A Blazing Hot Sunday in CA

Saturday it was 104 and today it’s supposed to be 106.  Friday we had to quit working out in the warehouse at about 1:00 pm and then went back out at about 6:00pm and worked until midnight while it was slightly cooler.   Yesterday we worked until about noon and then called it a day.  We were going to make a margarita and sit outside last evening but it was too damn hot for that even.  Today we’re taking the day off and swimming this morning and then either staying in and watching baseball or going to the movies.


I love the picture with this story.

(Reuters) – More than 170 people were treated for heat-related ailments and some towns and cities took emergency steps to protect the homeless and elderly as the West sweltered on Saturday in dangerous near-record, triple-digit temperatures.

Extreme heat enveloped most of California and Nevada and parts of southern Arizona as a large high pressure system trapped hot air across the area, said National Weather Service meteorologist Todd Lericos.

More than 170 people were “treated for heat-related injuries” and 34 more were sent to local hospitals while attending an outdoor concert on Friday afternoon in Las Vegas, Nevada, where temperatures soared to 115 degrees Fahrenheit (46 C), said Erik Pappa, a spokesman for Clark County. On Saturday, highs are expected to reach 117 (47 C).

“It involves pretty much the entire West Coast at this point,” Lericos said, adding that the steamy conditions, which began in some pockets on Thursday afternoon, will likely continue throughout the weekend and linger into next week.

Temperatures were well into the triple-digits in most of the area, except in higher elevations.

In Death Valley, one of the hottest places on earth, temperatures could soar on Saturday to 128 F (53 C), close to the daily record set in 1994. 


There is a lot of pent up romance blooming in California.

In a surprise action, a federal appeals court cleared the way, bypassing a normal waiting period and lifting a hold on a trial judge’s order that declared Proposition 8 unconstitutional.

The news came in a single, legalistic sentence Friday afternoon from the U.S. 9th Circuit Court of Appeals.

“The stay in the above matter is dissolved immediately,” a three-judge panel wrote.

Gov. Jerry Brown told county clerks they could begin marrying same-sex couples immediately, launching plans for ceremonies up and down the state. The two same-sex couples who filed the federal lawsuit against Proposition 8 headed to the city halls in Los Angeles and San Francisco to tie the knot, ending their long fight to become legal spouses.

Of course in a state where the tension between the SSM sides is still alive and well, not everyone was pleased with the Court’s decision.

Supporters of Proposition 8 were furious that the 9th Circuit acted before the normal waiting period. ProtectMarriage, the sponsors of the ballot measure, has 25 days from the ruling to ask for reconsideration.

“It is part and parcel of the utter lawlessness in which this whole case has been prosecuted, said Chapman Law professor John Eastman, a supporter of Proposition 8. “Normally, courts let the parties kind of pursue their legal remedies before they issue a mandate.”


And many of us in CA, and elsewhere, realized Thursday that the SC decision could signal trouble to our system of ballot initiatives.  Be careful what you wish for I guess.

SACRAMENTO — Activists on both sides of the bitter fight over same-sex marriage managed to agree on one thing in the wake of Wednesday’s U.S. Supreme Court decision.

The justices, they said, set a worrisome precedent by giving elected officials undue power over ballot initiatives.

The court essentially voided Proposition 8, a measure placed on the state ballot by foes of gay marriage and passed by voters in 2008. The justices said supporters of the initiative had no standing to defend the measure after state leaders — who opposed the law — had refused to do so.

Their reasoning drew a testy dissent from Justice Anthony M. Kennedy, a Sacramento native, who wrote that the decision “disrespects and disparages” California’s political process — a staple of which is the ballot initiative.

The court, Kennedy wrote, did “not take into account the fundamental principles or the practical dynamics of the initiative system in California.”

Many in the state, regardless of their views on same-sex unions, shared Kennedy’s sentiment, fearing that elected officials now have permission to scuttle initiatives they dislike by simply deciding not to defend them in federal court.

“The initiative process, by its nature, is designed to bypass elected officials,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn., a group named for the man who transformed California government in 1978 with Proposition 13, a ballot initiative that reined in property taxes.

“Anything that vests power in those elected officials over the initiative process is a dangerous move,” Coupal said.

Even Lt. Gov. Gavin Newsom, an early supporter of same-sex marriage when he was San Francisco’s mayor and an opponent of Proposition 8, expressed such reservations.


And just to confirm some of the hopefully irrational fears expressed out in America somewhere, here’s one from the SF Chronicle.

