Morning Report – No we are not in another housing bubble 05/17/13

Posted on May 17, 2013 by Brent Nyitray

Vital Statistics: 

  Last Change Percent
S&P Futures  1655.5 7.4 0.45%
Eurostoxx Index 2817.6 10.9 0.39%
Oil (WTI) 95.88 0.7 0.76%
LIBOR 0.274 -0.001 -0.18%
US Dollar Index (DXY) 84.29 0.700 0.84%
10 Year Govt Bond Yield 1.90% 0.02%  
Current Coupon Ginnie Mae TBA 104.7 -0.3  
Current Coupon Fannie Mae TBA 103 -0.1  
RPX Composite Real Estate Index 198.2 0.3  
BankRate 30 Year Fixed Rate Mortgage 3.6    

Markets are stronger this morning on good economic data. The University of Michigan Consumer Confidence index rose to 83.7, a post-bubble high and better than expected. Leading Economic Indicators increased .6%, which was better than expected. These should normally not be market-moving indices, but lately stocks can do no wrong and bonds can do no right. The market seems to be convinced that the Fed can stick the landing and end QE without any major hiccups. 

The CoreLogic / Case-Schiller Q412 report is out. House prices increased 7.3% nationwide in 2012. They are forecasting prices to rise 2.5% in 2013 as the market broadens out from the red-hot Western markets like San Francisco and Phoenix. They see a 5-year annualized trend growth of 3.9%. The areas with the largest price gains: Phoenix (+23,8%), San Jose (+17%), Detroit (+ 16.7%), Miami (+13.5%) and Lost Wages (+13.4%). The biggest declines were in Long Island (-4.3%), Virginia Beach (-2%), Richmond (-1.5%), Philthy (-1.3%) and Birmingham (-1.3%). They do note that the fast-rebounding markets could hit an air pocket as professional investor demand wanes.

They do not see evidence of a new housing bubble. I actually find it humorous that a small rally off the bottom could be considered a “bubble.” Bubbles are rare things and are based on an idea that an asset price cannot go down. We saw that mentality during the late 90s – “Buy quality companies and hold them for the long term. Stocks always go up in the long term. The biggest risk is not being fully invested” People wrote books like Dow 40,000. Similarly, during the real estate bubble, people thought prices could never fall. People who had no experience in real estate were buying “Flipping Houses for Dummies.” Nobody that experienced the stock market bubble or the real estate bubble is going to believe that these asset prices cannot fall. There may be another stock or real estate bubble, but we won’t see it. Maybe our grandkids will.

It was noted at the MBA Secondary conference that private label spreads were widening. We finally see evidence of this with Redwood’s latest private label deal. They just sold $424 million of bonds with the senior tranches priced to yield 2.82%, a spread of 190 basis points over swaps. In January, similar deals were priced at 97 bps over swaps. $5.5 billion of private label deals have been done so far this year, as compared to $3.5 billion for all of 2012. That said, during the bubble, $1.1 trillion of PL securities were issued in one year, so we are still a long way from re-living the salad days of big real estate finance.

The House is holding a hearing this morning on the IRS scandal. Whether this turns into another Watergate or not, the President’s political capital is waning quickly. The net effect could be that not much more happens in Washington for the rest of his term. For us, that means replacing FHFA Chief Ed DeMarco with Mel Watt is going to be an even tougher sell, and principal mods for conforming loans / extension of HARP eligibility dates are become less of a sure thing.

Filed under: Morning Report |

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25 Responses

  1. jnc4p's avatar
    jnc4p, on May 17, 2013 at 9:23 am said:

    Eric Holder is full of shit on the AP story posing a national security risk.

    “Then, in a meeting on Monday, May 7, CIA officials reported that the national security concerns were “no longer an issue,” according to the individuals familiar with the discussion.

    When the journalists rejected a plea to hold off longer, the CIA then offered a compromise. Would they wait a day if AP could have the story exclusively for an hour, with no government officials confirming it for that time?

    The reporters left the meeting to discuss the idea with their editors. Within an hour, an administration official was on the line to AP’s offices.

    The White House had quashed the one-hour offer as impossible. AP could have the story exclusively for five minutes before the White House made its own announcement. AP then rejected the request to postpone publication any longer.”

    http://www.washingtonpost.com/politics/some-question-whether-ap-leak-on-al-qaeda-plot-put-us-at-risk/2013/05/15/47003ed4-bd77-11e2-89c9-3be8095fe767_story_1.html

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    • ScottC's avatar
      ScottC, on May 17, 2013 at 9:32 am said:

      jnc:

      Eric Holder is full of shit on the AP story posing a national security risk.

      For what it is worth, in an editorial today the WSJ, no cheerleader for Holder, says:

      In this case, Justice is investigating because the leak may have done serious national-security damage. Mr. Holder said on Tuesday that it was one of the worst leaks he’s seen in government. Our own security sources support his claim.

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  2. Let the mutherfuker burn!'s avatar
    Troll McWingnut or George, whichever, on May 17, 2013 at 9:42 am said:

    J, saw that link at HotAir last night. Is there enougheat on the bone? The fact that WaPo printed it spoke volumes about Washingyon Establishments desire to send O a message.

