Morning Report – Improving attitudes about the economy 1/12/15

Stocks are higher this morning on no real news. Bonds and MBS are up small.

Earnings season kicks off tonight in the traditional way with Alcoa. This week will be dominated by bank earnings, however we will hear from Lennar and KB Home. Analysts will be focused most on how the slide in oil prices has affected housing markets in Texas. It is probably too early to get a read on the Spring Selling Season, but they may have some anecdotal data. Certainly the precipitous drop in interest rates is a gift that no one expected.

In economic data this week, we have the JOLTs job openings data as well as industrial production. Nothing should be market-moving.

Last week’s FHA announcement caused Ginnie Mae TBAs to underperform Fannie Mae TBAs. At the margin, this means that FHA / VA loans will be somewhat more expensive relative to Fannie Mae loans. The new MI pricing sent fears into the MBS markets that prepayment speeds will pick up. So, for FHA loans the MI may be cheaper, but the rate went up. So it is probably all a wash.

Consumers are still somewhat cautious, according to Fannie Mae in the latest National Housing Survey. While they are tempering their outlook for further home price appreciation, the number of people who believe the economy is on the right track increased 5 percentage points, a big move. Perceptions of credit availability improved, with 52% of respondents believing a mortgage is easy to get versus 44% who believe it would be hard to get. The spread is the biggest in the survey’s history.

Delinquencies ticked up to 6.08% in November, according to the Black Knight Financial Services Mortgage Monitor. That spike could have been caused by technical factors however and might not mean much. The judicial states continue to lead the delinquency league tables. Foreclosure starts fell, however to 73,900, a 35% drop from last year.

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