Morning Report – Are we back in a real estate bubble? 03/27/13

Posted on March 27, 2013 by Brent Nyitray

Vital Statistics

  Last Change Percent
S&P Futures  1550.7 -6.5 -0.42%
Eurostoxx Index 2597.6 -43.6 -1.65%
Oil (WTI) 95.95 -0.4 -0.40%
LIBOR 0.284 0.000 0.00%
US Dollar Index (DXY) 83.21 0.328 0.40%
10 Year Govt Bond Yield 1.86% -0.05%  
RPX Composite Real Estate Index 190.8 -0.2  

Markets are lower this morning as Euro sovereign yields widen on the Cyprus situation. Mortgage applications rose 7.7% last week. This is the last full trading day of the week (Thurs is a half day), so volume should start to dry up as traders square their books for quarter-end and leave for the long weekend.  Bonds and MBS are up on the flight to safety trade.

We will have some Fed-speak today with Rosengren of Boston, Pianalto of Cleveland, and Kocherlakota speaking at various events during lunch. Hints about QE could move MBS, so watch your locks.

Consumer confidence fell in March to 57.9 from 61.4 a month earlier. The report blames Washington for the decrease. You certainly wouldn’t guess it from watching the stock market indices.  It will be interesting to see how the spending numbers shake out. 

New Home sales fell 4.6% MOM in February, but were up 12.3 YOY to a seasonally adjusted annual rate of 411,000 units. The median sales price was $246,800, an increase of 3% YOY. There definitely seems to be a bifurcation of the market, where existing homes are rising at a high single digit rate, yet the new home market is experiencing more modest price increases. Investor activity is probably driving the difference, as professional investors are purchasing distressed property for rentals, while new home sales are driven by actual homeowners. Volume is picking up, with the  sales in Feb up 13% from last summer. 

Bob Schiller pointed out that the latest housing data should be approached with caution. He points out that markets like Phoenix and Las Vegas are “frothy” and says that the recovery may even be a bubble. FWIW, I disagree that we are in another bubble – bubbles are psychological phenomenons that start with the view that “this time is different” and that the asset in question can only go up. That was the view of residential real estate in 2006.  It isn’t now. Our grandkids may experience another real estate bubble, but we won’t. Schiller believes that it will take 40 years for home prices to rise to pre-2007 levels. Yes, that is an eye-opening forecast, but he is talking about inflation-adjusted numbers. 

The government wants to impose a surcharge (through higher capital requirements) for the too big to fail banks. This will undoubtedly be another impetus for the big banks to break up voluntarily. 

Filed under: Morning Report |

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15 Responses

  3. novahockey's avatar
    novahockey, on March 27, 2013 at 10:17 am said:

    Troll …oh man.

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  4. Let the mutherfuker burn!'s avatar
    Troll McWingnut or George, whichever, on March 27, 2013 at 10:52 am said:

    Scott, mine, as Ace would say, is a recontextualization!

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    • ScottC's avatar
      ScottC, on March 27, 2013 at 11:04 am said:

      McWing:

      mine, as Ace would say, is a recontextualization!

      And a good one it is, given that I failed to point out that the person charge of implementing our new insurance regulations doesn’t actually know what insurance is.

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  5. Brent Nyitray's avatar
    Brent Nyitray, on March 27, 2013 at 11:41 am said:

    First post-crisis subprime deal:

    Springleaf Plans to Sell $1b RMBS Backed by Subprime Mortgages

    March 27 (Bloomberg) — May price next week. $1.019b. Joint bookrunners BofAML (str), Credit Suisse. 144a. May be rated by S&P.
    * Bloomberg ticker SLFMT 2013-1
    * Fixed-rate AAA, AA, A+, A-, BBB, BB notes offered
    * Information from person familiar with offering, who declined
    to be identified because terms aren’t set

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  6. novahockey's avatar
    novahockey, on March 27, 2013 at 12:42 pm said:

    Pre-existing conditions news:

    WASHINGTON, DC – The Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), today announced a hearing for Wednesday, April 3, 2013, at 1 p.m. in room 2322 of the Rayburn House Office Building entitled “Protecting America’s Sick and Chronically Ill.” Witnesses to be announced.

    E&C always webcasts their hearings.

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  7. lmsinca's avatar
    lmsinca, on March 27, 2013 at 8:29 pm said:

    Weird, I put a comment in and it disappeared.

    So, test.

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  8. lmsinca's avatar
    lmsinca, on March 27, 2013 at 8:34 pm said:

    Again…………..oh well. It must not like my link. I’ll try a tiny url and then I give up.

    Our daughter just got back from one of these trips and if you’re an avid skier and outdoorsy type this is for you. She said it was amazing. They hiked (skied and snow shoed) in about six miles but the back country skiing was phenomenal she said.

    http://tinyurl.com/d7qmfgk

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  10. lmsinca's avatar
    lmsinca, on March 28, 2013 at 7:58 am said:

    Yes, but you can visit the other tabs to see how to rent one. She’s training to climb Kilimanjaro in August so this trip was perfect because of elevation but they also have huts that are much lower in elevation and are easier to get to than the one they stayed in. I didn’t even know these existed and I spent years skiing in CO. Thought it was interesting and I know we have at least a couple of skiers here.

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  11. Kevin S. Willis's avatar
    Kevin S. Willis, on March 28, 2013 at 9:21 am said:

    Troll McWingnut: “Doom.”

    I hate to be a pessimist, and I’m not . . . in the long run. In the short term, I certainly agree. But there are so many people that think that the government needs to step in a provide security in every area where they might feel insecure, or uncomfortable, and correct every potential wrong in life, real or perceived, without any desire or ability to contemplate how such guaranteed security in all area of life can possibly be achieved within the limitations of the real world . . . thus little to no ability to consider that there might possibly be unintended consequences to government policies of universal insurance, insanely high minimum wage laws (I do not think ours are insanely high, although I don’t think we need minimum wage laws at all), guaranteed employment, etc., etc.

    But when you don’t even know what the words mean, and you’re in charge . . . well, that’s bad news. All I can say about that. You can decide the government needs to pay for everybody’s routine health services, and that may be a bad idea but there it is. But when you want to argue that that is “insurance” when it’s clearly not . . . ugh.

    Many things about the future do look positive, but I think a better future will happen as much in spite of humanity as because of it.

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