Morning Report: Fed Day 9/21/16

Vital Statistics:

Last Change
S&P Futures 2137.0 7.0
Eurostoxx Index 342.9 2.0
Oil (WTI) 44.8 0.8
US dollar index 86.7 -0.2
10 Year Govt Bond Yield 1.69%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.56

Stocks are up this morning after stocks rallied overnight on moves from the Bank of Japan. Bonds and MBS are flat.

The Japanese Central Bank is embarking on a new version of QE: attempting to hold the yield of the 10 year bond precisely at 0%. The BOJ holds something like 40% of all Japanese Government bonds, and between the other players that must hold Japanese government bonds (banks for capital and insurance companies) the central bank has essentially cornered the market in bonds, and can therefore set just about any price it wants.

The FOMC decision will be out around 2:00 pm today. Bonds could get volatile around then so be careful if you have locks to deal with. The Fed Funds futures have a low 20% chance of a rate hike at today’s meeting. Note that this meeting will introduce new economic forecasts and rate forecasts, so there will be a lot that can move markets. Janet Yellen will have a press conference at 2:30 PM EST following the decision.

Mortgage applications fell 7.3% last week as purchases fell 7% and refis fell 8%.

Housing starts and building permits fell last week due to lousy weather in the South. Housing starts came in at a 1.14 million annual rate. Single family starts rose while multi-fam (which is much more volatile than SFR) fell.

KB Home and Lennar both reported earnings that beat estimates, although the orders numbers disappointed. Gross margins fell as land prices increased. Lennar reported weakness in some Texas markets due to the slowdown in the energy patch.

Housing inventory fell for the fifth straight quarter, according to Trulia. Affordability continues to fall as the percentage of income to buy a home continues to rise. Starter homes now require 38.5% of the typical borrower’s income, up from 36.8% in the third quarter last year. Historically, 36% has been a level where the GSEs begin to get concerned. Starter homes represent 23% of the available inventory, which is out of whack with the historical average of about 40%. The high end represents the majority of the inventory out there (which is where we are starting to see softness in pricing). We are starting to see increases in inventory in some of the West Coast markets where supply is the tightest, especially places like San Francisco and San Diego.

trulia-inventory

Wells Fargo CEO Joe Stumpf went to Washington yesterday and got scolded by the usual suspects. Although the area affected was retail lending and not mortgages, I am sure the effects will be felt in mortgage banking as well.

As banks get hammered and tied up in red tape, house flippers who need money fast are turning to crowdfunders. One flipper raised $1 million in 12 hours on crowdfunding sites RealtyShares, LendingHome, PeerStreet and Patch of Land. He is paying 14% for 2.5 year money. You are even seeing builders use this market as banks back away.

26 Responses

  1. How is “crowd funding” not a violation of both the SEC and state blue sky laws?

    Did it receive an exemption from the full disclosure requirements of the law regarding solicitation of more than x persons?

    FRIST.

    Like

  2. I think I’ve said this before, but Vox really has jumped the shark this time:

    “The strange national mourning over Angelina Jolie and Brad Pitt’s divorce, explained
    Updated by Alex Abad-Santos
    Sep 21, 2016, 11:50a

    Angelina Jolie and Brad Pitt made a lot of people believe in love. Or at least respect it.”

    http://www.vox.com/2016/9/21/12989916/angelina-jolie-brad-pitt-divorce-explain

    Liked by 1 person

  3. Man i’m so close to voting for Trump just to watch the meltdown.

    Liked by 1 person

    • If you vote for Johnson and Clinton loses because of it, that’s just as good.

      Seriously, if it looks like he will win, I’ll probably end up voting for HRC. Status quo actually suits me pretty well and Trump has gotten worse as the campaign as gone on.

      If there was some way to construct a parallel universe where I could vote for Trump just to fuck over progressives and Democrats without having to live with him as President, that would be a different story.

      Liked by 1 person

      • jnc:

        If you vote for Johnson and Clinton loses because of it, that’s just as good.

        How would choosing Johnson over Trump cause Clinton to lose? Or are you operating from an assumption that Johnson could defeat Hillary?