SC marriage

And don’t worry I won’t turn every Sunday into a CA day….I don’t want to make y’all too jealous because you don’t get to live here.

Morning Report – First Time Homebuyer Sighting. 6/28/13

Vital Statistics:

  Last Change Percent
S&P Futures  1603.2 -3.4 -0.21%
Eurostoxx Index 2596.7 -23.2 -0.88%
Oil (WTI) 97.22 0.2 0.18%
LIBOR 0.273 -0.001 -0.33%
US Dollar Index (DXY) 82.83 -0.075 -0.09%
10 Year Govt Bond Yield 2.52% 0.05%  
Current Coupon Ginnie Mae TBA 102.1 -0.5  
Current Coupon Fannie Mae TBA 101.1 -0.4  
RPX Composite Real Estate Index 205.5 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.38    


Markets are down slightly on no real news. The NAPM-Milwaukee report came in better than expected. Bonds and MBS are down.
Big drop in mortgage rates yesterday. Bonds were up a bit, but this was a big move. Sounds like the pandemonium in the TBA market since last week is taking a breather. You had a period where mortgage REITs and originators were getting in each other’s way trying to sell TBAs. Perhaps the Great Mortgage REIT Convexity Hedge / Deleveraging Trade is finished, at least for the moment. Ginnie I / II spreads and Fannie / Gold spreads will tell the tale.
KB Home reported earnings yesterday, and gave some background on where they see the housing sector. There were two big takeaways from the conference call.  First, the increase in interest rates is not negatively affecting demand; in fact it is creating a “sense of urgency” among buyers. This comports exactly with what Lennar said on their call earlier this week. Second (and this is big), the first time homebuyer is back. KB Home is one of the lower price points for the homebuilders and focuses on the first time and move up buyer. 60% of their business is the first time homebuyer. If this is in fact the case (and Lennar also observed the same thing) this is the last step needed for a full, robust housing recovery. 
Pending Home Sales increased 6.7% to a 6 year high, according to NAR. These are contract signings, not sales, so they reflect the increase in rates over the month of May. We are finally seeing robust growth in the West. The Northeast was flat, but grew 14% year-over-year. The West grew 16%, but was flat year-over-year. Next month’s number will be very interesting because it will include the “Bernanke Scare”, which is becoming the euphemism for last week’s FOMC statement that scared the beejeezus out of the bond market. 

Morning Report – Bill Gross’ investment outlook and why the CRA disparate impact analysis is all wet. 6/27/13

Vital Statistics:

  Last Change Percent
S&P Futures  1604.5 9.0 0.56%
Eurostoxx Index 2604.7 1.9 0.07%
Oil (WTI) 95.87 0.4 0.39%
LIBOR 0.274 -0.002 -0.58%
US Dollar Index (DXY) 82.85 -0.128 -0.15%
10 Year Govt Bond Yield 2.49% -0.05%  
Current Coupon Ginnie Mae TBA 101.7 0.3  
Current Coupon Fannie Mae TBA 101.1 0.4  
RPX Composite Real Estate Index 205.6 0.2  
BankRate 30 Year Fixed Rate Mortgage 4.57    


Markets are up this morning as personal income comes in a little better than expected, and personal spending comes in at expectations. Initial Jobless Claims came in at 346k, more or less in line with expectations. Bonds and MBS are up.
The Corker – Warner Bill to wind down the GSEs is out. The full text of the bill (all 154 pages of it) are here. Punch line: GSEs are wound down, their liabilities are transferred to the taxpayer, some private entity will bear the first 10% loss on new securitizations, and the Federal Mortgage Insurance Corporation (FMIC) will re-insure losses over 10%. 
Bill Gross’s latest investment outlook takes the view that the recent spike in rates was overdone.Yes, there was too much risk in the system (read leverage) and the Fed needed to act to squeeze some of that out. But, he believes that the 10 year yield is probably 30 basis points too high and belongs at 2.2%. Reasons: (a) the Fed’s economic forecasts are too optimistic (remember, we just revised Q1 GDP downward yesterday from 2.6% to 1.8% after coming in at .4% in Q4). (b), the Fed wants higher inflation – 1% is too low, and finally, he makes the point that the Fed Funds rate is going nowhere until 2015 at the earliest. This anchor of Fed funds should hold down Treasuries, in his view. Color me unconvinced with that final argument – the 10 year has yielded over 4% in the context of a 25 basis point Fed Funds rate. In fact, since we have been at ZIRP, the average 10 year yield has been 2.65%. From 2009 to 2011, it average 3.25%. So, I don’t see any reason why it can’t go back to those levels. 
Insurance companies are suing HUD over the “disparate impact” rule – which says if statistically your lending to “underserved” groups doesn’t comport with the national statistics, you are guilty of discrimination, no questions asked. Here is the complaint. Of course, these sorts or analyses use FICO as the only relevant variable, which is incorrect – the volatility of prices in the neighborhood matters too. As a lender, you are short a put (if the house drops in price, the borrower can toss you the keys and walk away, yet if the house increases in price, you get the cash flow stream). That put must be priced, and you can see that the volatility of the real estate indices in places like San Bernardino is much higher than places like Milwaukee WI. Which means loans in San Bernardino should have higher rates than loans in Milwaukee WI to take into account the price of that put. It isn’t discrimination, it is the proper pricing of risk. 

