have ever been. Lower rates mean a lower payment which makes housing more “affordable”. However, often times when this happens, we see home prices start to rise because consumers have cheaper access to capital. We will soon see if this increase in “affordability” really just ends in a wash.

Mortgage applications were down 5% last week form their peak a few week ago. Year over year, they are up 22%.

Mortgage bonds are down 8bps from the ceiling that we spoke about yesterday. With a lot more room to fall, we are holing a locking bias.