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

Vital Statistics:

 

Last

Change

Percent

S&P Futures 

1649.5

-2.1

-0.21%

Eurostoxx Index

2654.8

-11.8

-0.44%

Oil (WTI)

97.95

+0.2

+0.23%

LIBOR

0.273

0.000

0.00%

US Dollar Index (DXY)

80.92

-0.031

-0.04%

10 Year Govt Bond Yield

2.198%

+0.02%

 

Current Coupon Ginnie Mae TBA

104.5

-0.1

 

Current Coupon Fannie Mae TBA

103.1

-0.1

 

RPX Composite Real Estate Index

203.4

0.5

 

BankRate 30 Year Fixed Rate Mortgage

4.01

 

 

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. 
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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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