Morning Report – Purchase Apps up in spite of rate rise 6/26/13

Morning Report

  Last Change Percent
S&P Futures  1587.9 6.5 0.41%
Eurostoxx Index 2599.1 55.8 2.19%
Oil (WTI) 94.88 -0.4 -0.46%
LIBOR 0.276 -0.001 -0.18%
US Dollar Index (DXY) 82.73 0.144 0.17%
10 Year Govt Bond Yield 2.53% -0.08%  
Current Coupon Ginnie Mae TBA 101.2 0.7  
Current Coupon Fannie Mae TBA 100.7 0.7  
RPX Composite Real Estate Index 205.5 0.2  
BankRate 30 Year Fixed Rate Mortgage 4.58    


Green on the screen in spite of a nasty downward revision in Q1 GDP. Stock futures are holding in while bonds are taking off, with the 10 year yield down 7 basis points from an hour ago. MBS are on the move as well.
The first estimate of Q1 GDP released in late April had growth at +2.5%. That number was revised downward to 2.4% the following month. The third and final revision came in this morning: +1.8%. Hardly robust. It makes you wonder what Bernanke was looking at when he announced QE was coming to a close. 
In spite of the bloodbath in bonds last week, mortgage applications fell only 3%. The MBA purchase index was up 2%. Refis dropped 5.2%. There has been two theories out there about the increase in rates – either (a) the higher rates are going to put people off and they will withdraw from the market or (b) the higher rates are going to get people off the fence, because rates and prices are going up. So far, it looks like its the latter.
One other rate rise datapoint: yesterday: The Conference Board Consumer Confidence Index came in at 81.4, the highest since winter of 2008. Dig into the internals, and you will see the expectations index jumped considerably – this index takes into account a respondent’s view of their own personal financial situation, and shows that so far, the increase in rates has yet to be felt. Of course credit card rates are fixed to prime, which hasn’t moved quite yet, but the early data shows the economy is taking the hike in rates in stride.
Lennar, the big homebuilder who reported better than expected quarterly numbers yesterday, sounded extremely bullish on its conference call. First, they see no evidence that rates are affecting home purchases yet, which comports with what we saw out of the MBA purchase numbers above. Second, they are spotting…. wait for it…. the first time home buyer. Lennar’s average price point is $255k, which puts them squarely in the “first time homebuyer” category. They are noticing “household decoupling” which is a fancy way of saying recent grads are moving out of their parents’ basements. One other interesting tidbit – their price increases were pretty much eaten by increased costs. While lumber did rally hard late last year and into early this year, it has fallen precipitously. So what was the other increased cost? Labor. There is a shortage of skilled labor in many geographical areas. Does that make them bearish? Absolutely not – rising middle class wages is exactly what the economy needs. 
Finally, Census put out new home sales data yesterday. Sales of new single family homes came in at a seasonally adjusted rate of 476,000 in May, up 2.1% from last month and 29% from a year ago. The median sales price was $263,900, while the average sales price was $307,800. These are increases of 10% and 18% respectively, but it is not based on any sort of repeat-sales methodology so you can’t extrapolate existing home price appreciation from it. The difference between mean and median is the widest it has been, which implies most of the action is in the luxury end of the market. There are 161,000 houses for sale at the end of May, which represents 4.1 months’ supply at current sales volumes. As you can see from the chart below, we are still at very, very depressed levels. 

