Morning Report: House flippers are back 12/28/16

Posted on December 28, 2016 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2266.5 5.5
Eurostoxx Index 361.3 0.8
Oil (WTI) 52.2 0.1
US dollar index 93.7 0.3
10 Year Govt Bond Yield 2.55%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.29

Stocks are up this morning on no real news. Bonds and MBS are flat.

Pending home sales fell 2.5% in November on rising mortgage rates and tight supply, according to the National Association of Realtors. They forecast existing home sales to hit just over 5.5 million in 2017, which works out to be a 10 year high. NAR anticipates that increasing wages will offset some of the problems with affordability.

Same store sales increased 2.1% last week according to Johnson Redbook. Despite the increases in consumer confidence indices, it doesn’t appear to be translating into actual buying.

Bob Shiller (of Case-Shiller fame) thinks that next year could usher in a housing boom, provided some regulatory relief happens. Initially, he thinks that rising rates could accelerate home purchases, as buyers realize that waiting will mean higher house prices and higher rates.

House flippers are making a comeback as well. The number of house flippers has reached a 9 year high, and average profits are up to 61k from 19k at the bottom of the market. About 1/3 are financed with debt, the highest level in 8 years. The market for home flipping loans is still relatively small compared to the vanilla home loan market, but it is expected to reach almost $50 billion this year. The banks don’t seem to be making these loans directly, but are lending to smaller finance companies that do. Since these loans are non-owner occupied, a lot of the post-crisis regulations don’t apply to them or the companies that make them. Rates are in the 7% – 12% range.

Zillow is predicting a modest slowdown in home price appreciation. They are forecasting a 0.7% increase in November, which works out to be a 5.6% increase YOY. Most analysts are looking for a 3% – 5% increase in house prices for 2017.

Here is a good summary of the various important housing charts, all in one place.

The key to improving housing and mortgage lending next year is to bring back the private label securitization market. You can see below that private label securitization is still way below pre-bubble levels. Increasing interest rates could actually be a help as the risk-reward ratios of home lending decrease, which will bring in more investor money. More regulatory clarity will help issuers.

Filed under: Economy, Morning Report |

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37 Responses

  1. Let the mutherfuker burn!, on December 28, 2016 at 9:28 am said:

    What year(s) were the last time the media “stepped up”?

    Liked by 1 person

    Reply
    • novahockey, on December 28, 2016 at 9:36 am said:

      2001- Jan 19, 2008

      Liked by 1 person

      Reply
    • Brent Nyitray, on December 28, 2016 at 9:36 am said:

      They have to be even more hostile to him than they already are?

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      • Kevin S. Willis, on December 29, 2016 at 2:26 pm said:

        They live in this illusion that the 4th estate is the most important branch of government, and that the only explanation for Trump’s victory is that they didn’t do a good enough job. So they have to “step up” in obstructing Trump. Which is going to work even better than their efforts to get Hillary elected did.

        Robert Reich things the pundits and the press basically have the power to impeach Trump. I think they may end up being disappointed.

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  2. jnc4p, on December 28, 2016 at 10:07 am said:

    Apparently this is supposed to be a bad thing:

    “The Coming Exodus of Career Civil Servants

    Research shows many professional staffers leave when a new president takes power—especially one with whom they don’t agree.

    Andrew McGill”

    https://www.theatlantic.com/politics/archive/2016/12/the-coming-exodus-of-career-civil-servants/511562/

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  3. jnc4p, on December 28, 2016 at 10:08 am said:

    Strange bedfellows and all that:

    “Trump and Trudeau: An Odd Couple That Scares the Hell Out of Environmentalists
    Both leaders want the Keystone XL pipeline—and just might get their wish.
    By Demi Lee
    December 28, 2016
    …
    As heads of state, Trudeau and Trump could not be more different. But a shared interest could bring them together: reviving the Keystone XL Pipeline expansion.

