Monday November 21 20916 Housing and Economic stories

TOP STORIES:

Whiff of Panic in Miami’s Condo Market - (www.wolfstreet.com) The Miami-Dade County condo market is coming under severe stress, and turmoil is spreading. There are two aspects: supply and sales activity overall, and the more obscure but highly indicative “preconstruction market.” Preconstruction condos are a favorite playground for condo flippers. They buy the units before construction begins. When the building is completed, some of the buyers (in recent years 30% to 40%) flip their units at a profit, benefiting from the run-up in condo prices in the interim. This activity is crucial in helping developers fund their working capital. Alas, the math has stopped working. The overall condo and townhouse market in Miami-Dade County is already in trouble. In October, sales plunged 30% year-over-year, while inventory for sale rose to over 14,000 units as of November 1, according to StatFunding’s Preconstruction Condo Market Update.

Bond Rout Eats Into the One Remaining Valuation Case for Stocks - (www.bloomberg.com) The selloff in debt that sent 10-year Treasury yields to the highest levels since January threatens to make an already richly priced stock market look downright expensive. That’s because of its effect on a valuation framework known as the Fed model, which says it’s OK to own equities as long as their prices compare favorably with bonds. The comparison plots S&P 500 Index earnings expressed as a percentage of price, now 4.9 percent, against Treasury rates. Spiking bond yields have narrowed the advantage enjoyed by stocks to the least in three years. The S&P 500 was little changed at 2,164.20 by 4 p.m. in New York on Monday, while the Russell 2000 Index of small caps climbed 1.3 percent to a record, exceeding an all-time closing high set in June 2015. The 10-year note yield rose to the highest this year. The selloff wiped a record $1.2 trillion off the value of bonds around the world last week and sent 30-year yields above 3 percent for the first time since December, while major stock gauges rallied the most in at least two years.

Italy bears brunt of year's biggest bond rout - (www.reuters.com) The selloff in debt that sent 10-year Treasury yields to the highest levels since January threatens to make an already richly priced stock market look downright expensive. That’s because of its effect on a valuation framework known as the Fed model, which says it’s OK to own equities as long as their prices compare favorably with bonds. The comparison plots S&P 500 Index earnings expressed as a percentage of price, now 4.9 percent, against Treasury rates. Spiking bond yields have narrowed the advantage enjoyed by stocks to the least in three years. The S&P 500 was little changed at 2,164.20 by 4 p.m. in New York on Monday, while the Russell 2000 Index of small caps climbed 1.3 percent to a record, exceeding an all-time closing high set in June 2015. The 10-year note yield rose to the highest this year. The selloff wiped a record $1.2 trillion off the value of bonds around the world last week and sent 30-year yields above 3 percent for the first time since December, while major stock gauges rallied the most in at least two years.

Panic in housing market as Trump effect pushes mortgage rates to 4% - (www.cnbc.com) More selling in U.S. bond markets Monday pushed mortgage rates to a psychological breaking point. The average contract rate on the popular 30-year fixed mortgage hit 4 percent, according to Mortgage News Daily, a level most didn't expect to see until the middle of next year. Rates have now moved nearly a half a percentage point higher since Donald Trump was elected president. "The situation on the ground is panicked. Damage control," said Matthew Graham, chief operating officer of Mortgage News Daily. "People were trying to lock loans quickly last week and are now facing a tough choice to lock today or hope for a bounce. Many hoped for a bounce last week heading into the long weekend and we obviously didn't get it."

Trump Tech Meltdown Hits Fourth Day With Amazon Cut by $35 Billion - (www.bloomberg.com) The group stands out as the only industry that normally benefits from a rising economy not to rally on speculation Trump's policies will stoke domestic growth. Tech stocks in the benchmark equity gauge have slumped 3.1 percent over four days, trailing the S&P 500 Index by 4.2 percentage points, the most since May 2009. ... No single fact explains the tech rout though everything from trade and immigration policy to industry rotation to flat-out campaign retaliation have been cited. Technology is the biggest group in the S&P 500 by far and one of the only ones to consistently post earnings growth over the last 18 months. ... The industry, which largely supported Hillary Clinton during her presidential campaign, may also face higher hurdles for expanding their footprints after some high-profile business leaders including Amazon Chief Executive Officer Jeff Bezos clashed with Trump during the election. 

OTHER STORIES:

Selloff in Bonds, Emerging-Market Assets Deepens as Dollar Gains - (www.bloomberg.com)
Wall Street ends flat as financials' rise offsets tech drop - (www.reuters.com)
Bond Rout Lifts U.S. Yields to 2016 High on Trump Stimulus Bets - (www.bloomberg.com)

Trump's victory has set off a stampede into stock ETFs - (www.cnbc.com)
The Next Generation of Hedge Fund Stars: Data-Crunching Computers - (www.nytimes.com)