Morning Report – Comforting thoughts about the recent rate rise 6/25/13

Vital Statistics:





S&P Futures 




Eurostoxx Index




Oil (WTI)








US Dollar Index (DXY)




10 Year Govt Bond Yield




Current Coupon Ginnie Mae TBA




Current Coupon Fannie Mae TBA




RPX Composite Real Estate Index




BankRate 30 Year Fixed Rate Mortgage



Green on the screen after the 10 year bond recouped all of its early losses and ended up positive on the day. The Chinese central bank agreed to keep money-market rates at a “reasonable” level. Durable Goods orders came in at 3.6%, above the 3% estimate. Ex transportation, they were up .7%, above the consensus estimate. April numbers were revised up. Bonds and MBS are up.

Homebuilder Lennar reported 2Q earnings per share of $.61, ahead of the $.33 estimate. The numbers included a tax benefit, but even without the one-time item, earnings still beat estimates by ten cents. Deliveries were up 39%, new orders were up 27% and backlog was up 55%. Stuart Miller, the CEO addressed the recent increase in rates directly: “Against the backdrop of recent investor concerns over recent mortgage rate increases, we believe our second quarter results together with real-time feedback from our field associates continue to point towards a solid housing recovery….Demand in all of our markets continues to outpace supply…affordability remains high and despite recent interest rate increases, we have seen very little impact on sales or pricing.” The stock is up 4.5% pre-open.

Senators Corker and Warner plan to introduce their bill today to euthanize Fan and Fred. They will be replaced by the Federal Mortgage Insurance Corporation which will act as a re-insurer and not a primary insurer. How this will actually play out is anyone’s guess – right now there are no mortgage insurance entities big enough to replace F&F. Perhaps the answer will be to over-collateralize MBS backed by QM mortgages by 10% and then apply the FMIC insurance. Obviously Dodd-Frank will have to weigh in on that one, and they are still figuring that part out. 

Lender Processing Services reported that April home prices were up 1.5% from March and 8.1% year-over-year. We are starting to see the Midwestern states start to show up in the top 10. California and Nevada are still #1 and #2 as usual. The LPS HPI is a little different than the other indices like Case-Shiller in that it applies a normalization process to REO and short sales in order to come up with a non-distressed index.

Case-Shiller reported home prices increased 1.72% month-over-month and 12.05% year-over year. This was the highest gain in the history of the Case-Shiller indices. David Blitzer of Case-Shiller addressed the recent increase in rates: “Last week’s comments from the Fed and the resulting sharp increase in Treasury yields sparked fears that rising mortgage rates will damage the housing rebound. Home buyers have survived rising mortgage rates in the past, often by shifting from fixed rate to adjustable rate loans. In the housing boom, bust, and recovery, banks’ credit quality standards were more important than the level of mortgage rates. The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue.”

The FHFA Home price Index reported an increase of .7% month-over-month and 7.4% year-over year. Remember, each of these indices (LPS, Case-Shiller, and FHFA) have different methodologies and samples. FHFA looks only at properties with a conforming mortgage, which eliminates jumbos, distressed, cash-only, etc. This index is more of a “central tendency” index than Case-Shiller or LPS.


Morning Report – What to watch for in economics this week 6/24/13

Vital Statistics:

  Last Change Percent
S&P Futures  1568.5 -15.6 -0.98%
Eurostoxx Index 2502.6 -46.9 -1.84%
Oil (WTI) 93.38 -0.3 -0.33%
LIBOR 0.277 0.004 1.47%
US Dollar Index (DXY) 82.8 0.483 0.59%
10 Year Govt Bond Yield 2.64% 0.11%  
Current Coupon Ginnie Mae TBA 99.5 -1.6  
Current Coupon Fannie Mae TBA 99.38 -1.1  
RPX Composite Real Estate Index 205 0.2  
BankRate 30 Year Fixed Rate Mortgage 4.36    


A sea of red to greet investors this morning. The SPUs are down 15, and the the 10 year is down close to a point. MBS are down as well, with the FNCL 3.5s below par. We should be best-exing into a 4% security at this point, and are well on our way to hitting 4.5s.
The back up in yields is not only a US phenomenon. The UK gilt and the Canadian 10 year have been moving almost in lockstep with the US 10 year. Japanese and German yields are up small, but not as much as us. For those keeping score at home, the 10 year yield increased 40 basis points last week. 
Economically, we have a lot of stuff coming up this week, although not much is market moving. The big question is whether the back up in interest rates is affecting the economy.Watch the consumer confidence numbers (Conference Board on Wed, Michigan on Friday) to see if the jump in interest rates is affecting people’s perception of their own financial situation. Pending Home Sales on Thursday is another one – that should affect contract signings over the past month and will give a clue as to whether the hike in rates is affecting the purchase market. On Thursday, we also get personal income and personal spending. 
Bond mutual funds and ETFs had record withdrawals in June, according to Trim Tabs. So far, over $47 billion has exited bond funds. This withdrawal exceeds the record set in October 2008 at the height of the financial crisis. Where that money goes is the $100,000 question. 
The Chicago Fed National Activity Index improved somewhat in May, although it is still negative and the the 3 month moving average is getting dangerously close to recession territory.