    “He actually brought up Keystone XL and indicated that he was very supportive of it,” Trudeau said at an event last week, referring to Trump. “I’m confident that the right decisions will be taken.”

    The “right decisions,” as Trudeau sees it, is for the U.S. to approve the pipeline. After Obama rejected it last year, Trudeau said he was “disappointed by the decision.””

    https://newrepublic.com/article/139382/trump-trudeau-odd-couple-scares-hell-environmentalists

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    • Kevin S. Willis, on December 29, 2016 at 2:24 pm said:

      Trump is largely non-ideological, give all evidence of being at least superficially socially liberal (but willing to pander to evangelicals) and, most of all, cut deals, compromise, and do whatever to get things done and make things happen.

      In other words, he’s what most Democrats have always claimed would be an ideal Republican politician. Yes, he might have different views, but he won’t be obstructionist: he’ll cut deals and work with politicians, regardless of politics, to accomplish political goals.

      Just goes to show, people don’t know what they want.

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  4. novahockey, on December 28, 2016 at 10:34 am said:

    Really too bad about Carrie Fisher. Big fan. I guess, in the end, CP30was right.
    They’ll be no escape for the princess this time.

    Liked by 1 person

    Reply
    • Kevin S. Willis, on December 29, 2016 at 2:15 pm said:

      Or her mother. Or the guy who did the voice of Heat Miser and narrated the Rocky and Bullwinkle cartoons. Or the dude who wrote Watership Down.

      I mean, granted, a lot of them were old. But Prince, Bowie, and everybody else? If you’re a pop culture geek, 2016 has been just brutal.

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    • novahockey, on December 28, 2016 at 12:47 pm said:

      wow.

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    • Brent Nyitray, on December 28, 2016 at 1:11 pm said:

      Then, my company’s COO, a Chinese American, told me how his small children were distraught, and in tears that morning. Children in their preschool had bullied them with comments such as: “your father is going to be killed because he didn’t vote for Trump”, and “you are going to be kicked out of the country”.

      Anyone believe that actually happened? I don’t.

      Liked by 1 person

      Reply
      • Let the mutherfuker burn!, on December 28, 2016 at 1:22 pm said:

        Lefties don’t even believe it, they know it’s just ghost stories.

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      • novahockey, on December 28, 2016 at 2:00 pm said:

        Not a chance that happened.

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      • Kevin S. Willis, on December 29, 2016 at 2:21 pm said:

        “Children in their preschool had bullied them with comments such as: “your father is going to be killed because he didn’t vote for Trump”, and “you are going to be kicked out of the country”.”

        If this happened, and I grant that it’s possible, I’d bet money those children have liberal parents and live in a liberal household. In other words, most of the fear-mongering about Trump is not coming from Trump supporters or conservative Never Trumpers, but liberals so dedicated to the narrative they are driving into in their kids. Most of the direct parent/terrified-child stories I have seen post-election were Hillary supporters who had terrified their children with stories of what a Trump presidency would mean.

        In what kind of preschool are children not terrified of bullying anybody in this day and age? It’s like bringing a gun to school.

        Tangent: that anybody is that terrified of who the president is speaks to a larger problem, but especially of Trump, who is almost entirely a superficial brand. It’s a culture of obsession with celebrities and reality shows that has created a world where supposedly serious people, the MSM, etc., thinks most of what is irrelevant nonsense from Trump actually poses an existential threat to all humanity.

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    • Kevin S. Willis, on December 29, 2016 at 2:32 pm said:

      Every person who voted for Trump is complicit. Some, like Hillary’s deplorables, are incorrigible. Others, like our comfortable friends, chose their own pocketbooks, or their understandable distaste of Hillary Clinton, over doing what was right.

      These people should have known better. Any student of history can compare current times to the rise of fascism in the 1930’s – when an electorate reeling from The Great Depression brought to power Hitler and emboldened Mussolini. The formula was eerily familiar: blame others for your own failures and turn power over to a man who pledges to restore the country to its prior greatness.

