Morning Report – people think mortgages are getting harder to get 5/8/14

Vital Statistics:


  Last Change Percent
S&P Futures  1870.4 -3.8 -0.20%
Eurostoxx Index 3176.4 16.7 0.53%
Oil (WTI) 100.2 -0.6 -0.61%
LIBOR 0.223 -0.001 -0.27%
US Dollar Index (DXY) 79.24 0.037 0.05%
10 Year Govt Bond Yield 2.60% 0.01%  
Current Coupon Ginnie Mae TBA 106.3 0.0  
Current Coupon Fannie Mae TBA 105.5 0.1  
BankRate 30 Year Fixed Rate Mortgage 4.2    


Markets are down small on no real news. Bonds and MBS are down as well.
Initial Jobless claims came in at 319k, a decent number.
Janet Yellen spoke yesterday, but nothing market-moving came out of it. The punch line is that ending asset purchases remains appropriate, but it is still too early to think about increasing interest rates. She declined to give any sort of timeframe as to when it might be appropriate to raise rates. The Fed is anticipating a rebound in Q2 after a dismal Q1. She mentioned that she saw “reaching for yield” in the high yield bond market (as if the Fed has nothing to do with that). The Fed is also considering whether additional measures might be necessary to deal with the too-big-to-fail banks. 
So far earnings season has not been kind to the tech stocks. Erstwhile darlings like FireEye (FEYE) and Twitter (TWTR) have been demolished over the pat few months. FireEye is down 71% since early March, and Twitter is down 43%. It has been a rough market for some of these darlings that disappoint. Vol traders have to be loving life. Momentum traders, not so much.
Chart: Twitter stock price



Fannie Mae’s April Housing Survey is out, and there are a few interesting tidbits. The first one is that that people think it is harder to get a mortgage now than it was a few months ago. As anyone in the business can tell you, bankers are easing terms, not tightening them. In March, the 47% of respondents said it would be difficult to get a loan, vs 52% who thought it would be easy. Now, it is 52% think it would be hard, vs 45% who think it would be easy. That is a surprising result.


The second interesting tidbit is an increase in the number of people who think now is a good time to sell. The percentage of people who think it is a good time to buy are largely unchanged, but the potential sellers are increasing. This will hopefully portend an increase in purchase activity as we fix the low inventory problem.



Speaking of inventory, professional investors are marketing bonds issued against rental properties. Blackstone plans a $1 billion issue, after American Homes 4 Rent did a half a billion issue last month. I figured the pros would at some point become sellers, but I guess the opportunity cost of capital right now is exceptionally low. With home prices up 23% in some places they can’t be looking at high single digit rental yields anymore. 


45 Responses

  1. It’s true, I hate women.



    Well, hates is a strong word. More like Do Not Respect.


  2. OT: I’m actually surprised by this. I had a decent opinion of Shinseki.

    I’m sure that Congressional Republicans will fuck up any attempt at oversight here.


  3. The sequester ended up causing the loss of one wafer-thin Federal job. Oh the humanity!


  4. I told you the sequestor was the apocalypse, bagger! Now there’s one less Federal Worker to watch porn all day. That’s gonna have downstream effects.


  5. Well, the multiplier on a Federal job is about a gazillion, so you are right there will be downstream effects. Could affect the real estate market in DC…


  6. Do you believe in the multiplier effect?


  7. generally yes, though studies have shown the multiplier effect for Keynsian pump priming is pretty low. I think economic experience bears this out – the stimulus did bupkis, Japan has been following Dr. Cowbell’s prescription to the letter for a generation with no results, and even the Great Depression’s economic record was mixed, to put it charitably.

    Keynsian pump priming may be the humanitarian thing to do, but doing it as a way to boost the economy is a waste of money and pushes debt to the point where it becomes a drag on the economy. I think the reason why it always overpromises and under-delivers (compared to what the textbooks say should happen) is that spending decisions are made on the basis of political whim, not an economic, market-driven mechanism. This is why the multiplier effect for tax cuts is much higher – the money is spent according to best use, not who’s poll numbers need a boost.