Sunday Funnies and Open Thread

I’m not going to say “I told you so” but I did have the feeling this was going to happen somewhere.  I just don’t think all civic responsibilities lend themselves that well to private enterprise.

It would be interesting to uncover what is happening in other states.  Maybe it’s going better than in these three.

Because the private sector can do everything better, more efficiently, and therefore more cheaply than government, many states have outsourced their prisons to private prison companies to generate cash, and to save money in their budgets. However, three states have now dumped the largest private prison company in the U.S., due to numerous, serious issues. According to ThinkProgress, Idaho cut ties with Corrections Corporation of America (CCA), while Texas closed two CCA prisons of its own, and Mississippi ended their relationship with CCA as well. All of this happened within the last month. The problems these states were seeing ranged from inhumane conditions (including the use of prison gangs, denying access to medical care, bad food and sanitation, widespread abuse by guards, and more) to financial problems, such as falsifying hours to extract more money from the government, and deliberately understaffing the prisons.


Ralph Nader says it’s not just about privacy when we consider the NSA story, it’s about privatization of what were and maybe should still be government functions.

This is a stark example of the blurring of the line between corporate and governmental functions. Booz Allen Hamilton, the company that employed Mr. Snowden, earned over $5 billion in revenues in the last fiscal year, according to The Washington Post. The Carlyle Group, the majority owner of Booz Allen Hamilton, has made nearly $2 billion on its $910 million investment in “government consulting.” It is clear that “national security” is big business.

Given the value and importance of privacy to American ideals, it is disturbing how the terms “privatization” and “private sector” are deceptively used. Many Americans have been led to believe that corporations can and will do a better job handling certain vital tasks than the government can. Such is the ideology of privatization. But in practice, there is very little evidence to prove this notion. Instead, the term “privatization” has become a clever euphemism to draw attention away from a harsh truth. Public functions are being handed over to corporations in sweetheart deals while publicly owned assets such as minerals on public lands and research development breakthroughs are being given away at bargain basement prices.

These functions and assets—which belong to or are the responsibility of the taxpayers—are being used to make an increasingly small pool of top corporate executives very wealthy. And taxpayers are left footing the cleanup bill when corporate greed does not align with the public need.


And last, I hate that Paula Deen story.  I don’t follow her cooking show or know too much about her but I have watched her a few times when my husband flips through the channels.  She always seemed like a bit of a character to me.  If what everyone’s saying is true it sounds like she made some pretty inappropriate and even racist comments and then botched the apology.  Sheesh, I grew up with people who used the “n” word which was completely cringe worthy and caused a lot of family arguments and even tears on occasion.  But, and this is a big but, there are ways and then better ways to comment or make your point.  I thought this story had a perspective we don’t see in print very often.  It’s something I think about a lot.

When the story broke, media coverage was almost tabloid-like. Not surprising, considering it was the National Enquirer that broke the story. In this day and age, when people want easily digestible bites of information rather than well-detailed and supported fact-based news, many saw the titles and nothing more. Titles such as ‘Paula Deen Admits To Using The N-Word’ and ‘Paula Deen’s Apology for Using The N-Word Is Ridiculous.’ As a result, reactions weren’t much better. As one of my colleagues said, it’s as if someone popped the lid off Ugly and let it all spill out. On Facebook, one page posted a picture of Deen with the text of the alleged comment, captioned “Racist Tw*t… Yes you are.” The ensuing comments on the post ranged from civil discussion to “racist white trash c*nt,” “C*nt fucking retard,” and “shove a stick of butter up her ass.” Really?

There were cases where people made offending remarks about her weight, about her diabetes, about being southern. People called for her to be hanged and lynched. People called her a “cracker,” a “honkey,” and other vulgar, racist words for whites. People called her a bigot, a racist, a bitch, all while calling her that most vile word you can call a woman– a c*nt. I won’t even spell it out, I find it so offensive. Since when did it become socially acceptable to skewer someone with the same type of ignorant language you are accusing them of using?