        Seriously, if it looks like he will win, I’ll probably end up voting for HRC.

        Obama v Romney v Johnson…vote Johnson.

        HRC v Trump v Johnson…vote HRC.

        Interesting calculus.

        Like

        • Yes, Trump’s a lot worse than any of the others.

          It’s the downside risk.

          With regards to the first part, it’s an assumption that the vote for Johnson comes out of HRC’s column. Obviously voting for Trump maximizes Trump’s chances.

          At the end of the day, I tend to end up in PJ O’Rourke’s camp where Clinton is wrong, but within the usual parameters whereas Trump is outside of them.

          Like

        • Agree with you, and PJ O’Rourke, JNC. But I would probably vote for Johnson, even if I lived in FL or OH.

          My single vote will not turn the election and I don’t have to vote for either a suspect character or a scam artist. I just don’t.

          My oldest daughter gave me 15 minutes of hell about that on the phone from Santa Fe.

          Liked by 1 person

        • jnc:

          Yes, Trump’s a lot worse than any of the others.

          I can certainly understand that sentiment. As you know I am no supporter of Trump, and I will definitely not be voting for him. I just find the relative valuation between 2012 and 2016 notable, that is all. The prospect of a 2nd term for Obama was not enough to induce you to try to elect a decent and honest moderate conservative as the only other viable candidate, but the prospect of President Trump will induce you to try to elect a corrupt and dishonest progressive as the only other viable alternative. I wonder if Trump’s candidacy leads you to regret being indifferent between Romney and Obama, given that, had Romney won in 2012, we would not now be facing the prospect of a President Trump.

          With regards to the first part, it’s an assumption that the vote for Johnson comes out of HRC’s column.

          Given that nova is contemplating voting for Trump in order to watch the left meltdown, I assumed he is choosing between Johnson and Trump, not HRC and Trump. But that is just a guess.

          Like

        • Yes, I consider Trump worse than Obama and it’s mitigated by the likelihood of a Republican controlled Congress.

          Short of it is, if I have the luxury of voting for the candidate I most want to win, that will be Johnson. If I have to vote to prevent the candidate I least want to win from taking office, then that probably means HRC to stop Trump.

          Mostly, it’s about not voting for Trump just out of spite against progressives and Democrats, no matter how much I may want to on any given day due to PL.

          Like

        • “I wonder if Trump’s candidacy leads you to regret being indifferent between Romney and Obama, given that, had Romney won in 2012, we would not now be facing the prospect of a President Trump.”

          Not really. Obama has mostly been stymied by Congress in his second term.

          Worse thing will be HRC getting to pick SCOTUS nominees, but I don’t think Trump would be any better.

          Pity Romney wasn’t the candidate this year. I think he would have done better in the general vs Clinton than Obama.

          Like

        • jnc:

          Obama has mostly been stymied by Congress in his second term.

          They haven’t done much to stymie his continued abuse of executive and regulatory power.

          Worse thing will be HRC getting to pick SCOTUS nominees, but I don’t think Trump would be any better.

          Whether he would be better is definitely questionable, but he can’t possibly be worse, so on that score we have nothing to lose with a Trump presidency.

          Pity Romney wasn’t the candidate this year. I think he would have done better in the general vs Clinton than Obama.

          There is no doubt he would have done better, although I wonder if Johnson would still have garnered your vote in such a matchup.

          Like

        • I suppose the other point would be that I consider Trump to be unqualified to hold the office, leaving aside any policy consideration.

          I don’t even think he’s committed to divesting his business interests should he take office, and I certainly don’t think he’d have the ethical standards to stay at arms length from them.

          He’d be the ultimate crony capitalist and I could see him using eminent domain to advance his own businesses as President.

          Like

        • jnc:

          I suppose the other point would be that I consider Trump to be unqualified to hold the office, leaving aside any policy consideration.

          I totally agree. But so is Clinton.

          I don’t even think he’s committed to divesting his business interests should he take office, and I certainly don’t think he’d have the ethical standards to stay at arms length from them.

          But you think Clinton and her multi-billion dollar foundation will? Seriously?

          He’d be the ultimate crony capitalist and I could see him using eminent domain to advance his own businesses as President.