      Man, if I could go back in time and vote for Trump, I think I would.

      As far as the comments:

      I haven’t spoken to my parents since the election. I have their emails and phones blocked. They are not only Trump voters, they are deplorables as well.

      That’s a description of mental illness. It’s like disowning a child because you found out the didn’t vote for Clay Aikin when they called in on American Idol.

      And continued to read the comments . . . and some people think we live in a bubble! 😛

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    • Kevin S. Willis, on December 29, 2016 at 2:14 pm said:

      Well, British fascist, Hitler, and Trump-lover Nigel Farage supports strong, sovereign states (and supported Brexit) for just that sort of reason. Clearly, a maniac.

      Economic facts often seem to have a conservative bias, I notice. 😉

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  7. jnc4p, on December 28, 2016 at 1:45 pm said:

    Worth a read:

    “Who Will Do What Harry Reid Did Now That Harry Reid Is Gone?

    Nevada’s departing senator would have fought Trump with a ruthlessness perhaps no other Democratic leader has.
    By Jason Zengerle
    …
    But the job that Reid had in mind for Schumer when he anointed him as his successor isn’t the one Schumer will actually be doing. “Schumer would be a very good majority leader under President Hillary Clinton, and that’s what he thought he was signing up for,” says one prominent Democratic strategist, noting how aggressively Schumer waded into several Democratic Senate primaries in 2016. “He made the calculation that he wanted to win the Senate with people who were easily tamable and then he could be a majority leader like LBJ, just ramming things through.” As a minority leader with a Republican in the White House, however, Schumer will have a very different task — and there’s concern among some Democrats that he might not be cut out for it. “Chuck will go to the ramparts on an issue when it’s polling at 60 percent, but as soon as it gets hairy, he’s gone,” says one senior Democratic Senate aide. “Chuck wants issues to have no negatives, but it’s the Trump era. He’s looking at polls ­showing 60 percent for the Carrier deal” — in which Trump persuaded the company to keep a furnace plant in the U.S. in exchange for $7 million in tax breaks — “and thinking to himself, Maybe we should support that.””

    http://nymag.com/daily/intelligencer/2016/12/who-will-do-what-harry-reid-did-now-that-harry-reid-is-gone.html

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  8. jnc4p, on December 28, 2016 at 4:26 pm said:

    Interesting observation:

    “But while women who are top performers may benefit under women’s leadership, women who aren’t very good at their jobs may not. In a 2015 study, Berkeley researchers Sameer B. Srivastava and Eliot L. Sherman found that some women actually have worse outcomes under female supervisors. They looked at five years of in-depth data from a 1,700-person firm in the information-services industry, and found that most female managers had no effect on the wages of women below them. Yet drilling down into data, they found that some lower-performing women who switched from a male supervisor to a high-performing female supervisor had a lower salary the following year than men who made the same switch. This may be because the supervisor feels threatened by the worker’s poor performance, and worries she may be implicated in it. “Female managers, perhaps responding to collective threat, appeared to act in ways that amplified, rather than diminished, the gender wage gap,” they write.”

    https://www.theatlantic.com/business/archive/2016/12/female-bosses-in-the-workplace/506690/

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    • Brent Nyitray, on December 28, 2016 at 5:38 pm said:

      Hell, I remember during the GM bankruptcy, obama (or one of his cabinet members) threatened the senior bondholders with “embarrassment” if they rejected the pre-packaged bankruptcy and wanted their day in court.

      Of course “embarrassment” = intimidating your investors to withdraw their assets..

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  10. Let the mutherfuker burn!, on December 28, 2016 at 7:05 pm said:

    How come Trump, whom I’m told is Hitler and who has surrounded himself with Nazi’s (I’m. looking at you a Steve Bannon) strongly supports Israel?

    Liked by 1 person

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  11. Let the mutherfuker burn!, on December 28, 2016 at 7:06 pm said:

    I’ll tell you why, he’s diabolical!

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