Morning Report – House prices within 6% of peak levels 10/23/14

Markets are higher as earnings come in decent and we get some positive economic surprises this morning.

In economic data, the Chicago Fed National Activity Index rebounded strongly to +.47 from -.25. Initial Jobless Claims rose to 283k, which is still an incredibly strong number. September’s initial jobless claims were the lowest since 2000. The Bloomberg Consumer Comfort index rose to 37.7 from 36.2, but is still below 50, which is “normalcy” and shows why Democrats are looking at losing the Senate this fall in spite of stronger economic data. Finally, the index of leading economic indicators rose to +0.8% from flat in August. So overall, strong data, but the consumer remains unhappy.

The FHFA Home Price Index rose .5% in August and is up 4.8% year-over-year. The index is within 5.8% of its August 2007 peak. Remember the FHFA index only looks at homes with conforming mortgages, so it ignores the very high end and distressed sales which are usually cash. As a result, it is more of a central tendency index than either Case Shiller or CoreLogic. It has still been a case of two markets, however with the West Coast and Mountain states outperforming the East Coast and Midwest by a large margin:

Ocwen cannot get out of its own way. The stock is down 68% over the past year. NY AG Eric Schneiderman announced that he found evidence of backdating of letters sent to borrowers. Wall Street BFF Elizabeth Warren is piling on, prodding the GAO to look at nonbank servicers. Note that this could affect MSR valuations, which would pressure on nonbank lenders in general by reducing the fair value of MSRs on their balance sheets and also depressing SRP schedules.

Why have the regulators have changed their opinion on risk retention rule?. Because the full housing recovery has taken longer than expected. Tight credit is holding back the recovery, and they are correct. Unfortunately for Mel Watt, just saying “everybody back in the pool” won’t be enough. Banks are run by the business discouragement units (aka compliance) these days, and consider regulatory risk, not credit risk as the thing to be most mindful of. Note that the article speculates that FHA might be lowering the fees it charges (Mel Watt’s first act was to freeze Ed DeMarco’s planned FHA fee hike) in addition to lowering the downpayment on conforming loans. So, even if conforming loans go to 3%, FHA loans might still be competitive.

31 Responses

  1. In the latest round of “general welfare” is not a power granting clause debate:
    I’ve never seen someone concede the point and then just not care.

    jarstfer
    10:19 AM EDT
    Imagine trying to get rid of medicare. Good luck. I think having a bunch of elderly living in poverty is reprehensible. But to each his own. Seems the majority also disagree with you including the GOP. EPA is also not in the constitution. In fact – there is not much in there. It is a framework not a to do list.

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  2. Actually I don’t find that surprising at all given the entire premise of the “living Constitution”.

    How often do you see arguments for good or bad policy argued with constitutional trappings? I.e. if it’s good policy then it’s constitutional and if it’s bad policy then it’s unconstitutional.

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  3. sure, but i just chalk that up to, well, not being too bright.
    this guys seems to know better than that.

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  4. No, they don’t view the Constitution as something that should be controlling, if it’s preventing good policy results. Outdated and antiquated and written by a bunch of dead white men.

    It’s the classic ends justify the means.

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  5. The official announcement was made today; we were just awarded a $23M U54 grant from NIH:

    http://baltimore.cbslocal.com/2014/10/23/record-setting-research-grant-awarded-to-morgan-state/

    Tooting my own horn a bit, Josh is my star student. I’m hoping that they’ll post the video, because he handled the interview like a pro. Looks like my decision to move to Baltimore has been validated!

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    • Mich:

      The article doesn’t say what research will be done with the grant. All it says is:

      With the grant, Morgan State University is looking forward to expanding and diversifying the next generation of scientific researchers.

      Is the grant intended to fund actual research, or is it intended for recruiting certain demographics into the research field?

      Also I thought this was curious:

      “Hispanic, African American and Asian and multi-racial. Those are the populations that are not going into the fields that are absolutely critical for American innovation, for American competitiveness,” said David Wilson, president of Morgan State University.

      Why should anyone care about the race of people who are doing the research?

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  6. Congrats Michi.

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  7. ScottC – looks like process improvement?

