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Morning Report: New Home Sales up big


Vital Statistics:

Stocks are higher this morning as investors wait for numbers from market darling Nvidia. Bonds and MBS are up.

New Home sales rose 4.4% MOM and a whopping 31.5% YOY, according to the Census Bureau. The median sales price fell 9% to $436,700.

Overseas investors have sold a record $11 billion worth of Chinese blue chip stocks over the past 13 days. Chinese equity markets have been battered by continued fallout from the burst real estate bubble and the potential default of Country Garden, one of China’s biggest real estate developers. It missed a bunch of bond payments, and investors are still working out when the 30 day grace period ends.

There is a distinct possibility that China is where the US was in August of 2008. A burst real estate bubble is picking up momentum and the dominoes are starting to fall.

Mortgage applications fell 4.2% last week as purchases fell 5% and refis fell 3. “Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high. This spike pushed mortgage rates higher last week, with the 30-year fixed rate increasing to 7.31 percent – the highest level since December 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Applications for home purchase mortgages dropped to their lowest level since April 1995, as homebuyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power. Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing.”

Luxury homebuilder Toll Brothers released earnings yesterday, with earnings per share increasing 59% on a year-over-year basis. Revenues were up 19%, while contracts were up 30%. CEO Douglas C. Yearley, Jr said:

“Our third quarter performance reflects a market for new homes that continues to benefit from historically low levels of resale inventory, favorable long-term demographic trends, and the persistent underproduction of homes for well over a decade. In addition, our strategy of increasing our supply of spec homes in recent quarters has contributed to our success…

While rising rates remain a challenge, they further cement the lock-in effect that has kept resale inventory at historically low levels. With our deep and well-located land holdings, industry-leading brand, healthy backlog, more efficient operations and balanced spec strategy, we are well positioned to capitalize on continued solid demand for new homes.”

MBA: Mortgage Applications Decreased in Weekly Survey; Purchase Applications “lowest level since April 1995”

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