Morning Report – rental cap rates falling 12/30/13

Vital Statistics:

Last Change Percent
S&P Futures 1836.3 -0.2 -0.01%
Eurostoxx Index 3098.8 -12.6 -0.41%
Oil (WTI) 99.86 -0.5 -0.46%
LIBOR 0.247 0.000 0.00%
US Dollar Index (DXY) 80.12 -0.270 -0.34%
10 Year Govt Bond Yield 2.98% -0.02%
Current Coupon Ginnie Mae TBA 104 0.2
Current Coupon Fannie Mae TBA 103.1 0.2
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.56
Markets are flattish on the penultimate day of 2013. Bonds have bounced back below 3% in yield. The ISM Milwaukee came in better than expected, and we will also get pending home sales later.
Today is also Black Monday for losing NFL coaches. Leslie Frasier is gone, as is Rob Chudzinski. Are Shanny and Schwartz next?
CoreLogic’s latest Market Pulse is out, and as usual it is full of good stuff. One thing they discuss is that cap rates are falling for rental markets as prices have increased. Which means that the bidding wars of professional cash buyers are probably over. As prices appreciate, expect to see the pros begin to ring the register. For originators, this means we can still have purchase apps increase as cash buyers drop from 40% of buyers back to their more typical 20% of buyers.

The consensus is growing that 2014 will be the year the economy finally gets out of first gearJob creation is back towards 200k a month, consumer confidence is rising, and 3Q GDP came in at +4.1%, though I wouldn’t read too much into that number. Pent-up demand is finally becoming unleashed. One thing to watch: if extended unemployment benefits aren’t renewed, we should see a drop in unemployment as people take part-time jobs to pay the bills. That won’t necessarily be an indication of economic strength, but it may matter psychologically.

22 Responses

  1. Can’t believe KC missed that field goal that would have sent the Steelers to the playoffs.
    I am comforted by the fact that Baltimore also missed out.


  2. Is this income inequality ok? If so, why?

    If not, what should be done about it?


  3. NoVa, I’ve said it before and I’ll repeat it. I would eliminate the Army, use Marines for any ground action and cut the Navy and Air Force by a third. We can no longer afford the military we have. The world will (continue) to be very dangerous.

    We are 18 trillion in debt and adding more every minute of the day. either it’s an emergency or we repudiate the public portion of the debt.


  4. I just seemed weird to me to try to fit the army into a role that’s already filled. not that I know much about it.


  5. “Carl”–I’d cut them all except the Army. It has the hardware (with the exception of the Navy’s BIG boats, which could simply be signed over to them) to do what each of the other branches does.


  6. Michi,

    The Army’s far to big. I’d even cut the 3rd Marine Division.

    Goal of Navy is shipping lanes and Nuke subs. AF nuke missiles and long range bombing. Marines can temporarily hold a small portion of land for, say, bomber refueling.

    Either 18 trillion in debt is an emergency or it’s not. If not, what level is an emergency?

    What country has survived this level of debt without massive disruption?


  7. “This broad has a very low opinion of her constituents.”

    Well, getting someone to agree with something and getting them to write a check are two very different things…


  8. NoVA and “Carl”: I’ve had a chance to finally read the WaPo article now; in reality, the Army is only trying to do in the Pacific what they’ve long done in the Atlantic (i.e., work more closely with the Navy and Marines afloat).

    That doesn’t mean it shouldn’t merit a long, hard, look–but it doesn’t mean that the Army is trying to take over the Marines’ mission (despite what the Marine generals think).

    I think the military, overall, is too large and still oriented toward large land wars which are unlikely to happen again. But eliminating the Army and counting on the Marines to handle all terra firma operations isn’t the answer, either.


  9. Michi, why not? We cannot afford any land war. If that’s the case, then keep a very small force capable of holding a small amount of land for a very short amount of time (days) to act as a refueling point for planes.

    Do you think we can afford a land war? If yes, how big of one? If no, why keep the Army?


  10. “Carl”–clearly we can afford two rather large land wars. . . as long as we budget for them.

    And the whole idea of merely using land as a refueling point is foolish. There has never been, and never will be, an operation that doesn’t require holding land. And that requires troops on the ground.


  11. What would you cut to afford a land war? Or what level of taxation would you impose to afford the war(s)?

    If you’re willing to finance a war, how much above 18 trillion in debt are you willing to borrow?

    My point is increased taxation to finance a land war (or two) somewhere other than the United State seems like a pretty obvious loser, from the electorates standpoint. See the public’s enthusiasm for Libya and Syria. Times have changed. I place the blame on Bush and Iraq as well as Afghanistant. We should have slaughtered those that needed it and armed a bloodthirsty Pro-American dictator and gotten out. Lesson learned.

    If you think we can cut to finance a war, where would you cut? I don’t think, unfortunately, that will occur either.

    That leaves borrowing/monetizing the debt. How much over 18 trillion will start to be a problem?

    I see no other options here. Are there?


  12. I agree with the article. This looks like the Army trying to redefine it’s mission to avoid budget cuts.


  13. I’d increase taxes. . . which would serve the dual purpose of keeping us out of piddly-assed police operations which we should never have gotten into in the first place. If it’s worth fighting for it’s worth paying for, and if you can’t sell it to the electorate that way then you shouldn’t be doing it.

    I think the electorate’s reluctance to raise taxes for a war has more to do with overall distrust of politicians and their motives than simply Bush/Iraq/Afghanistan.


  14. Name a country you’d be willing to increase your taxes to defend as well as American citizens that will be sacrificed. How much more in taxes would you be willing to pay?

    I’ve hit my limit re Iraq and Afghanistan. I cannot think of a country if be willing to pay more than I already do.


  15. Good WSJ piece on how a new PPACA tax that kicks in on January 1 will increase costs for existing plans.

    “The Congressional Budget Office reports the tax will be “largely passed through to consumers in the form of higher premiums” and “would ultimately raise insurance premiums by a corresponding amount.” The Joint Tax Committee and private economists, such as former CBO director Doug Holtz-Eakin, say the tax will boost insurance costs about 2% to 2.5%. The consultant Oliver Wyman estimates the take will rise to as much as $500 per covered worker by decade’s end.”


  16. Awesome! It just keeps getting better!


  17. All I know is that I lost my “Cadillac” plan for a new one that costs about the same and has higher deductibles and more restrictions. But obama says this is better so I should just sit back and be happy..


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