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.

35 Responses

  1. Bloomberg consensus is 3.2%, FWIW. Still demonstrates that the markets and the economy ignored the drama in DC.


    • Interesting story about Dinesh D’Souza’s legal woes. But this caught my attention:

      “This office and the FBI take a zero tolerance approach to corruption of the electoral process,” Manhattan U.S. Attorney Preet Bharara said in a statement.

      Does anyone believe that?


  2. Well, if one believed that R appointed prosecutor’s did
    It then you have to at least have some doubt, no?

    Progressives, do you believe Bharara? I do not.


  3. I’m sure everyone here can relate to this…


    • Brent:

      I’m sure everyone here can relate to this

      Didn’t get a chance to watch that until I got home. That was great.


      • Interesting stuff.

        QB used to talk about how conservatives could understand and even make arguments from a liberal perspective, even though they disagreed with those arguments, while liberals seemed generally incapable of actually understanding the conservative point of view. In other words, liberals tended to oppose a caricature of conservative thought, rather than actual conservative thought. Now there is a study that seems to confirm that.

        One other point that I find really interesting and important about Haidt’s work is his findings on the ability of different groups to empathize across these ideological divides. So in his book (p. 287) Haidt reports on the following experiment: after determining whether someone is liberal or conservative, he then has each person answer the standard battery of questions as if he were the opposite ideology. So, he would ask a liberal to answer the questions as if he were a “typical conservative” and vice-versa. What he finds is quite striking: “The results were clear and consistent. Moderates and conservatives were most accurate in their predictions, whether they were pretending to be liberals or conservatives. Liberals were the least accurate, especially those who describe themselves as ‘very liberal.’ The biggest errors in the whole study came when liberals answered the Care and Fairness questions while pretending to be conservatives.” In other words, moderates and conservatives can understand the liberal worldview and liberals are unable to relate to the conservative worldview, especially when it comes to questions of care and fairness.

        In short, Haidt’s research suggests that many liberals really do believe that conservatives are heartless bastards–or as a friend of mine once remarked, “Conservatives think that liberals are good people with bad ideas, whereas liberals think conservatives are bad people”–and very liberal people think that especially strongly. Haidt suggests that there is some truth to this.

        If it is the case that conservatives understand liberals better than liberals understand conservatives, why is that? Haidt’s hypothesis is that it is because conservative values are more overlapping than liberals–conservatives have a “thicker” moral worldview that includes all five values, whereas liberals have a “thinner” view that rests on only two variables. Thus, the liberal moral values are constituent part of the liberal views, but not vice-versa. So conservatives can process and affirm liberal moral views and liberals literally cannot understand how someone could be both moral and conservative–the moral values that might be animating a conservative (say, tradition or loyalty) are essentially seen by liberals as not being worth of moral weight. So conservatives who place weight on those values are literally seen as “immoral.”


        • This was also interesting, from the same article:

          One final word on libertarians: Haidt has written a completely separate scholarly article analyzing the “Psychological Dispositions of Self-Described Libertarians.” While one can quibble with such things, his findings seem largely persuasive to me. In that article, Haidt applies the same tools to self-described libertarians and concludes that there are distinct psychological correlates to to libertarian morality that distinguished libertarians from both liberals and conservatives. Perhaps most striking is the libertarians emphasis on systematization. Now this, I think, is an important insight. For it explains a point that seems to be highly distinctive to libertarians: the recognition by libertarians, often with a high degree of pride, that libertarianism offers the only “consistent” ideology and that is one of the most compelling aspects of it. Well here’s Haidt’s point: Most people simply do not care whether their ideological views are consistent. For most people (liberals and conservatives), consistency is simply not a relevant variable or axis for determining what you believe or your ideological worldview. This explains, I think, the frequent bewilderment that libertarians face when they try to persuade someone to change their mind about, say, a social policy because it is “inconsistent” with their economic policy beliefs. It simply is not a relevant argument to them. This has obvious implications for communicating libertarian ideas to non-libertarians (i.e., the overwhelming number of people in America!).

          Which raises a related point: Haidt finds that libertarians place a much higher emphasis on rationality and logical reasoning than do other ideologies. But that doesn’t mean that libertarian beliefs are less-motivated by unexamined psychological predispositions than other ideologies. Again, take the idea that libertarians believe that “consistency” is a relevant variable for measuring the moral worth or persuasiveness of an ideology. But that is not a self-justifying claim: one still must ask why “consistency” maters or should matter. So while libertarians may place a higher stated value on rational argumentation, that does not mean that libertarian premises are any less built upon subjective psychological foundations.