    At the end of the day, Keynsian spending programs work only in the textbook, and is simply pork-barrel spending in drag.


  8. “is that spending decisions are made on the basis of political whim, not an economic, market-driven mechanism.”

    I win again!


  9. speaking of political whim… One of the PL regulars was arguing that pharma R&D should be taken out of the private sector and should be done completely by the government.

    If that happened, I would bet the R&D budget would be spent 50% on breast cancer and 50% on AIDS.


  10. The other problem with Keynesian multiplier theory is that If I recall right it’s effective because it partially relies on expectations being set based on the old spending level and more importantly old taxation and debt levels.

    As information becomes more real time, people build the debt level and future tax increases or other offsets into their behavior expectations and adjust accordingly.

    I.e. the government would have to increase spending secretly in order to get maximum effect.

    This was an interesting summation.

    Edit: I think a big part of the expectations issue is that Keynesians no longer advocate for balanced budgets and zero debt as the baseline from which you deviate counter cyclically, but rather for permanent deficits that then simply get larger when there’s a downturn. It’s a lot closer to MMT these days.


    • I agree with JNC that neo-Keynsians like PK give Keynes a bad rep. Fiscal policy as counter-cyclicals made sense and still makes sense, but perpetual indebtedness is just perpetual indebtedness and totally dependent on “TRUST ME”.

      Which is the premise of MMT, really. Flood the world with currency and no one will notice and they will continue to TRUST.


  11. And there’d still be no antibiotic research.

    So, government only research = less drugs and more money spent.


  12. Thanks Brent. Btw, wasn’t it Robert Barro’s theories you just stated?


  13. No, just my own


  14. ” I would bet the R&D budget would be spent 50% on breast cancer and 50% on AIDS.”

    what else is there?


  15. “what else is there?”

    why do you hate women and the LGBT community you knuckle-dragging, bible thumping xtian bagger you?


  16. I shoulda asked J about Barro. Sorry Brent.


  17. “”

    always a good day when Patton Boggs gets fucked.


  18. No, Brent, what i mean is what beyond AIDS and breast cancer is worth investigating. Nothing of course.


  19. “No, Brent, what i mean is what beyond AIDS and breast cancer is worth investigating. Nothing of course.”

    If it ain’t got a bumper sticker, it ain’t worth fixing….


  20. Keynesian multiplier theory at it’s core usually rests on the assumption that the government can just increase spending by X with no other offset. The analysis assumes the money comes from thin air and dismisses what will happen when future taxes go up to pay for the current spending as “long term” concerns.

    The more ignorant disciples (like those at PL) who are more Keynesian than Keynes will argue that you can fully offset it with tax increases and because it’s the government, it will by it’s very nature as government spending have a multiplier effect, but the actual trained economists who argue for it always assume it as deficit financed.

    That’s when you get into the whole zero lower bound, market is paying the government to borrow money, etc. arguments that Krugman and Klein will make.


  21. I just nutted:

    Barro believes that the Keynesian multiplier is less than one. He believes that for every dollar the government borrows and spends, spending elsewhere in the economy falls by almost the same amount.[7]

    FWiW, Krugman called him “the smartest guy he’s ever met who is always wrong.”


  22. BTW, am I the only one here who expects Teh Krugman to publish Sermons in Stone any day now?



  23. “If it ain’t got a bumper sticker, it ain’t worth fixing…”

    I’m working on a yard sign for JNC’s “more wingnut than thou” campaign.


  24. Wow, Mark’s a Doom!er like me!


  25. I wonder if those on the left pause to consider how much they are discrediting their own cause with arguments such as these.

    I believe that the net result of lying about the Koch’s & climate change as Reid is doing is to signal to less informed voters in the middle that climate change is just another political food fight.

    If the left truly believed it to be an existential threat, then using the same tactics (i.e. lying) that were used in say the sequester fight will simply backfire. A significant chunk of people who might be persuadable otherwise will logically assume that the arguments being presented are the same percentage of bullshit as arguments over how many jobs would be lost and how much economic growth will be impacted during the sequester and discount them accordingly.


