Morning Report: FHA mortgage insurance premiums drop 1/9/17

Vital Statistics:

Last Change
S&P Futures 2268.5 -3.0
Eurostoxx Index 263.4 -2.0
Oil (WTI) 52.9 -1.1
US dollar index 92.8 0.0
10 Year Govt Bond Yield 2.37%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.11

Stocks are lower this morning on overseas worries. Bonds and MBS are up.

The week after the jobs report is typically data-light, however we will have a lot of Fed-speak this week, especially today, Thursday, and Friday.

The labor market conditions index slipped in December to -.3 from 1.2 in November. Note this is a meta-index of many leading and lagging indicators, so it is possible to have a so-so number just after a decent jobs report.

HUD announced they are cutting the annual insurance premium for most FHA loans by 25 basis points, which should save the typical homeowner about $500 annually. This will affect mortgages with a disbursement date after Jan 27. The reduction is due to the improving health of the housing market and the FHA’s insurance fund. Since the crisis, FHA has increased premiums by 150% to restore capital reserves. This reduction reverses that move and brings annual premiums back down to close to pre-crisis levels.

The current HUD Chairman, Julian Castro is worried that Ben Carson will roll back some of the HUD initiatives over the past several years. The one most likely to be on the chopping block is a controversial policy in which HUD sues local governments in order to force them to change their zoning laws in order to accommodate more multi-family housing. Westchester County in New York has been fighting this for the entire Obama administration.

Notwithstanding the jump in wage inflation last month, overall wage inflation has been hard to come by, not only in the US, but globally. The relationship between unemployment and wages seems to have broken down. What is going on? First, the most likely explanation is that the new jobs being created pay less than the jobs that were lost. This is the most plausible explanation, as many of the construction jobs that were lost in the bubble never came back, and most of the employment growth is coming in lower-paying health care jobs. Second, workers lost so much bargaining power in the recession that they don’t feel comfortable asking for more. A third explanation could be that the cost to employers has risen, but these costs are largely regulatory and don’t flow through to wages. Regardless of the reason, wage growth is an imperfect representation of labor market strength.

Now that it is becoming harder to find buildable lots, many homebuilders are returning to half-finished subdivisions that were abandoned as the housing bubble burst in 2007 and 2008. The supply of developed vacant lots (go-dirt) has fallen by 20% since 2011. The buyers seem to be the big national homebuilders like Lennar. The credit markets for homebuilders remains a case of “haves and have-nots.” The big builders are able to issue corporate debt at super-low interest rates while the small guys are getting turned down by the local bank.

20 Responses

  1. Yet another piece examining the Trump phenomenon and these feral red staters


  2. The horse trade that is going on between the auto makers and Trump.

    More jobs here in return for a relaxation of obama’s fuel economy rules…


    • Can’t read the whole thing, as I don’t subscribe, but the first part is interesting. The implication of “Donald Trump picks a trade lawyer who was a nuts-and-bolts guy for Ronald Reagan’s offenses against free trade—a memory usually far from the minds of the Gipper’s free-market fans” is that free markets and free trade are the same thing, kind of, which I’m not sure is true. You can have free domestic markets while engaging in trade wars with other countries.


  3. Dr. Cowbell is worried about debt and deficits again.

    No more Abenomics?


    • Give that man a broken window!


    • What wasn’t quite so predictable, however, was that Republicans would stop pretending to care about deficits at almost precisely the moment that deficits were starting to matter again.

      What is predictable that Krugman will say deficits don’t matter when Democrats are engaged in deficit-spending, but will say they are super important when Republicans are engaged in deficit-spending.


    • McWing:

      That is fantastic.

      “The speed with which the term became polarized and in fact a rhetorical weapon illustrates how efficient the conservative media machine has become,” said George Washington University professor Nikki Usher.

      Yes indeed. In the old days the liberal media machine was able to create fake news memes that would last for weeks, months or even years without being debunked by the conservative media machine. How ironic that, thanks to the handy invention of the “fake news” narrative by the liberal media machine itself, the conservative media machine has a handy way of dismissing the made up stories of the liberal media machine!

      As Jeremy Peters wrote in the New York Times: “Conservative cable and radio personalities, top Republicans and even Mr. Trump himself . . . have appropriated the term and turned it against any news they see as hostile to their agenda.”

      How dare they appropriate and turn against liberals the very terms meant to discredit conservatives!


      • The lack of self awareness in the editorial and the fact that the Post published it in a non-ironic way just blows my mind.


        • McWing:

          Noted over at Ace, I have to ask, how is it possible that this brief description by CBS of the Chicago attack by 4 blacks on a white man is not intentionally deceptive?

          The viral video of a beating and knife attack in Chicago suggests the assault had racial overtones. CBS’s Dean Reynolds tells us the victim is described as a mentally-challenged teenager.

          In the video he is choked and repeatedly called the n-word. His clothes are slashed and he is terrorized with a knife. His alleged captors repeatedly reference Donald Trump. Police are holding four people in connection with the attack.”

          I mean, you really have to go out of your way and be creative in order to leave the impression, without explicitly lying, that the victim was black and attackers were white\. I don’t see how this can be explained by anything other than a conscious and deliberate attempt to deceive. (audio at link)


        • The “right wing climate of hate” (copyright) created that description.


  4. Oh the irony:

    “Thank you, Hollywood Foreign Press. Just to pick up on what Hugh Laurie said: You and all of us in this room really belong to the most vilified segments in American society right now. Think about it: Hollywood, foreigners and the press.”

    Or perhaps the most vilified segment in American society right now might be Trump voters.

    “Disrespect invites disrespect, violence incites violence. And when the powerful use their position to bully others we all lose.”

    Perhaps a mirror might be appropriate here.

    It all seems to be an exercise in “more victim than thou”.


    • jnc:

      Or perhaps the most vilified segment in American society right now might be Trump voters.

      As a member of the bankster class, all I can say is…finally someone else!


    • “Foreigners”

      I keep coming back to the same old quip: It is amazing that the left can distinguish between dozens of different genders but cannot grasp the difference between legal and illegal immigration.


    • lobbyists are very respected members of society.


  5. Worth a note:

    “What You Need to Know About Escalation of Force

    This is why a U.S. warship fired warning shots at Iranian speedboats.

    By Robert Bateman
    Jan 9, 2017”


  6. Interesting.

    “Why Uber lost $2.2 billion in 9 months
    Updated by Timothy B. Jan 9, 2017, 3:10pm EST ”


  7. Clemson with a huge win! What a great game. Two years in a row with a spectacular National Championship game.


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