          On this score I think Trump is a far safer choice than Clinton. With Trump acting for personal rather than ideological gain, any abuse of power is far more likely to be checked and contained by the other branches, including those in his own party. But as we have seen with Obama, abuses of power and perversions of the constitution for ideological reasons are increasingly met with support from his party members in congress and legal embrace from his fellow travelers on SCOTUS. That trend will continue in spades with Clinton in the Oval Office.

          Like

        • Not JNC, but –

          But you think Clinton and her multi-billion dollar foundation will? Seriously?

          Yep. This is so easy it is almost a no-brainer.

          As for DJT, see this:

          http://www.pbs.org/newshour/videos/#193513

          Like

        • mark:

          This is so easy it is almost a no-brainer.

          Just to clarify…you think it is a “no-brainer” to believe that the Clintons have the ethical standards to maintain an arm’s length relationship between themselves and their foundation?

          Like

        • Because it is a no-brainer how to separate a public charity from its founders her ethics are irrelevant to the task.

          It is not a no-brainer how to separate a business owner from his business. In fact, even impeccable ethics by a business owner would make that pretty much impossible, unless the business owner converted his business to cash or negotiable instruments and put those in a blind trust.

          Aside from the large public charity that does global public charity stuff, there is a small Clinton Family Foundation, that is comparable in scope to the small DJT Foundation. For these we pretty much rely on IRS oversight. The rules are different.

          Like

        • mark:

          Because it is a no-brainer how to separate a public charity from its founders her ethics are irrelevant to the task.

          Doesn’t seem to have been so irrelevant when she was Sec State.

          For these we pretty much rely on IRS oversight.

          This would be the same IRS that targeted conservative non-profits under Obama, and will report to a President Hillary Clinton, right?

          Like

        • I’m not convinced HRC will be more ethical than Trump would be by any stretch of the imagination, although Trump might find new ways to push those boundaries in office.

          My concern with the likely HRC presidency is actually her health. Melodrama aside, there seems to be more going on there than is being suggested by the Clinton camp.

          While I did not care much for Romney, I care less for Trump. Which suggests maybe I should quit being so judgmental of the GOP candidates, as next time it will just be worse. 😉

          I’d have to be convinced I or anybody else has any real insight into the future, or can predict what even “bad” ideas from a president might actually, ultimately, lead to to say I’d pick HRC over Trump. I don’t personally like either of them, but the reality is either one could turn out to be a great president, or a terrible president or—most likely—somewhere in-between. My ability to predict that is not very good, and my sense is that is true of everybody.

          And such predictions will not be objectively appraised, most of the time, as confirmation bias makes that very difficult. We’ve already decided someone is going to be great or awful, so it’s hard to see evidence to the contrary, and easy to see affirming evidence.

          All the candidates make me grateful that the founding fathers decided not to make the president a king. And an elective office, for when they try to be.

          Like

        • KW:

          I’m not convinced HRC will be more ethical than Trump would be by any stretch of the imagination

          Me neither.

          All the candidates make me grateful that the founding fathers decided not to make the president a king.

          Unfortunately congress and the courts have, in many respects, allowed the presidency to become exactly that.

          Like

        • i’m fine with casting a vote for Johnson and letting the chips fall as they will.

          Trump would be a pure spite vote.

          Clinton .. i just can’t. not after loathing her for 25 years.

          Liked by 1 person

      • It’ll be truly ironic if you end up needing to vote for HRC while I get to vote for Johnson.

        Liked by 1 person

  4. Except for AGW science, that shit is Rock.Fucking.Solid.

    Like

  5. People in Texas pissed off about toll roads. Can’t say I blame them.

    http://austincountynewsonline.com/bombshell-senators-find-tolls-charged-roads-paid/

    What say you, @markinaustin?

    Like

    • Considering that until 20 years ago there was only one short tollway in the entire State it is no surprise that people react with everything from annoyance to violence about their proliferation, which is in no small part the legacy of Rick Perry, which is due, in no small part, to people paying no attention to what is going on in front of them until it inconveniences them.

      I can proudly say I was agin’ it from the inception of the concept.

      Liked by 1 person

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: