Morning Report: Job openings fall

Vital Statistics:

S&P futures4,164 9.75
Oil (WTI)81.070.65
10 year government bond yield 3.40%
30 year fixed rate mortgage 6.34%

Stocks are higher this morning on no real news. Bonds and MBS are down.

Job openings decreased from 10.6 million in January to 9.9 million in February. It looks like openings fell across most business sectors. This is evidence the Fed’s tightening is finally getting some traction on the labor market. The quits rate inched up, however it still lower than late last year. Quits are often a leading indicator for wage increases.

The bond market rallied on the number, with the 10 year yield falling 7 basis points immediately after the report.

Home prices rose marginally in February, according to Black Knight. This was the first increase in 8 months. Black Knight attributes this to the decline in rates in the beginning of February bringing buyers back into the market. That said, inventory remains extremely tight and isn’t improving. Some of the usual suspects – places like Miami – saw increases.

Overall prices rose 0.16% MOM and rose 1.94% YOY. “The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better. In fact, seasonally adjusted inventory levels continued to deteriorate in February, marking not only the fifth straight month of such declines, but also the largest inventory deficit we’ve seen since May of last year, with more than 90% of markets seeing such deficits grow in February. New listings – already trending well below pre-pandemic levels for months – ran 27% below those levels in February as potential home sellers continued to shy away from the market. All in, total active for-sale inventory is back to 47% below pre-pandemic levels after having recovered to within 38% of normal levels late last year. Without a significant shift in interest rates, home prices or household income, this is a self-fulfilling dynamic that is quite likely to continue for some time.”

You would think with such low inventory that the homebuilders would step into the breach, but their cancellation rates were pretty elevated in their fourth quarter numbers, and many are in the process of just burning off their backlog.

Private residential construction fell 0.6% month-over-month / 5.7% year-over-year in February. Single family construction was down big: 1.8% MOM and 21.4% YOY. On the other hand multifamily was up big: 1.4% MOM and 22.% YOY

You can see the divergence below. Single family remains the dominant component of housing starts, but it has been in decline while multi has kind of stayed in a range. The construction spending numbers suggest that multi-fam is accelerating.

CoreLogic reported that home prices rose 0.8% MOM and 4.4% YOY in February.

“The divergence in home price changes across the U.S. reflects a tale of two housing markets,” said Selma Hepp, chief economist at CoreLogic. “Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns and relative affordability due to new home construction.”

“But while housing market challenges remain, particularly in light of mortgage rate volatility and the ongoing banking turmoil,” Hepp continued, “pent-up homebuyer demand is responding favorably to lower rates in many markets. This trend holds true even in the West, leading to a solid monthly gain in home prices in February. U.S. home prices rose by 0.8% in February, double the month-over-month increase historically seen and indicating that prices in most markets have already bottomed out.”

Home price appreciation does exhibit a seasonal variation, and it looks like home prices started rising at the beginning of the Spring Selling Season.