    “The goal is to develop a program with novel training methods to properly prepare students.”

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    • jnc:

      looks like process improvement?

      I found another article about the grant and that makes it sound more like an affirmative action program.

      Morgan State University and the University of Maryland, Baltimore County will receive millions of dollars from the National Institutes of Health to develop ways to attract and retain more minorities in the biomedical sciences, NIH officials announced Wednesday.

      Morgan and UMBC are among 12 schools nationally that will receive the NIH funding during the next five years to improve such efforts, agency officials said.

      “While past efforts to diversify our workforce have had significant impact on individuals, we have not made substantial progress in supporting diversity,” said NIH Director Francis S. Collins. “This program will test new models of training and mentoring so that we can ultimately attract the best minds from all groups to biomedical research.”

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  8. Congrats, Michi

    Like

  9. @ScottC: “Why should anyone care about the race of people who are doing the research?”

    There is a reason when minorities are half the population, just in terms of the quantity of people you have doing research. This may or may not be misguided, but from a numbers standpoint addressing minorities that aren’t getting into research and both attracting them and getting them equipped to do so makes sense, beyond just general recruitment. Given what the folks who fund such ventures value, it makes sense as an appeal to get money, as well.

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    • Kevin:

      There is a reason when minorities are half the population, just in terms of the quantity of people you have doing research.

      I don’t understand how. If half of the population is comprised of people with brown eyes and the other half comprised of people with non-brown eyes, should we be concerned with the number of non-brown eyed “minorities” in the research field, just in terms of the quantity of people we have doing research?

      This may or may not be misguided, but from a numbers standpoint addressing minorities that aren’t getting into research and both attracting them and getting them equipped to do so makes sense, beyond just general recruitment.

      It makes sense to me to want to attract and prepare people with specific characteristics that are particularly relevant and conducive to scientific research. But I don’t see how race could be one of those characteristics.

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      • How Griggs v Duke Power created the college tuition bubble.

        The Griggs decision has made that organic rise through the ranks impossible, as disparate impact left businesses liable for those who failed to pass hiring tests.

        “Most legitimate job selection practices, including those that predict productivity better than alternatives, will routinely trigger liability under the current rule,” Wax wrote in a 2011 paper titled “Disparate Impact Realism.”

        The solution for businesses post-Griggs was obvious: outsource screening to colleges, which are allowed to weed out poor candidates based on test scores. The bachelor’s degree, previously reserved for academics, doctors, and lawyers, became the de facto credential required for any white-collar job.

        By the late 1970s, universities were in crisis mode. The baby boom produced more students than they knew what to do with, but declining birth rates left them with a smaller pool of tuition-paying students. Their new role as the gateway to respectable careers and higher salaries solved that problem. They replaced comprehensive liberal arts education with career-oriented majors that displaced the apprentice, rise-from-the-bottom system that had previously defined the American labor market. Curriculum quality and homework rates plunged, but endowments swelled.

        “To keep their mammoth plants financially solvent, many institutions have begun to use hard-sell, Madison Avenue techniques to attract students. They sell college like soap, promoting features they think students want: innovative programs, an environment conducive to meaningful personal relationships, and a curriculum so free that it doesn’t sound like college at all,” academic Caroline Bird noted in her 1975 essay “College Is a Waste of Time and Money.”

        Colleges, aware of their newfound utility and the easy money pouring in from student loans and Pell grants, jacked up prices. Education costs, as George F. Will has noted, grew 440 percent in the post-Griggs era. That trend continues today. The Project on Student Debt found that total college loans increased 6 percent annually between 2008 and 2012. The average student today takes out nearly $30,000 in debt to buy a ticket to the good life. They’d be better off taking that money and buying a new Mercedes CLA and faking the good life.

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    • @ScottC: “Why should anyone care about the race of people who are doing the research?”

      I was going to write what KW wrote on 10/24 in his first sentence. I’ll add this to the general “quantity” argument. Texas’ continuing growth and economic strength depend on the the proportion of its population that is industrious and productive. That population is less than half Anglo.

      However, the solution is not ethnic or racial outreach in education, as such, but school outreach to the financially disadvantaged. The “wasted” children, as assets to the community, are largely from among the poor regardless of race or ethnicity. To Hispanic kids, because it requires some effort at bilingual education, this will necessarily look like outreach that is based on ethnicity.

      Summitt Elementary, where my granddaughters attend, has immersion English for Vietnamese speakers beginning in K. Does it surprise anyone that the school produces top tier scores by fifth grade but not at first grade? The school also has computer labs beginning in K and robotics classes beginning in 2d Grade. These classes are taught by local engineers, generally. The demographics of the school are 34% Anglo, 29% Asian, 29% Hispanic, 6% Black, and 1-2% Native American. It is good that the Fifth Grade math and reading scores are at the top, regardless of the the demographics, because Texas needs them. These scores would not have improved so markedly for these kids had there been no outreach to them beyond the vanilla one size fits all.

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      • AISD also provides these stats:Summitt is 35% limited English on entry, 44% economically disadvantaged, 46% “at Risk.” AISD as a whole is 63% economically disadvantaged and 54% “at risk”. 5th grade pass rates on the Math Texas Assessment statewide are 97% Asian, 93% Anglo, 88% Native American, 84% Hispanic, and 77% Black.
        Summitt 100% Asian, 98% Anglo, 96% Hispanic, and 71% Black.

        Summitt has both Vietnamese and Spanish immersion. Its Asian and Hispanic kids do well. However, its relatively few black kids actually dropoff all the way through school, which is also the case district wide and statewide. The dropoff is more pronounced at Summitt than district wide, while the gains at Summitt are quite spectacular for the other three measured groups. I have no idea why.

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      • Mark:

        I think there is a significant and fundamental difference between educational programs at the elementary level designed to cater to the specific needs/characteristics of a local community, and a federal program for universities designed to seek balanced representation of certain racial/ethnic demographics in certain fields of study. You are talking about the former, while the NIH grants are seemingly aimed at the latter. I don’t think the two are comparable, nor do I think the benefits of the former justify the existence of the latter.

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        • a federal program for universities designed to seek balanced representation of certain racial/ethnic demographics in certain fields of study is different.

          Agreed. I thought my drift was clear – I was taking up KW’s point about quantity.

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  10. Is the grant intended to fund actual research, or is it intended for recruiting certain demographics into the research field?

    Some of both; the first year and part of the second is spent creating five core teaching units (my PI has two of them) and recruiting students into the program. Starting hopefully in the second year, but more likely the third, it is guiding undergraduate students through research projects which they design and complete as part of an interdisciplinary program (and heavily mentored–the student:mentor ratio will be 1:1).

    Why should anyone care about the race of people who are doing the research?

    Blacks and to a lesser degree hispanics are woefully under-represened in the sciences. I have absolutely no idea why Dr Wilson included Asians in that statement, except that, being an HBU, Morgan doesn’t have very many Asians on campus.

    This grant program is aimed, short term, at where the undergraduates are right now that we’d like to draw into the sciences, with the long term goal to also equip those universities to expand their graduate programs.

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    • Mich:

      Blacks and to a lesser degree hispanics are woefully under-represened in the sciences.

      OK, but again, so what? Why should anyone care whether a scientist is white or black or Asian or a Martian?

      Like

  11. Brent and jnc–thanks!!

    Like

  12. Forget it, Scott. This will turn into another pointless round-and-round.

    Like

    • Mich:

      Forget it, Scott. This will turn into another pointless round-and-round.

      Ok, but it seems to me to be a rather obvious question. If there was a sensible answer I don’t know why you’d want to keep it a secret.

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  13. It’s hardly a secret, and in this thread alone both jnc and Kevin have hit upon it. You just don’t think it’s the right answer and you want to score some points off of me.

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    • Mich:

      It’s hardly a secret, and in this thread alone both jnc and Kevin have hit upon it.

      jnc hasn’t said anything about why we should care about the race of people doing research, and I doubt very much he thinks we should. (Please do set me straight, jnc, if you do.) And as I pointed out to Kevin, I don’t understand his reasoning. It has nothing to do with being the “right” answer. It just doesn’t seem like a sensible one to me. As I pointed out, should we care about whether certain eye-colors are “underrepresented” in the research field?

      you want to score some points off of me.

