Morning Report: Existing home sales fall 5/24/17

Vital Statistics:

Last Change
S&P Futures 2398.3 0.3
Eurostoxx Index 392.2 0.2
Oil (WTI) 51.5 0.0
US dollar index 88.8  
10 Year Govt Bond Yield 2.25%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4

Stocks are lower this morning after Moody’s downgraded China’s sovereign credit rating overnight. Bonds and MBS are up small.

Existing Home Sales dropped 2.3% in April to a seasonally adjusted annual rate of 5.57 million. Tight inventory remains the biggest problem and pushed days on market to a record low of 29 days. Inventory is 1.93 million homes, down 9% YOY and represents a 4.2 month supply. The first time homebuyer accounted for 34% of all sales, while the median home price rose 6% to 244.8k, which has pushed the median house price to median income ratio to 4.1x, which is straying back towards the bubble years.

Home prices rose 1.4% in the first quarter and are up 6% YOY, according to the FHFA House Price Index. The biggest annual increases were in DC, Idaho, New Hampshire, Colorado, and Washington. New England is beginning to show some signs of life after lagging the rest of the country post-crisis.

Mortgage Applications rose 4.4% last week as purchases fell 1% and refis rose 11%. The refinance share of mortgages rose to 44% from 41% the week before. The contract interest rate on conforming mortgages fell 6 basis points to 4.17% the lowest since November. The 10 year bond yield fell 9 basis points to 2.23% for the week ending May 19.

We will get the FOMC minutes from the April meeting this afternoon at 2:00 pm EST. Be careful locking around that time as we could see some volatility.

HUD’s statement on the proposed budget. HUD is getting $500 billion in new commitment authority for FHA. The Community Development Block Grant program is slated to be defunded, while most other activities continue intact. Rental Assistance is also unchanged.

Speaking of HUD, Ben Carson hinted last week that he intends to widen the number of condos which will be eligible for the FHA’s condo program. The biggest change will be to allow financing of individual units in buildings that lack FHA certification. Only 7% of condo buildings have FHA certification so this could open up the program quite a bit. Overly strict regulations issued by the Obama administration more or less put the FHA condo program in a dormant state, however the outgoing administration suggested some tweaks in the final months to try and get more loan volume.

Zillow is facing a class action lawsuit over its Zestimates.  A homeowner in Illinois is charging that Zillow’s Zestimimate undervalued her house and and that Zestimate constitutes an appraisal under Illinois law. The suit seeks to have her Zestimate changed to reflect what she wants it to be, to have Zillow licensed and to require the consent of the homeowner before the estimates are posted online.

Comp values exceed the appraisal price on 61% of all appraisals, according to CoreLogic. While in theory this should push appraisal prices higher, adjustments by the appraiser negate this to some extent. You would think in a rising real estate market, the comps would generally be lower due to timing differences, but they aren’t.

Dave Stevens from the MBA discusses what to do with the GSEs. The punchline: The current situation is untenable, as the GSE’s capital buffer will be gone by the end of the year. The recap and release option without any sort of reform is no solution either. The MBA fears that a more conservative (i.e. someone who wants a smaller Federal role in the mortgage market) FHFA director could be nominated when Mel Watt’s term expires in 2018.

24 Responses

  1. Frist! I must’ve clicked just as you posted, Brent.


  2. Never underestimate the coercive power of the state…


  3. This Brennan testimony is amazing,

    “’I encountered and am aware of information and intelligence that revealed contacts and interactions between Russian officials and U.S. persons involved in the Trump campaign that I was concerned about because of known Russian efforts to suborn such individuals,’ he told lawmakers. ‘And it raised questions in my mind again whether or not the Russians were able to gain the cooperation of those individuals.’

    What level of spying can’t be justified by this rationalization?

    Now we know what Obama is going to use to justify spying on his and the Clinton’s political opponents.

    This was also Nixon’s justification as well. The question is, do they believe it like Nixon et al believed?

    Don’t forget, Brennan literally spied on Senate Democrats and they did nothing about it.


    • Yep, if we just listened to this guy, we would have peace in our time…


      • I will never understand the fear of pushing people out of the so-called “gray zone” into the hands of evil.

        one of the comment was interesting, however. she likened ISIS and hte like the a cancer than needs to be cut out. what she didn’t realize is that not everyone survives cancer.


  4. What are the social justice warriors going to do when they discover Taco Bell is owned by Yum Brands which has a white male CEO?


    • ““How can we empower communities to address this practice from within rather than having Big Brother come down and say, ‘This is wrong?’ ””

      its like they are totally ignorant of what government is. it’s a club. if you don’t want people cutting parts of little girls, you use that club.


      • nova:

        its like they are totally ignorant of what government is.

        They are. It is a willful ignorance, but pretty much all of the rhetoric of the left is grounded in this ignorance.

        Liked by 1 person

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