Morning Report: Homeownership rate rises 10/28/15

Markets are slightly higher as we await the FOMC decision. Bonds and MBS are flat.

Mortgage Applications fell 3.5% last week as purchases fell 3.1% and refis fell 3.8%.

The FOMC decision is set to be released around 2:00 pm EST. I don’t expect major volatility around that time, but you never know. Just be aware.

The FOMC meeting is expected to be a non-event, with no move in rates and perhaps some hawkish language. One thing to watch for will be how the Fed handles its QE portfolio. For the moment, they are re-investing maturing proceeds from their portfolio back into the market. Some Fed-watchers are thinking the Fed may announce plans to let at least some of their Treasury portfolio run off. For the moment, they don’t intend to let their MBS portfolios run off.

The homeownership rate rebounded off the 50 year low set in the second quarter. It rose from 63.4% to 63.7%. Household formations have been decelerating all year, however they increased by a 1.3 million pace in September. So far it looks like these people are renters and not homeowners, as rental vacancies remain low and rental inflation continues. We have yet to see a downturn in Millennials living at home with their parents.

Mortgage REIT American Capital Agency got roughed up last quarter with volatility in world markets. This is notable given that interest rates actually fell during the quarter. Mortgage Backed Securities spreads (the risk premium that investors demand to hold this asset over Treasuries) widened considerably during the quarter. That poor performance in MBS almost necessarily will translate into poor performance of TBAs, which help set mortgage rates. So, if you noticed mortgage rates didn’t fall as far as you would have expected during the quarter, that is why.

15 Responses

  1. Frist!! Sitting at the dentists office waiting on my daughter, who is getting teeth pulled. Thanks, Obamacare!


  2. @brentnyitray: possibly because the GOP politicians can’t understand science? 🙂


    • Mich:

      possibly because the GOP politicians can’t understand science?

      I think you mean “science”, not science.


      • Just saw Ted Cruz’s debate response re the media being in the bag for the Dems. He just got my vote. Rubio’s rip on the MSM was pretty good too.


  3. I don’t blame them, accountability can be a bitch.



  4. We understand “hide the decline”


  5. Too bad Cruz didn’t punch that smug SOB in the face.


  6. Who? Whorewood?


  7. yeah. that guy.


  8. I was glad to see them call out the MSM openly… It is about time..

    Quit cowering to these assholes and call them the partisan fucks that they are..


  9. i’ll accept that they might not be liberal. but they’re Democratic Party first and foremost.


  10. Fascinating.


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