      It is not about you at all. In fact I was under the impression that you had nothing to do with this grant beyond it being one one your students who helped obtain it. I just want to understand why anyone would care whether a particular demographic was “underrepresented” in the research field (or any field, for that matter…are Jews underrepresented in professional basketball and if so should the NBA seek federal funds in order to “fix” the situation?). I don’t care, and I don’t see why anyone should care.

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  14. Scott, sometimes your lack of understanding of science, how it’s conducted, how it’s funded, and much of anything about it is absolutely flabbergasting.

    To quote Ygritte, you know nothing, Scott C.

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    • Mich:

      Scott, sometimes your lack of understanding of science, how it’s conducted, how it’s funded, and much of anything about it is absolutely flabbergasting.

      Maybe, but what I really don’t understand is why anyone thinks the racial makeup of the scientific research industry is important. It seems pretty obvious to me that you are stumped on that one too.

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  15. @ScottC: “I don’t understand how. If half of the population is comprised of people with brown eyes and the other half comprised of people with non-brown eyes, should we be concerned with the number of non-brown eyed “minorities” in the research field, just in terms of the quantity of people we have doing research?”

    Not really, and I’m not sure how effective minority outreach will be in mining the larger population for quality scientists, but in the case of “racial diversity” we’re observing a characteristic, such as skin color, that corresponds generally to a cultural group, and saying: none of those dudes is scientists. Eye color has very little cultural association in America.

    “It makes sense to me to want to attract and prepare people with specific characteristics that are particularly relevant and conducive to scientific research. But I don’t see how race could be one of those characteristics.”

    Which would make more sense. But when policy makers and grant-writers are hyper-aware of race and ethnic diversity, wrapping recruitment into a science or engineering career with a cloak of many colors may be the best way to get funding for said recruitment, which I expect is some of what’s happening. That, and a fair amount of people like diversity as a concept and think it’s important and feel the world would be a better place if all careers and specialities were homogenous.

    Ultimately, I can see it as an organizing principle, but it begins with the assumption that racial minorities are under-represented because of lack of attention or active courting or outright discrimination, and not because more members of a given race are members of a cultural group that is uninterested in science and engineering.

    But . . . it’s money. There are excellent scientists and scientific minds in all minority groups, and such a pro-diversity argument might supply the money to attract them, where the funds would otherwise be lacking. So, there’s that, too.

    Just having a more diverse group, racially, has little value that cannot be replicated by putting together a diverse group, mentally, without regards to race or national origin.

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    • Kevin:

      but in the case of “racial diversity” we’re observing a characteristic, such as skin color, that corresponds generally to a cultural group

      I question that premise. It may be true that people of a given culture in America tend to be of a given race, but the reverse is definitely not true. And regardless of whether that premise is true, I even question the value of cultural diversity to the field of science. What is it that someone from an urban culture can bring to the lab that someone from a suburban culture can’t?

      But when policy makers and grant-writers are hyper-aware of race and ethnic diversity…

      Well, that is pretty much the crux of my point. They shouldn’t be and it is disturbing to me that this “hyper-awareness” has infested even such places as the NIH.

      And I should also say we should be concerned with all races being less interested in science and engineering than the past,

      I wouldn’t frame the point in terms of “all races” because I think race is irrelevant. I would simply say that we should be concerned that there are fewer people interested in science and engineering.

      (BTW, is it the case there there are fewer people going into science and engineering fields than in the past? I really have no idea.)

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  16. @ScottC: ” As I pointed out, should we care about whether certain eye-colors are “underrepresented” in the research field?”

    No, for the reason that eye-colors are not a broader indicator of cultural background. Eye-colors ≠ race.

    And I should also say we should be concerned with all races being less interested in science and engineering than the past, but there is no real solution to that problem. Any efforts to remedy that would have to be targeted at education and a young age, home life, and incentives throughout the school career of the youngsters, of whatever race.

    That being said, I don’t support programs designed to create diversity, and won’t, unless there is some clear value to them, which, thus far, I’ve never seen. I support everything being broadly open to everybody with the skills and inclinations. Perhaps diversity programs are necessary for this, but I’m dubious.

    Like

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