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Market Snapshot October 26, 2021

Good Tuesday AM,

Bonds are flat this morning. The news was mixed. Most notable is Consumer Confidence, which came in well above expectations. Not surprising given the continued run up in the stock market and home equity wealth, combined with an abundance of jobs. The bond market is likely to trade in a narrow range for the next couple of days, as we await the most important news days of the month and even the quarter. On Thursday we will see the 3rd quarter GDP number and on Friday we will see the key inflation numbers: the personal consumption expenditures (PCE which the FED watches more closely then CPI). Both GDP and PCE are of such great importance, any big surprises can create massive buying or selling in bonds, depending on the direction of the surprise. Technically, the charts look OK, but are teetering and can go either way today. They lean a bit favorably, but again, I do not expect much until we see Thursdays GDP.

I have been doing a lot of thinking and a little research on why there are more jobs than people who want to work and more people are quitting their jobs than they have in 20+ years. Well, prior to Covid, about 1 million applications to form business with employees were made during the first nine months of the year. In 2020, that number was 1.14 million, and through September 2021, the number is at 1.4 million. This means an extra 540,000 new business applications have been made in the Jan-Sept period during the past two years. If not the culprit, this is certainly adding to the hiring strain. Keep in mind that 75% of all startup businesses fail within the first 5 yrs. Many will be back in the workforce again.

The future is here. Lennar Corp. and construction-technology firm Icon are poised to start building next year at a site in the Austin metro area, the companies said. While Icon and others have built 3-D printed housing before, this effort will test the technology’s ability to churn out homes and generate buyer demand on a much larger scale. Here is the WSJ link for more insight.

And for those who continue to incorrectly say that FHFA has raised the conventional loan limits to $625k, the reality is that this morning’s 1.0% increase in the FHFA home price index accounts for the 2nd to last month of data required to arrive at the new conforming loan limits one month from today.  While the headline HPI differs slightly from the expanded seasonally adjusted data set that drives the loan limit calculation, it’s close enough to safely conclude the $625k level has been surpassed.  In fact, we’d be closer to $633k assuming last year’s correlation with a final number near $640k if September’s prices increased at 1.0% as well. We will have the actual new conventional loan limit announcement in a month.

Please remain safe and healthy, make today great.