Morning Report – Judicial vs. non-judicial home price appreciation 12/8/14

Markets are lower this morning on no real news. Bonds and MBS are up.

The week after the jobs report is typically data-light, and this week is no exception. The highlights from a bond market perspective will probably be the JOLTS job openings on Tuesday and retail sales on Thursday. We will also hear from luxury home builder Toll Brothers on Wed morning.

The latest Black Knight Mortgage Monitor is out. Foreclosure starts dropped by 10.5% to 81,400 and the foreclosure inventory dropped to 3.6MM homes, which is down 18% year-over-year. They have a cool chart that illustrates the difference between the judicial and non-judicial states in terms of home price appreciation, both in terms of decline and rebound. You can see how the judicial states have experienced much lower rebounds off the bottom than the non-judicial states. It would be interesting to see compare the peak to trough price declines of judicial vs. non-judicial states. I suspect we would find that having tougher foreclosure requirements did not help support house prices.

S&P lowered the ratings on Italy’s sovereign debt to BBB- from BBB, which is one level above junk status. Yet, Italian sovereigns are trading at 1.97%, 33 basis points lower than AA+ rated US Treasuries. This is all about the ECB and QE, but it shows again that all of this central bank manipulation of global sovereign bond markets has created some major dislocations. Of the 5 PIIGS, only Portugal and Greece have higher yields than the US 10-year. Strange times.

There were no changes in the federal limits on conforming loans for 2015.

San Francisco is looking at using eminent domain to steal from bondholders help people in who are in foreclosure keep their homes. The city is also trying to issue about $400 million in GO munis, and something like this cannot help.

22 Responses

  1. That is funny


  2. Interesting reporting sparked by the Rolling Stone story:

    “The College Rape Overcorrection

    Sexual assault on campus is a serious problem. But efforts to protect women from a putative epidemic of violence have led to misguided policies that infringe on the civil rights of men.

    By Emily Yoffe
    Dec. 7 2014 11:53 PM”


  3. Frank is correct on the conventional wisdom shift regarding Democrats:

    “By “we,” I mean the Democratic Party. Once upon a time it was the dedicated champion of the interests of average people, but today Democrats are hemorrhaging the votes of the white working class. This catastrophic development is the pundit subject du jour, replacing the happy tales of demographic inevitability of two years ago. Since the beginning of September, according to Lexis-Nexis, there have been no fewer than 46 newspaper stories predicting, describing and analyzing the evaporation of Democratic appeal among this enormous slice of the electorate.

    This is not merely disastrous, it is pathetic. What kind of lamestain left can’t win the working class . . . in year seven of a crushing demonstration of the folly of free markets? What kind of political leadership can’t figure out a way to overcome the backlash sensibility after four decades?”


    • From Frank:

      …in year seven of a crushing demonstration of the folly of free markets?

      Frank needs to re-evaluate his premises.


  4. As if the real estate bubble was a function of free markets and not the Fed / do-gooder social policy…


    • Brent:

      As if the real estate bubble was a function of free markets and not the Fed / do-gooder social policy…

      Exactly. Interestingly, I absolutely agree with Frank’s conclusion.

      The important matter for Democrats is admitting they have a problem—that these have been a lousy series of decades for working people and that Democrats deserve a large part of the blame for it. Nothing can change until they first accept responsibility for what they have done.

      Unfortunately, knowing that you’ve been wrong and knowing why you have been wrong are two drastically different things. Frank is totally baffled when it comes to the latter.


  5. I think he’s correct that politically, this has been the best opportunity for Democrats and progressives since possibly the Great Depression to advance their arguments against free market capitalism and they’ve pretty much been unsuccessful, except on the margins.

    Boris Johnson made a similar argument in a speech he gave on Margaret Thatcher.

    “But it was Mrs Thatcher who made the essential point about charity, in her famous analysis of the parable of the Good Samaritan. He wouldn’t have been much use to the chap who fell among thieves, she noted, if he had not been rich enough to help; and what has been really striking about the last five or six years is that no one on the left – no one from Paul Krugman to Joe Stiglitz to Will Hutton, let alone Ed Miliband – has come up with any other way for an economy to operate except by capitalism.

    We all waited for the paradigm shift, after the crash of 2008. The left was ushered centre stage, and missed their cue; political history reached a turning point, and failed to turn. Almost a quarter of a century after the collapse of Soviet and European communism – a transformation that Mrs Thatcher did so much to bring about – there has been no intellectual revival of her foes, whose precepts are now conserved only by weird cults in south London.

    Ding dong! Marx is dead. Ding dong! communism’s dead. Ding dong! socialism’s dead! Ding dong! Clause Four is dead, and it is not coming back.

    Like it or not, the free market economy is the only show in town.”



    here’s part:

    Sen. Mitch McConnell wants to hit the ground running in January — and he thinks Democrats are ready to join him in crafting a more open, functional Senate.

    In an exclusive interview in his Capitol office suite, the incoming majority leader told CQ Roll Call he’s been preparing his would-be chairmen to move quickly since spring.