  26. There’s this about Reid.

    I don’t think Dem politicians actually believe that Global Warming is so much of a threat as a opportunity.


  27. Krugman is far from the worst offender on Keynesian multipliers. He at least makes a clear distinction on stimulus during the zero lower bound and during the “normal” economy.

    This last point is one that is often elided in arguments over stimulus. Many of the proponents of it assume a cyclical baseline where the economy will return to “normal” eventually with GDP growth rates and associated revenues returning to post World War II trends. If this doesn’t occur, then the problems with the level of deficit spending being advocated become much more significant.

    I tend to agree with David Stockman that the economy as it exists now is the “long run” of a bunch of previous short term decisions and that keeping the same short term focus of just boosting demand is counter productive at this point.

    I also agree with Steve Pearlstein that the political system in this country lacks the ability to actually engage in counter cyclical actions to run a consistent surplus and pay down the debt when the economy is growing.

    “The positive economic news also means that the economy is in the process of shifting workers and capital to new and more productive sectors and companies. At this point in the recovery, the focus of public policy ought to be on supporting and accelerating that process, not on trying to delay and thwart it with more stimulus.

    One way for government to support it would be to get its own finances in order. This is not mindless austerity, as some would have you believe. It is the restructuring and right-sizing of the public sector that, as a practical political matter, only happens when the fiscal pressure is on. It can easily be phased in without throwing the economy into recession. ”

    This goes back as far as the 1960’s where the best and the brightest thought that they could push the unemployment rate below 3% with Keynesian policy and blew it all up.,9171,842353,00.html

    And in my opinion, government was more competent then and more trusted than it is now.


  28. “climate change is just another political food fight.”

    which it is.

    is it changing? sure.
    our fault? sure.
    we we doomed? not cause of that.
    are we going to stop it with higher taxes? no.
    are we going to lower standards of living? not voluntarily.


  29. Mark, that’s why state rainy day funds that are funded with surpluses first and then drawn on during downturns are a much better solution than perpetual deficits and in my opinion actually more “classical” Keynes.


  30. Always interesting how people can disconnect what they are actually experiencing from the policies that they advocate for.

    “After four years working at Walmart in Mountain View, I am bringing home about $400 every two weeks (I’d like to get more hours, but I’m lucky if I work 32 hours a week). ”

    Now why would this person be prevented from working more than 32 hours a week…


    • jnc:

      One clear omission from the article is what the person profiled was doing prior to her employment at Wal-Mart. That would be an interesting line of inquiry.

      I was struck by this part:

      Right now, I don’t have a place to call home. I sleep on the floor of my son’s living room because I can’t afford my own place.

      Sounds to me like she does have a place to call home. It’s the same place her son calls home. And personally I’m more bothered by the son who makes her sleep on the floor than the employer who pays her more than she can get anywhere else.


  31. Cause Wal-Mart is evil?


  32. You can make six figures and still be destitute in Mountain View CA….


  33. Presumably. One clear omission from the article is what the person profiled was doing prior to her employment at Wal-Mart. That would be an interesting line of inquiry.


  34. is there were i’m supposed to tell you two to check your privilege?


  35. If it makes you feel better. Still won’t get that woman any more hours.


  36. that about sums it up, doesn’t it.


  37. Hmm. This could be more interesting than Issa’s BS.

    Edit: Good analogy –

    “Gowdy only talks about Benghazi the way he’d talk about a re-opened murder investigation, a case given to his courtroom because somebody else screwed it up.”


  38. So, based on the commetary from the left, we are either doomed and/or have to get rid of capitalism to stop climate change

    or it’s easy peasy.

    “Fighting climate change isn’t really all that different from saving fisheries; if we ever get around to doing the obvious, it will be easier and more successful than anyone now expects.”


  39. “And personally I’m more bothered by the son”

    that jumped out at at me as well.


  40. It’s not the responsibility of her immediate family to help her. It’s everyone else’s but theirs.


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: