Morning Report – Comparing housing starts to job creation 6/11/14

Vital Statistics:

Last Change Percent
S&P Futures 1941.7 -8.8 -0.45%
Eurostoxx Index 3292.3 -21.6 -0.65%
Oil (WTI) 104.4 0.1 0.06%
LIBOR 0.23 -0.001 -0.22%
US Dollar Index (DXY) 80.72 -0.100 -0.12%
10 Year Govt Bond Yield 2.63% -0.02%  
Current Coupon Ginnie Mae TBA 106.3 0.1
Current Coupon Fannie Mae TBA 105.2 -0.1
BankRate 30 Year Fixed Rate Mortgage 4.21

Stocks are weaker this morning after the World Bank cut its global economic forecast. Bonds and MBS are stronger.


Mortgage applications rose 10% last week in spite of a large increase in interest rates. The 10 year bond yield increased 11 basis points and the Bankrate 30 year fixed rate mortgage increased 2 basis points. Purchases rose 9.3% while refis increased 11%. Refis rose to 53.6% of all applications.


Foreclosure filings decreased 26% in May, according to RealtyTrac. The judicial states are reporting increases in foreclosure activity as they finally begin to address their bloated foreclosure pipelines. We are starting to see increases in foreclosure activity in New York, New Jersey, Connecticut and Massachusetts.


The NAR released a study showing that housing supply remains constrained and 2 factors explain it. First, a lack of housing turnover due to underwater homes. The number of underwater homeowners stood at 6.3 million in Q1, down from 11.8 in Q111, but still elevated compared to historical numbers. This explains why existing home sales numbers have been weak. Second, new construction has been weak since the bust. In fact, new home construction has lagged job growth over the past 3 years by a large factor. These supply constraints are driving price higher. Check out this chart, which looks at the ratio of jobs created to housing starts.

Of course there are caveats with this study, but it still shows how much housing construction is lagging.


What is going on in the bond market? The rally in bonds has caught many investors off guard and many pros went into this rally underweight bonds to begin with. Perhaps the ECB cutting rates to below zero on deposits is driving it, but the fundamentals in the US argue for higher rates, not lower rates. Bearish interest rate bets in the CME Eurodollar futures are at a record.

34 Responses

  1. Frist!

    Anyone know the facts on the TX-AZ move of the child IAs?


  2. Wow!


  3. Cantor, now that he has lost, is an okay Republican to the left, a true moderate. If he wants to become a regular Dem hero, all he has to do is pull a Charlie Crist—then he won’t even be a racist anymore.


  4. Not sure this helps McCarthy.


  5. Brat:

    “The Republicans are not truly free market in any sense. Everybody’s free market in theory until it effects their firm. Everybody wants a little carve-out, or a little tax credit, or a little of this here and there, and it’s ruining the country. And so now everybody — it affects my students. Everybody wants to be a lawyer because everybody’s in the rent-seeking business instead of the manufacturing and productive sectors.”


  6. It’s amusing to contrast the media accounts of Cantor with direct personal observations.

    Statements like this are just 100% wrong.

    “Had Cantor not been so disliked by his constituents, this would not have worked so well. But by all accounts, he was rarely in the district and didn’t respond to local needs, as when an earthquake hit his district, but he refused to help get federal funds for repairs.”

    Cantor’s issue wasn’t constituent service. It was his profile on controversial national issues.


  7. You’re in VA-7, jnc?


  8. Yes. And Ezra Klein is truly an idiot here:

    “Eric Cantor wasn’t beaten by the Tea Party
    Updated by Ezra Klein on June 11, 2014”

    Citing bad GOTV and polling is an explanation only a self described wonk could buy.

    There’s a reason the voters didn’t want to vote for Cantor.


  9. NoVA, the best predictor of Brat’s win was my Facebook feed of people I went to high school with.

    People on PL who think I’m the RWNJ should see those guys.

    Also, Brat’s observations here match my own:

    “What do you attribute your victory to in particular?

    It’s just a perfect combination of all the things. I take policy seriously, I’m not just trying to be a political hack. And then, you meet with people, and I gave 20 minute stump speeches, and the press made fun of me for giving wonkish economic talks.

    I talked to the press continuously, and I said, ‘look, I’m not a liberal economist like Eric’s ads say, I’m not a total Tea Party guy,’ I said, ‘I’m trying to run as a Republican on the Republican creed on serious policy kind of issues.’ And the press just always kind of wanted to, ‘surely you’re joking. You’re not for real.’

    No, I was for real, and the Tea Party folks, the grassroots folks, and everybody I met with loved that. They are constantly put down by the press, but they’re very concerned with constitutional issues and free-market issues and that’s what’s right about the country, when people want to learn how to make things better.

    And then, the other major variable, is Eric Cantor started the campaign off with a million dollars in ads calling me a liberal professor that worked for Gov. Tim Kaine. It helped me to win — it gave me a million dollars in name ID.”

    Every person I know who personally saw Brat speak said that he treated them respectfully and like an intelligent adult.


  10. “explanation only a self described wonk could buy”

    when your only tool is a hammer ….

    re: facebook, I believe it. i come off as non crazy i a lot of other settings. part of it, frankly, is that i’m just more polished.


  11. “Every person I know who personally saw Brat speak said that he treated them respectfully and like an intelligent adult.”

    imagine that.

    I think it’s great that he stayed true to himself on the campaign. even it if was with wonk speeches. would have looked fake otherwise.


  12. Ben Jones is actually closer to the mark in Salon than most of the MSM:

    “On why Cantor lost:

    Eric was beaten by a coalition [of] mostly real conservatives. These weren’t Tea Party wackos that we hear about, these were thoughtful, sober, classic conservatives, like the William F. Buckley and Edmund Burke and all those people. They know their stuff, and they saw Cantor as just an extremely ambitious hack, who over the years has just swelled-up with hubris. So a lot of people said, “Well, the only chance we have to bring him down is right here, right now.” [Brat] is a very honorable guy. He’s a very serious guy. He’s a classical conservative, all the Hayek and Von Mises and all that stuff. He’s not a wheeler-dealer. He’s an intellect. Eric Cantor’s not an intellect. Eric Cantor is a political hack, frankly. A very ambitious one, but nevertheless. He doesn’t have the substance that Brat has.”


    • Getting elected, developing good policy, and governing well each requires different skill sets. The chances of any one person having all 3 skill sets is pretty small, but every successful politician by definition has the first set. Which goes some way towards explaining the general absence of good policy and governance.


  13. Jeez, Jnc. I might have to send him my resume.


  14. All the Dems & progressives who think that yelling “He wrote about Ayn Rand & Hitler!!!!” and that will make the race competitive may be in for a big surprise.

    Having said that, as a first time candidate it’s his race to lose now if he can’t get a decent media game put together quickly.

    I’m on the fence between him and the actual Libertarian in the race, James Carr.


    • jnc:

      I’m on the fence between him and the actual Libertarian in the race, James Carr.

      Or, in other words, helping elect a libertarian-esque R or helping elect a D.


  15. Isn’t that a good spot to be. you have an actual choice to make. not just a protest vote.

    it’s R+10. after running back the interception to say the 10 yard line, the RWNJs are going to want to punch it in. i’m curious as to how Gillespie responds to this.

    ” “He wrote about Ayn Rand & Hitler!!!!””

    This is where I think Brent is spot on. The left doesn’t get us at all.


    • As I wrote earlier, he is an attractive candidate to me from the supposedly critical column George linked from the WSJ. The D’s website is a complete mess – I never saw anything like that in a major campaign. His criticism of fundamentalist Christians imposing religion on others will not sit well with fundie Rs, I suspect – but I wonder if the L candidate would actually be a better exemplar than Brat.

      FWIW, Brat was in no way praising Adolf, but I guess all of us know that here.


  16. Delicious!


  17. “Flu experts have made a mutant version of the 1918 “Spanish flu” virus that killed tens of millions of people, sparking a new debate over whether such work is too dangerous.” – NBCNews

    Oh, goody!


  18. “Vice President Joseph R. Biden told a National Association of Manufacturers’ crowd this week that what the United States needed was more, not fewer, immigrants.

    “Specifically, he called for a “constant, unrelenting stream” of new immigrants — “not dribbling [but] significant flows,” to bolster the national economy, The Hill reported.” – WashingtonTimes

    And yet we’re told we need to further extend unemployment benefits because there just aren’t enough jobs to go around. Besides, he probably means a constant, unrelenting stream of illegal immigrants.


  19. Look, we need the human capital. It will depress wages and collapse the welfare state. It’s what comes after that’s important. Do we make the same mistakes
    Or do we learn and make different mistakes?


  20. Every Greg Sargent concern troll and election analysis column, summarized.

    Speaking of Greg, who failed to guess that his post today about Cantor would be based on a phone call to his favorite “Republican” Peter King to explore just how disastrous the result is for the hapless GOP? I mean, who among us couldn’t ghost write Greg at this point.


  21. Like

  22. Fair Point Scott. The more I read about Brat, the more I like him, aside from the overly public religious aspect. But I certainly don’t have the issues with him that I had with Ken Cuccinelli.


  23. Mark, looks like the oil states in the middle of the country are doing the best! Our daughter will love that.


  24. I think this is another one of the few good Brat pieces:

    “David Brat: Half Elizabeth Warren, Half Ludwig von Mises”

    It’s been interesting to contrast the national media reporting with my own direct observations about events that are actually local to me. I’m going to validate a lot of Scott & QB’s opinions when I note that I didn’t realize how bad the national media had actually gotten.

    I’ve been discounting the spin for a while, but I didn’t realize the extent of the amount of straight lying and everyone repeating everyone else’s baseless opinions.


    • jnc:

      I’m going to validate a lot of Scott & QB’s opinions when I note that I didn’t realize how bad the national media had actually gotten.

      First Mark, and now you. I’m starting to feel like I should change my avatar.


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