Home Sales and EU Stimulus

Good morning everyone – happy Tuesday!

Stocks this morning are up this morning, about 4% from all time highs.

Tomorrow we will get the existing housing report. This is a really important report as existing home sales make up more than 90% of the purchase market. Estimates project a 25% increase – great news for the general market. The most recent Housing Trends Report found that 11% of Americans were looking to purchase a new home within the next year. This figure is almost flat from the 12% who said the same thing in Q2 2019. However, it is important to consider that this increase could be a result of pent up demand during COVID shutdowns instead of a long-term trend. We will see what Americas purchase appetite is after stimulus comes to an end in the next few weeks. On the other hand, the United States has a large number of Millennials reaching the median age of US first-time home buyers which could be pushing this trend. We will follow purchase reports closely over the next couple months.

The EU met in Brussels last week and boasts that the bloc is more united than ever. Together, the EU agreed on a 1.8 trillion euro package to recover from the economic shutdown over the next six years. This spending package includes a combination of grants and business loans. Many claim that this is a large step in the EU’s movement toward a true fiscal union. Bloc leaders claim this package will expedite Europe’s economic recovery while allowing economically troubled countries (Italy, Spain, Greece, etc.) to increase government spending without the massive fear of debt default.

US congress estimates another $1 trillion in economic relief. They hope to have a plan by the end of the month with a huge focus on finding a vaccine.

Mortgage bonds are up this morning but are still in a large trading range. With so much room to fall, we hold a locking bias.