Morning Report: Don’t fear the Fed Funds 12/29/15

Markets are higher this morning as commodities gain. Bonds and MBS are down.

Home Prices rose 0.84% in October and are up 5.5% YOY, according to the Case-Shiller Home Price Index. Portland, San Francisco, and Denver led the charge. For those worrying about how the increase in the Fed Funds rate will affect mortgage rates, don’t worry about a 1-for-1 increase in mortgage rates as the Fed hikes rates. Note that in the 2004-2005 tightening cycle, the Fed Funds rate went from 1% to 5.25% while the average 30 year fixed rate mortgage went from 6% to 6.75%.

One thing to keep in mind, however: ARMS that are pegged to shorter-term rates like LIBOR, Fed Funds or Prime will increase as the Fed hikes short term rates. Might be a good time to pitch a switch from an ARM to a 30 year fixed.

Ever since the bubble burst, homebuilders have largely focused on the luxury end of the market and the move-up buyer. Fun fact: the average size of a new home has increased by 150 square feet since 2008. Entry-level homebuyers had been priced out of the market. Now that is beginning to change, as builders are focusing on starter homes. High land prices remain an issue.

Consumer Confidence rose from 92.6 to 96.5 in December.

Retailers had a decent holiday shopping season, with sales between Black Friday and Christmas up almost 8%.

Average days to close a loan increased by 3 in November, according to Ellie Mae. Blame TRID. Average FICO slipped a point to 721.

4 Responses

  1. Merry Fristmas! And a Happy Frist Year!


  2. I hope shit like this bankrupts all the collaborators.


  3. They made a deal with the devil…

    That said, if they go bankrupt, obama will nationalize the industry, which was probably the plan all along..


    • Brent, wouldn’t a strictly NYS “feature” have to be funded strictly from Albany? Supposedly there is room for states to “experiment”, but don’t they have to pay the incremental cost of the experiment?

      NoVA probably knows this and can explain.


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