Morning Report – Very little construction in the Northeast 5/23/14

Vital Statistics:

Last Change Percent
S&P Futures 1890.5 0.3 0.02%
Eurostoxx Index 3191.9 4.3 0.13%
Oil (WTI) 104.1 0.3 0.31%
LIBOR 0.229 0.002 0.97%
US Dollar Index (DXY) 80.37 0.112 0.14%
10 Year Govt Bond Yield 2.53% -0.02%
Current Coupon Ginnie Mae TBA 106.4 0.0
Current Coupon Fannie Mae TBA 105.6 0.1
BankRate 30 Year Fixed Rate Mortgage 4.17

 

Markets are flattish this morning on no real news. Bonds and MBS are down. Today should be dull as most of the Street will probably be on the L.I.E. by noon. Bonds close early today.
New Home Sales came in at 433k, an increase from the upward-revised 407k the month before. The vast majority of the new homes are in the South, with 235k. The Northeast is deader than Elvis with only 22k new home sales. (look below for an explanation why). The Midwest and the West had 84k and 92k new sales respectively. Inventory was still low, with 5.3 months’ supply. The median price dropped from $281,700 to $275,800.
A new article out of the New York Fed addresses the hollowing out of the middle class. At least it New York, the jobs lost in the Great Recession have been in middle-skill jobs, like teachers, construction, admin support. Those jobs have not come back. The buckets where jobs are growing have been in the higher-skilled jobs like engineers, financial analysts, etc as well as low-skilled jobs like retail, food service, etc. This is IMO partly the fault of New York State’s extremely borrower-friendly (creditor unfriendly) foreclosure laws. While states like California have worked through their foreclosure inventory and are now building, there is virtually no new construction in New York State. In California, Texas, etc where there is building going on, construction workers are in high demand and wages are increasing. Yet another case of good intentions smacking into the law of unintended consequences.
Does judicial review of foreclosures create deadweight losses? The Federal Reserve Bank of Cleveland asks that question. Anecdotally, I see the effects in New York State, where may homes sit vacant while the foreclosure wends its way through the courts. While there may be a useful part of this, where we ensure we don’t throw people out on the street, many of these foreclosures are vacant. At that point, letting a vacant house sit does no one any good.
Finally, I discuss housing reform, monetary policy, and the homebuilding sector with Louis Amaya on Capital Markets Today. Lots of housing wonky goodness.

18 Responses

  1. “Does judicial review of foreclosures create deadweight losses? The Federal Reserve Bank of Cleveland asks that question. Anecdotally, I see the effects in New York State, where may homes sit vacant while the foreclosure wends its way through the courts. While there may be a useful part of this, where we ensure we don’t throw people out on the street, many of these foreclosures are vacant. At that point, letting a vacant house sit does no one any good. ”

    Absent the ability to cram down the loan, probably not. It merely delays the inevitable.

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  2. While states like California have worked through their foreclosure inventory and are now building

    You mean CA actually got something right?

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  3. IMO, once the house is vacant, it is professional investor vs professional investor. The process should be streamlined at that point. In my neck of the woods, there is nothing, happening home sales wise, and there are a lot of foreclosed vacant houses sitting around, depreciating.

    And yes, Lulu, CA got this one correct, and is why we are seeing double digit price increases on the West Coast, while prices stagnate out here….

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  4. place in my neighborhood just closed for 50k over list.

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  5. Brent, Richmond California and the other cities haven’t successfully implemented their plans to use eminent domain to seize the mortgages themselves correct?

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    • jnc:

      I’d argue that this is indistinguishable from torture.

      If the guy wants to kill himself, I can’t understand why we would refuse to let him.

      Like

  6. Bullet to the back of the head.

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  7. Brent, Richmond California and the other cities haven’t successfully implemented their plans to use eminent domain to seize the mortgages themselves correct?

    No they have not. SIFMA, who controls securitizations, has come out and said mortgages from localities that pursue ED are unsecuritizable, which will pretty much mean people would have to go to their local credit union to get a mortgage or else they are out of luck..

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  8. uh, my mortgage holder just called and lowered by rate by a .25 point. just cause*. no cost to me. but it did extend my loan from 29 to 30 years.

    *customer retention was the official reason.

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  9. Brent, Mel Watt and the FHFA weren’t as receptive as advocates had hoped for either, correct?

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    • Is there an official name for the psychological condition by which a person is incapable of experiencing shame or embarrassment? If not I propose calling it Ehrlichosis.

      Like

  10. Brent, Mel Watt and the FHFA weren’t as receptive as advocates had hoped for either, correct?

    Not at all. The left wanted two big things – an extension of the HARP eligibility dates, and principal forgiveness on loans held by the GSEs. They got neither. At the end of the day, the difference between Mel Watt and Ed DeMarco is that DeMarco wanted to raise guarantee fees to crowd in private capital, and Mel Watt wants to study the issue a little bit more. I suspect Watt wants to make sure origination volumes hold up before increasing fees again.

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  11. Gaia, wingnut! Everything in service of it.

    And, as Roosevelt said, no enemies to the left.

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  12. Just wanted to wish everyone a Happy Memorial Day weekend…………..hope it’s a three day for all of you. It’s raining here this evening so I’m glad we took our beach trip last weekend. I can’t remember the last time we had rain this late in the Spring. My garden will love it!

    Like

  13. Have a happy weekend, Imsinca.

    BB

    Like

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