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  3. jnc4p's avatar
    jnc4p, on May 17, 2013 at 9:44 am said:

    Holder is lying and the WSJ is wrong, but consistent with their past position on national security and the War on Terror. I could see the argument for the NYT StuxNet leak, but not the AP one.

    Holding the story for one day before the administration announces it themselves doesn’t constitute a national security breach.

    Read the original story for yourself.

    http://www.guardian.co.uk/world/2012/may/07/cia-al-qaida-bomb-plot

    This is a key point that I think helps to explain the administration’s reaction:

    “The operation unfolded even as the White House and department of homeland security assured the American public that they knew of no al-Qaida plots against the US around the anniversary of bin Laden’s death. “

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  4. jnc4p's avatar
    jnc4p, on May 17, 2013 at 9:49 am said:

    The NYT Stuxnet story is the real deal as a security breach, in that it reveals the method by which they penetrated Iran’s air gapped network at the uranium processing facility to infect it with the virus, along with numerous other operational details.

    ” Getting the worm into Natanz, however, was no easy trick. The United States and Israel would have to rely on engineers, maintenance workers and others — both spies and unwitting accomplices — with physical access to the plant. “That was our holy grail,” one of the architects of the plan said. “It turns out there is always an idiot around who doesn’t think much about the thumb drive in their hand.”

    In fact, thumb drives turned out to be critical in spreading the first variants of the computer worm; later, more sophisticated methods were developed to deliver the malicious code. ”

    http://www.nytimes.com/2012/06/01/world/middleeast/obama-ordered-wave-of-cyberattacks-against-iran.html?pagewanted=all

    see also:

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  5. jnc4p's avatar
    jnc4p, on May 17, 2013 at 10:07 am said:

    Colbert King jumps on the bandwagon:

    “CoIntelPro? No. Unchecked government power? Yes.”

    http://www.washingtonpost.com/opinions/colbert-king-disturbing-abuses-of-power/2013/05/17/915a7264-bea9-11e2-9b09-1638acc3942e_story.html

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    • ScottC's avatar
      ScottC, on May 17, 2013 at 11:29 am said:

      McWing:

      WOW!

      I was watching it live on CNBC when Rangel started his questioning, and I remarked to my colleague what a twilight zone moment it was.

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  8. Let the mutherfuker burn!'s avatar
    Troll McWingnut or George, whichever, on May 17, 2013 at 11:36 am said:

    Scott, it really is breathtaking.

    Like

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  10. jnc4p's avatar
    jnc4p, on May 17, 2013 at 12:07 pm said:

    Drip Drip Drip

    “Official Says Treasury Dept. Knew of I.R.S. Inquiry in 2012

    By JONATHAN WEISMAN
    Published: May 17, 2013

    WASHINGTON — The Treasury Department’s inspector general told senior Treasury officials in June 2012 he was investigating allegations that the Internal Revenue Service had targeted conservative groups, disclosing for the first time on Friday that Obama administration officials were aware of the matter during the presidential campaign year.”

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  11. novahockey's avatar
    novahockey, on May 17, 2013 at 12:14 pm said:

    amen troll .. This city deserves a better class of criminal.

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    • ScottC's avatar
      ScottC, on May 17, 2013 at 12:51 pm said:

      McWing:

      Why wouldn’t Obama approve her bonuses, unless she refused to follow orders.

      What I want to know is why is she, or any other federal employee, is getting any bonus at all, given that the government perpetually operates at a loss and requires annual taxpayer bailouts. Why am I paying for IRS bonuses? Where’s the outrage?

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  13. jnc4p's avatar
    jnc4p, on May 17, 2013 at 1:52 pm said:

    Because it’s not their fault. It’s Congress’s.

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    • ScottC's avatar
      ScottC, on May 17, 2013 at 2:05 pm said:

      jnc:

      Because it’s not their fault. It’s Congress’s.

      In all the populist demagoguery over Wall Street bonuses in the wake of 2008 I don’t recall the outrage exempting those employees who were not at fault (which was, of course, the vast majority of them).

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  15. jnc4p's avatar
    jnc4p, on May 18, 2013 at 1:54 pm said:

    I like Shelia Blair a lot, but I’m skeptical.

    “Sheila Bair: Dodd-Frank really did end taxpayer bailouts
    By Mike Konczal, Published: May 18, 2013 at 10:27 am”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/18/sheila-bair-dodd-frank-really-did-end-taxpayer-bailouts/?hpid=z9

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  16. Let the mutherfuker burn!'s avatar
    Troll McWingnut or George, whichever, on May 18, 2013 at 3:29 pm said:

    J,

    No one believes that the govt won’t bail out whatever industry or company that bribes the right group if politicians. That is the reason these regulations, hell, any regulations exist. It is an artifact of government.

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  17. Michigoose's avatar
    Michigoose, on May 18, 2013 at 9:45 pm said:

    Dang it, McWing, that wasn’t fair.

    Semper fi!

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  18. Michigoose's avatar
    Michigoose, on May 19, 2013 at 5:40 pm said:

    Scott:

    Question since you haven’t posted in a while. You’re OK, right? Did the train crash mess with your commute?

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