Morning Report – Housing still very affordable 1/24/14

Vital Statistics:

Last Change Percent
S&P Futures 1812.4 -11.8 -0.65%
Eurostoxx Index 3075.9 -41.2 -1.32%
Oil (WTI) 97.19 -0.1 -0.13%
LIBOR 0.235 -0.003 -1.36%
US Dollar Index (DXY) 80.45 0.007 0.01%
10 Year Govt Bond Yield 2.74% -0.04%
Current Coupon Ginnie Mae TBA 105.4 0.1
Current Coupon Fannie Mae TBA 104.2 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.38
Markets are lower again after yesterday’s bloodbath. Emerging markets have been getting smoked lately, which is probably QE – driven to some extent. Bonds are beneficiaries of the risk-off trade, with the 10 year trading below 2.75%.
The government’s guns are not only trained on mortgage bankers, they are also on payday lenders who are running afoul of usury laws. The Feds seem to forget that if a lender is going to make a loan that only lasts a week or so, they have to charge a high enough interest rate to make it worthwhile. Which means an eye-popping rate if you annualize it. They also hate check cashing places too. Not sure what low-income people are going to do for cash once these guys are chased out of business, but I am sure fair lending will have something to do with the “solution.”
Another chart to show how affordable buying has become. I took the median house price since the mid 70s, and calculated the expected mortgage payment using the conforming rate at the time (with 20% down) and divided that by median income. We have just bounced off all-time lows, so even though housing is more expensive than it was a year ago, it is still very cheap historically.

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