I so want to write this kind of long(ish) sentence sometimes……haha

economic cartoon

evidence comic

women comic

Morning Report – Dissecting the Bernank 6/21/13

Vital Statistics:

  Last Change Percent
S&P Futures  1590.7 6.8 0.43%
Eurostoxx Index 2595.4 9.0 0.35%
Oil (WTI) 95.37 0.2 0.24%
LIBOR 0.273 0.000 0.07%
US Dollar Index (DXY) 82.08 0.168 0.21%
10 Year Govt Bond Yield 2.39% -0.03%  
Current Coupon Ginnie Mae TBA 102.3 -0.7  
Current Coupon Fannie Mae TBA 101.8 0.3  
RPX Composite Real Estate Index 204.8 0.3  
BankRate 30 Year Fixed Rate Mortgage 4.24    


Markets are higher this morning after yesterday’s bloodbath. There is no economic data this morning. Bonds and MBS are up small.
Mortgage rates are up 30 basis points this week so far. We should be best-exing into 4% coupons soon if not already. Will the higher rates crush the purchase market? Well, the National Association of Realtors reported May Existing home sales rose 4.2% to a seasonally-adjusted 5.18% annual rate. The median home price rocketed 15.4% year-over-year. Days on market fell to 41 days from 46 days in April. During the month of May, the 10 year went from 1.67% to 2.13% and the 30 year mortgage went from 3.43% to 4.10%. So, at least on the purchase front, so far, so good. 
The sell-off in bonds has been dramatic. Is it overdone? IMO, not really. Two things in Bernake’s press conference jumped out at me. First, was that the Fed expects the labor market to improve slowly and for inflation to remain moderated. And if the economy acts as expected, they will start tapering QE by the end of the year and fully exit by mid 2014. In other words, the default path is to exit QE, and it will take exceptionally weak economic news to change that. I think going into the FOMC meeting, the market was discounting the possibility that the default path was to continue QE and it would take strong economic data to change that. That possibility has now been taken off the table.
Second, when asked about his concern over the recent increase in interest rates, Bernake said that their economic forecasts were done in the past few days, so they take into account the recent spike in rates. He went on to characterize the increase in rates as “increasing for the right reasons” – i.e. economic strength and the markets getting ahead of the Fed. 
The next question is “how high can rates go?” Well, if you look at historical numbers, a lot higher. Below is a chart of the 10 year yield less the Fed Funds Target Rate since we went to ZIRP. The yield curve had been a lot steeper in the past few years. 


Finally, I recently did an interview on Capital Markets Today, where I talked about the Fed, shadow inventory, mortgage rates, and the real estate market. It is a deeper dive into what the Fed had to say (it was done right after the FOMC release). Check it out.


Friday Morning Open Thread

Brent’s away, so no morning report.

Morning Report – Why household formation is still lagging 6/19/13

Vital Statistics:





S&P Futures 




Eurostoxx Index




Oil (WTI)








US Dollar Index (DXY)




10 Year Govt Bond Yield




Current Coupon Ginnie Mae TBA




Current Coupon Fannie Mae TBA




RPX Composite Real Estate Index




BankRate 30 Year Fixed Rate Mortgage




Markets are flattish as we await the FOMC decision, which should be out around 2:00 pm EST. Bonds and MBS are flat
Mortgage applications fell 3.3% last week, which is surprising since rates fell 9 bps. The purchase index fell 3% while the refi index fell 3.4%.
The CoreLogic Market Pulse has lots of good things in it this month. One article notes that prices are adjusting more quickly in this cycle as opposed to historical cycles. They also expect gains to moderate in the red-hot West Coast markets as previously underwater homeowners put their properties on the market. They also are hearing that professional investors believe some of these market to be overheated and are looking to exit. This could be good for originators as the cash buyers become a smaller percentage of buyers.
Wells Fargo recently held a conference call on the housing market. They see the Fed starting to move towards tapering QE towards the end of the year, but believe it will be gradual. They make an interesting point regarding the low household formation numbers – that they remain depressed because the jobs that are being created are not quality jobs. They are low paying / temporary jobs that will not really give a boost to housing demand. 

Another interesting tidbit – although it seems like the refi boom is over, it turns out that half of the outstanding mortgages in the U.S. have interest rates of 5% or more.

And finally, Treasury Secretary Jack Lew has re-done his signature from OOoooooooOO to something a bit more legible. His new John Hancock will be gracing your dollar bills shortly.
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