          I’m not sure I agree with that last bit. I think the fact that consistency matters is self-evident, as even non-libertarians often make appeals to consistency. Just think of any argument drawn from analogy. An argument made by analogy implicitly relies on the value of consistency. It says, essentially, that if we agree about the moral judgment in situation X, then we should also agree about it in situation Y, because X and Y are analogous. The value of consistency is implicit in such an argument. And both liberals and conservatives draw arguments from analogy all the time.

          It could be that liberals/conservatives value other things over and above consistency, but that consistency has value, or “matters”, is I think self-evident.


  4. Someone’s not on mute. There’s like a wind noise. Can everybody mute when you’re not talking?




    You’re on mute.


    • Just watching CNBC..David Gregory is on and is talking about the politics of the economy, and questions that are being asked…”Why is there so much income inequality? Why is there so much less mobility?” Apparently Gregory doesn’t read either jnc or the WaPo.


  5. What is the optimal spread of income?

    When were we closest to it?


  6. “What’s up with the Dow?”

    Emerging markets getting slammed… I would be shocked if we made it through the end of QE without a few bumps in the road.


  7. Ahhhh.



  8. Just scanned the headlines at the PL and those assholes have the Tea Party on the brain.

    Do the commenter’s still believe us Baggers are pure AstroTurf? Quite a disconnect betwixt writer and reader, no?


  9. Why not? Schumer thinks the same exact thing:


  10. I guess they’re worried about 2014.

    Meh, we’re already irrevocably fucked.


  11. Consistency matters most in predictability and stability, especially when it comes to placing people I. Positions of power. If they are consistent in their worldview and their worldview is consistent, their behavior and decisions will be consistent and predictable.


  12. Economically, I think this makes sense simply because 99% of schools teach economics from a liberal perspective and very few teach it from a conservative (free market) perspective. I had two extremes – with my undergraduate at UW Madison and MBA at Rochester. Madison was predictably left-leaning and its only nod to free markets was that one professor put Milton Friedman’s “Free to Choose” on the optional reading list. The only other nod to free markets was the admission that we tried to fine tune the economy in the 1960s and it didn’t work out.

    Rochester on the other hand was straight out of the Chicago school. (Chuck Plosser was my faculty advisor). Very much a free market perspective, concentrating on how regulation is almost invariably a tool of the entrenched to keep out the upstarts. Also, how meddling in markets creates distortions (and opportunities) which almost always cost more than they benefit.

    Unless you went to a handful of schools, you simply aren’t taught conservative, free-market arguments. However everyone gets educated from a left-wing perspective. That is why I can argue all day with people on PL and understand their arguments, while they invariably argue with what they fantasize I am saying versus what I actually am saying (though there are a few exceptions – some of the left leaners I can debate with).


    • Brent:

      I probably mentioned this before, but I was an Economics major as an undergrad, so I took a lot of varied economics courses. I think Friedman may have been mentioned once or twice (as an aside) but at no point were names like Hayek, von Mises, Bastiat ever discussed. I graduated with an Economics degree and had never even heard of the Austrian School until I started reading about it on my own time years after I had graduated. I was in school not even a decade after Hayek had won the Nobel Prize for economics, and in the middle of both the Reagan and Thatcher revolutions, yet all I was taught was the same old Keynesian crap. Just makes me shake my head. If I, being focused on economics, hadn’t learned a thing about modern free market schools of thought, what chance does the average non-economics person have? Its really depressing.

      I think that the Road to Serfdom should be required reading not only for all economics majors, but literally for all college students, not only for its take on economics and philosophy, but also for the story behind it getting published, which itself is a life lesson on defeat, perseverance, and success.


  13. Sarah Palin was unavailable for comment.


  14. This has got to be a false flag.

    Or else the sumbitch jut wants a handicap parking permit.

    Either way, I support the strategy.

    And I’m not even voting for Abbott.


  15. “It could be that liberals/conservatives value other things over and above consistency, but that consistency has value, or “matters”, is I think self-evident.”

    More so on Internet blog debates than in real life. The usual dodge is to claim “pragmatism” as the explanation for inconsistency.


  16. Even Krugman concedes it now:

    “The Bush tax cuts haven’t gone completely away, but at the very high end they have been pretty much reversed; plus there are additional high-end taxes associated with Obamacare. The result is that taxes on wealthy Americans have basically been rolled back to pre-Reagan levels”


  17. Weird that we’re not experiencing tremendous growth that the pre-Reagan tax levels on the rich engender.




  18. Thanks Scott. Interesting.


  19. I watched the Grammy’s last night.

    Hold me.


  20. One week at Disney with the a four-year-old and the wife’s grandparents
    Happiest place on earth my ass.


  21. boardwalk villas, which worked really well for us.

    we actually had a great time. few days at the parks, few days on a disney cruise. but you couldn’t go 20 feet without seeing some kid just lose it.


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