Morning Report: Mortgage credit remains tight 12/20/16

Vital Statistics:

Last Change
S&P Futures 2265.5 5.5
Eurostoxx Index 360.9 1.3
Oil (WTI) 52.6 0.5
US dollar index 93.6 0.4
10 Year Govt Bond Yield 2.57%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.29

Stocks are higher this morning on no real news. Bonds and MBS are down small.

No economic data today. The financial networks are giddy over #Dow20000.

Housing credit remained tight in the third quarter, according to CoreLogic. New loan risk fell as credit scores improved and the average LTV fell to 85.8 from 86.8 a year ago. Average DTIs fell as well, to 35.4 from 35.7. I guess this index could be taken one of two ways: either credit is getting tighter, or the average borrower is getting into better financial shape as time goes on. I suspect it is a little of both. Regardless, you can see that we are a long way away from the glory days of the housing bubble, and even nowhere near the depths of the post 9/11 economy.

Ray Dalio of Bridgewater has a good piece on the incoming administration and compares it to Reagan and Thatcher in the late 70s / early 80s. Bottom line is that the reins of government will be handed from academics and activists to businesspeople, which should unleash some of the animal spirits that have been dormant for the past decade.

Quote from the article: “This particular shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital. Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge. Regarding attracting capital, Trump’s policies can also have a big impact because businessmen and investors move very quickly away from inhospitable environments to hospitable environments. Remember how quickly money left and came back to places like Spain and Argentina? A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money.”

What does that mean for the financial sector? First, it probably means a return of the private label securitization market, which will open up capital to borrowers who are currently shut out of the market. Certainly it will encourage homebuilders to begin to address the shortage of housing we currently have, with the concomitant job creation that entails. And finally, it may be the catalyst to get the Millennial first time homebuyer in a position to own a home. Granted, there are a lot of “ifs” in Dalio’s statement, but those sentiments are certainly being echoed in the stock and bond markets.

3 Responses

    • Brent:

      Anyone surprised:

      Not in the slightest. This part was good:

      There are a number of possible explanations for the different rates at which various groups unfriended others over politics.

      One is that Democrats may be feeling despondent about the election, and are thus more inclined to block stories about Donald Trump or victorious conservatives. Another is that liberals and women may be more frequent targets of online trolls, leading them to block more often.

      Yeah, right, I am sure it is one of those.

      Like

      • @scottc1:

        One is that Democrats may be feeling despondent about the election, and are thus more inclined to block stories about Donald Trump or victorious conservatives. Another is that liberals and women may be more frequent targets of online trolls, leading them to block more often.
        Yeah, right, I am sure it is one of those.

        I call bullshit. Not that women aren’t more frequent targets of online trolls—they definitely are, and in awful ways—but the people who are being unfriended aren’t trolls. These are friends, co-workers, family members, and so on. Not anonymous trolls. It’s not even remotely related.

        And they say it’s over politics, and sure it often is, but it’s just as often the fact their conservative friends can Google a story and come up with the facts that refute the clever meme they just posted. That meme offered catharsis and confirmation. Finding out it’s a lie takes that catharsis away. It creates cognitive dissonance, and disrupts the bubble. Easier just to get rid of the disruptive influence with minimal thought about why you’re unfriending this person who is communicating facts to you (and frequently those people are rude when correcting their liberal friends, or can be perceived as rude, so that gives them an excuse to unfriend, when the real issue is not the rudeness but the immediate refutation of their bias-confirming fantasy with real data).

        It’s got nothing to do with trolling. And not much to do with sharing pro-Trump stories. Only in rare cases will those posts dominate the feeds of people they are friends with, and could easily be glossed over. It’s almost always because the other has expressed a dissenting opinion, or provide data at variance with their biases.

        Like

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