Morning Report – Fed Day! 12/18/13

Vital Statistics:

Last Change Percent
S&P Futures 1776.3 3.3 0.19%
Eurostoxx Index 2973.2 31.4 1.07%
Oil (WTI) 97.34 0.1 0.12%
LIBOR 0.245 0.001 0.31%
US Dollar Index (DXY) 80.14 0.082 0.10%
10 Year Govt Bond Yield 2.87% 0.03%
Current Coupon Ginnie Mae TBA 104.3 -0.3
Current Coupon Fannie Mae TBA 103.4 -0.2
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.45

Markets are up small on a good housing starts number. Bonds and MBS are down.

Today is the last FOMC announcement under The Bernank. Starting next year we will have the “dream team” of Yellen and Fischer. The consensus seems to be no tapering, but only by a nose. I am more interested to see the forecast for 2014 GDP growth and whether it went up or down. The Fed has been revising down its estimates all year, but I am wondering if the stronger data we have been seeing lately will change the trend.

The bad news: Mortgage Applications hit the lowest level since 2001 last week as the MBA index dropped 5.5% to 374.60, the lowest level since 2001.

Here is the purchase index going back to 1991: We remain mired in this situation where cash buyers are almost half of all sales on purchase transactions and refis remain depressed. Will it turn around? Of course, once the first time homebuyer gets back on his or her feet.

The good news:  In the “been down so long everything looks up” category, housing starts leaped to the highest level since early 2008, with a print of almost 1.1 million units. While it is historically a very depressed number, (we averaged about 1.5 million units a year prior to the bubble years), it looks great compared to our average of 727k over the past 5 years. Housing construction has been the Achilles Heel of this recovery – it is a huge economic engine and employs a lot of people. The builders have been reporting massive gross margins, and I think will want to start ringing the register.

Lennar reported 4Q earnings this morning which beat analyst expectations. Homebuilding revenue was up 50%, and gross margins were an eye-popping 26.8% as average selling prices increased 18% year over year. Orders and backlog are up as well. The builders are undoubtedly going to take advantage of these numbers by boosting production, which will be good for the economy in general.

The WSJ has a write-up on the new LLPA hitting conforming buyers next year. FHFA has been hiking fees for years now, and the guarantee fee has been used as a cookie jar to pay for other spending. Jumbos lately have been offered at lower rates than conforming loans. This won’t help to get the MBA applications index up.

20 Responses

  1. Not really a RedState type of guy. Way too Socially conservative for me. However Eric Erickson makes some really good points about the Republican civil war.

    http://www.redstate.com/2013/12/17/the-political-corollary-to-you-will-be-made-to-care/

    Worth a read, particularly if hawt, Red on Red action is your thing.

    It’s my thing.

    Oh, and First!

    Heh.

    Like

  2. “Of course, once the first time homebuyer gets back on his or her feet.”

    My sister-in-law and soon to be fiance are in this situation. I just don’t see how it’s going to work for them. The only stuff on the market they can afford seems to be a short-sale. or needs renovations they can’t afford.

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    • nova:

      My sister-in-law and soon to be fiance are in this situation.

      That “are” obviated a lot of questions I would have had if it said “is” instead.

      Like

  3. “The only stuff on the market they can afford seems to be a short-sale. or needs renovations they can’t afford.”

    Tell them to look into 203k loans for reno projects.

    Like

  4. good idea .. thanks

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  5. senate will pass the budget deal today, and then the appropriators will begin negotiations on an omnibus for the rest of FY 2014. probably wrap that work up around Jan 6

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  6. I heard this morning that QE will only nudge a bit because until the middle class show better confidence and there are jobs for the still millions unemployed, the proof in the pudding of an economy that can stand on it’s own hasn’t been met. The fact that the stock market is up and, as you stated, most home sales are by cash buyers, means it’s not the middle class enjoying our economic recovery; which seems to be true since it’s been reported that 90% of our economic recovery “wealth”, including cash, housing and all other aspects of “wealth”, have been enjoyed by the top 1% while the remaining 99% have only enjoyed the remaining 10% of the economic recovery “wealth”.

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  7. QE decreasing, but rates will remain low well past unemployment < 6.5%. the fed giveth, the fed taketh away…

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  8. So, QE lite?

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  9. reducing MBS and Treasury purchases by 5 billion each a month. so still increasing the size of the Fed’s balance sheet, just not quite as fast as before.

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  10. oh, in DC-speak, that’s a cut.

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  11. true… hell, the bernank keeps talking about how tight fiscal policy is…

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  12. do people think OFA was trolling the right with their pajamaboy ad? Or just wanting to create controversy? Of do progressive men really wear onesie pajamas to bed?

    Like

  13. “Or do progressive men really wear onesie pajamas to bed?”

    Could be a millennial thing. Seems made for SNL parody.

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  14. I am just trying to imagine a group of people at OFA exclaiming “Yes! this is gonna sell a ton of insurance!”

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  15. Onesie = Hipster Douchebag.

    Like

  16. Max Baucus as ambassador to China?

    Like

  17. Oops.

    Like

  18. Hey Max, Fuuuuuuuuuuuuuuuuuucccccccccccckkkkkkkkkk Yooooooooooooooooouuuuuu!

    Mr. Baucus frets that the health care law had no Republican support in either the Senate or the House. “It is my belief that for major legislation to be durable, sustainable, it has to be bipartisan,” Mr. Baucus said in the interview. “I mean, one party can’t jam legislation down the other party’s throat. It leaves a bitter taste.”

    And then he decided to screw Americans again!

    After the measure became law, Mr. Baucus effectively gave the White House a pass and had no oversight hearings before the 2012 presidential election. It was not until this year that he came out swinging.

    Either he’s a liar or he’s stupid.

    In the months before the Oct. 1 rollout of the exchange, Mr. Baucus said, the two repeatedly assured him that HealthCare.gov would be ready.

    Did they lie? “I don’t think so; I don’t know,” Mr. Baucus said.

    http://mobile.nytimes.com/2013/12/19/us/politics/baucus-still-fretting-over-health-law-he-shepherded.html?smid=tw-share&_r=0&pagewanted=print

    Like

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