    “The worst experience any majority can have is that you convene and you look around and nothing’s ready to go. So what I said to the members who hoped they would be chairmen [was], ‘Let’s don’t have that problem. Be thinking now about legislation that you have, preferably that enjoys some Democratic support, because we certainly didn’t think we were going to have 60 and we don’t,’” the Kentucky Republican said.

    McConnell pointed to conversations he’s had with Democrats, whose cooperation will be required to get the Senate functioning as he would like.

    “Up to half the calls I got after the election were from Democratic senators. I’m not implying that they were happy I won, but they were awfully curious as to whether I really meant it early last year when I pointed out that we needed to run the Senate in a very different way,” he said. “I think there’s going to be bipartisan gratitude for having a chance to be relevant, to not be marginalized.”

    Asked about how he planned to address party discipline and splits in his majority, McConnell emphasized divides among Democrats.

    “They are the ones in disarray. They are the ones criticizing Obamacare publicly as a mistake, a political mistake. They are the ones who are suffering the embarrassment of having the president veto a bill that has just been negotiated between the Democratic majority in the Senate and the Republican majority in the House,” he said, a reference to President Barack Obama’s threat to veto a tax extenders package.


  7. If there’s a better example of liberal/progressive concern over income inequality being solely driven by pure envy and spite, I haven’t seen it yet.


  8. It’s going to be interesting to see McConnell run the Senate. It would have been a disaster for Republicans if he had lost. I think he’s the politician best suited to this political moment.


  9. it’s that cat cao’s avatar. hilarious.


  10. “Heh. Erdely, the author of the Rolling Stone rape piece, was a classmate of Stephen Glass.”

    Ironic! Seems to happen a lot in the left-leaning media. Can’t understand why.


  11. “Even conservatives should be uncomfortable with so much wealth being determined by lottery.”

    The obviously solution is legislation that determines what people are allowed to be interested in, and licensing branding opportunities only to brands that the government feels promote an appropriate moral code and advocates good citizenship.

    Why should I be uncomfortable with that? I’m pissed I don’t have a grumpy cat. I’d love me some of that grumpy cat money.

    On the other hand, I’m going to make more than enough money off my music, very old and much newer, to pay the $20 distribution fee and maybe end up with a few bucks left over. The same internet that makes Grumpy Cat possible makes that possible. And who am I to sneer at an extra $20 – $40 bucks at the end of the year off stuff that has made me exactly $0 for the past 30 years?

    Anyone who’d like to sample:

    Or search for Al Phlipp & The Woo Team on Spotify. The stuff from the 80s and 90s is very different than the stuff from the 2000s, but you know. That’s what always happens.

    And there’s really no way to tell which is what without asking me. Can’t backdate release dates, as it turns out.

    /end shameless plug

    Warning: There will be another plug when my “Christmas in the Ghetto”, done on incredibly crappy equipment back in 1986, becomes available on iTunes, et al. Kevin gotta eat!


    • Retarded Genius was the first one I listened to. Wow.


      • Heh. Yeah, most of the stuff with lyrics would be . . . an acquired taste. Retarded Genius was 1990, I think. 1989/1990. I would have been 20. Stuff done in the 2000s is instrumental/electronic. Releasing older stuff from high school that is much, much sloppier. But, you know. Organic. My opinion is “Technology” should be, like, the anthem for the climate change crowd. Even though acid rain and dead oceans is all kind of old school these days.


  12. Recently got in a conversation (PL or AintItCool, I don’t remember now) about how terrible it was Bill Gates was superrich, and how he did it by oppressing innovation (you know, all those Windows-based PC equivalents that were out there before Microsoft, but he traveled back in time, Terminator style, to oppress them). And so on. And how unhealthy it was that he was so rich. Yada yada.

    Here’s the thing. I can’t frickin’ afford to attempt to bring vaccines and laptops and education to Africa, or bankroll huge technology roll outs in schools in America. He can. And he is. His foundation is doing so frickin’ much real charitable work that its breathtaking. I can’t do that. I can’t afford to do it. Can you? And his foundation is getting billions from Warren Buffet. Who can afford to do that. Which is good, because I sure can’t.

    But no. Rich guys are the bad guys. Would it really be desirable to have a system which did not and could not create such people, and thus could not create such charitable giving and foundations?


  13. @Brent: “As if the real estate bubble was a function of free markets and not the Fed / do-gooder social policy…”

    As any economics guy can tell you: follow the incentives. Structure a system that incentivizes risky, crappy loans and a huge real estate bubble and that’s what you’ll get. Then, when it all comes crashing down, you bail the banks out and . . . hey, another incentive to do the same thing the minute the Fed gives the okay! Which it will.


  14. @ScottC: ” Frank needs to re-evaluate his premises.”

    That caveat needs to accompany every single thing Franks writes. Ever read “What’s The Matter With Kansas”? I did. His premises are all wrong, from top to bottom and from beginning to end. And he’s held up as a luminary. It boggles the mind.


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