Morning Report – Housing Starts rebound 1/21/15

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

The ECB decision is tomorrow. The market has priced in a lot of optimism for QE, so if they disappoint, rates could reverse hard. Keep in mind that US rates have been pulled down by Europe. The fundamentals of the US economy mean rates should be higher.

A headline just crossed the tape saying the ECB is set to propose QE of 50 billion euros a month through 2016. Assuming they start next month, that works out to be $1.1 trillion – I believe the expectations were for the mid $500s billion. Bonds are not reacting to the news. Again, this is just a leak or speculation, not the actual decision.

Housing Starts rose to 1.09 million in December, an increase from the upward-revised 1.04 million in November. Building Permits fell however.

Mortgage Applications rose 14.2% last week following up on an increase of 49% the week before. Purchases fell 2.2% while refis rose 22.3%. Refis are now 74% of all applications, a 10% increase from the beginning of the year. The MBA refi index is the highest it has been June of 2013, when the taper tantrum was beginning.

Obama gave the State of the Union speech last night. If you are interested, here is the take on it. I don’t think he had anything to say affecting housing although he wants to increase the capital gains tax and he vowed not to roll back banking regulations.

The Supreme Court is hearing arguments today challenging the Administration’s novel theory called “disparate impact” to prove discrimination.  Basically, the Administration wants to be able to declare a lender guilty of lending discrimination if the numbers don’t comport with the demographic make-up of their market, even if the lender did not intend to discriminate. The Court is expected to rule in June.

The rise in the dollar has been giving foreign real estate investors sticker shock. Foreign investment demand is behind a lot of the buying in big cities like NY, DC, SF, etc. The woes in Russia are having a big impact as well.

12 Responses

  1. Did you mean to refer to disparate impact as novel?

    Like

  2. I guess.. probably not the correct word… aggressive is better

    Like

  3. to clarify, they want to take that concept and apply it to lending.
    care to predict how the court will rule?

    Like

  4. Yes. So basically if you are a lender covering certain MSAs and your racial lending numbers don’t match up with the population, you are guilty of discrimination, no questions asked. Even if you had no intention of discriminating.

    I think there have been two cases, where one was withdrawn and one settled at the urging of the obama administration because they were afraid they would lose.

    I certainly hope they lose this case, but I am not a lawyer, so I don’t have a view on the merits of this particular case.

    Like

    • Brent:

      I think there have been two cases, where one was withdrawn and one settled at the urging of the obama administration because they were afraid they would lose.

      I thought that the disparate impact threat to coerce lenders into lending to politically preferred demographics existed for a long time. I didn’t realize it was a relatively new tactic.

      Like

  5. Pity this wasn’t part of the actual official response:

    “Mr. Cruz likened Mr. Obama’s approach to the famous “Saturday Night Live” spoof of the Blue Oyster Cult song “(Don’t Fear) the Reaper.”

    “To every problem,” Mr. Cruz said, “his solution was, ‘More cowbell! More cowbell!’ “”

    http://www.nytimes.com/2015/01/21/us/politics/republicans-have-one-word-for-presidents-proposals-and-veto-threats-no.html?_r=0

    Like

  6. Ted Cruz also goes with the crony capitalism populist critique of the administration:

    http://www.vox.com/2015/1/21/7866739/ted-cruz-1-percent

    Like

  7. I would enjoy a Cruz v Warren campaign.

    Like

  8. Predictions.

    1. Risk corridors never go away.

    2. Mandate never enforced.

    3. No claw backs, ever, for over subsidization.

    Like

  9. Nanking was a bitch for the Japs too ya know!

    When will we get that whole story Matt?

    AmIRight?

    Like

  10. Like

Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: