Morning Report: TRID shows up in the housing data 12/22/15

Stocks are higher this morning on hopes of more stimulus for the Chinese economy. Bonds and MBS are down small.

Existing Home Sales fell to an annualized rate of 4.76 million from 5.32 million last month. This was the lowest level in 19 months. Guess what the reason was. The median home price rose to $220,300. which is up 6.3%. Housing inventory is 2.03 million homes, which represents a 5.1 month inventory at the current sales pace.

The third revision to Q3 GDP came in at 2%, a slight downward revision from the 2.1% second estimate. A lower inventory estimate drove the revision. Personal consumption was 3%, while the core PCE index (the Fed’s preferred measure of inflation) rose at an annualized rate of 1.3%. Consumption has been depressed for so long that eventually consumers are forced to replace worn out clothes and cars. The average age of a car in the US recently hit a record at 11.5 years, and this is behind the stronger auto sales (along with cheap and easy financing).

Housing contributed 15.3% of GDP in the third quarter, about where it was in the fourth quarter. This is well below the historical levels and is explained by the drop in homebuilding. Given that the excesses of the bubble were worked off years ago, inventories are tight, and the Millennial generation is even bigger than the Boomers we will see a pick-up at some point, which should last years. Remember, housing starts averaged 1.5 million a year from the 1960s to 2002 (pre-bubble years). Since 2002, we have averaged under 1.2 million. When you take into account population growth, the deficit grows even larger.

House prices rose 0.5% in October, according to the FHFA. On a year over year basis, they rose 6.1%. Looking at the chart, it seems like we are back at the heights of the index set in 2007 or so.The Mountain states led the charge, while the Northeast fell a little.

Cash sales as a percentage of home sales fell to 32.5% of all sales from 35.9% a year ago, according to CoreLogic. REO sales tend to be most likely to be cash sales. You can see on the map below the range of percentages based on the state. It looks to correlate most closely with the foreclosure pipelines.

More TRID horror stories. Borrowers are having to pay for longer lock periods, and lenders are scrambling to meet closing deadlines. Hopefully this will be a memory in a few months. Non-agency remains an even bigger problem as investors are taking a zero defects stance on TRID and not buying loans.

3 Responses

  1. On the consumer end, it’s never fun to walk into closing and get stuck for all sorts of mystery fees. I had to walk away from one closing because I specifically told the lender that there would be no escrow for taxes or insurance since I pay those myself. Sure enough the closing documents showed escrows being set-up. It took several frantic phone calls and a flurry of paperwork to get it right.


  2. Worth a read:

    “I’m an academic, and a proud one, and many of my friends and family are academics, and I grew up within the academic left. But I’m perfectly willing to say that the academic turn within the American left — the way in which the university system has replaced the labor movement as the primary incubator of left-wing ideas — has been an unmitigated disaster. It has taken the materialist philosophies of socialism and corrupted them with a reality-denying postmodernism that prevents us from doing the basic work of politics, which is understanding reality and working to change it.”

    & unrelated:

    “But the Sanders/DNC flap was an early warning system about the consequences of a monopoly software provider. Because a dropped firewall isn’t the only potential hazard. What if a bug in a software update – the reason for the firewall problem, according to the DNC – causes the system to crash, or fail to update, or deliver incorrect information?

    We don’t have to guess about the outcome. It happened to the Romney campaign on Election Day in 2012. Orca, the system the Romney campaign relied on to get out the vote, failed miserably, preventing poll watchers from plugging in “strike lists” of who voted into the campaign database. 37,000 campaign volunteers did virtually nothing of value the entire day, as the Orca app wouldn’t allow users to log in.

    I recall Democratic campaign operatives laughing heartily at the Romney campaign when this all came out. But if the VAN similarly failed at a key moment, because of the way the DNC has this set up, nearly every Democrat running for office in America, from the President on down, would feel the effects.”


    • has been an unmitigated disaster. It has taken the materialist philosophies of socialism and corrupted them with a reality-denying postmodernism that prevents us from doing the basic work of politics, which is understanding reality and working to change it.

      Somebody understands that you cannot change everything about the planet with boycotts and sit ins.


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