Morning Report: Home price appreciation is accelerating 6/22/17

Vital Statistics:

Last Change
S&P Futures 2431.8 -1.8
Eurostoxx Index 387.6 -0.9
Oil (WTI) 42.9 0.4
US dollar index 88.8 -0.1
10 Year Govt Bond Yield 2.15%
Current Coupon Fannie Mae TBA 103.31
Current Coupon Ginnie Mae TBA 104.375
30 Year Fixed Rate Mortgage 3.92

Stocks are lower this morning as oil turns into a bear market. Bonds and MBS are up small.

Initial Jobless Claims rose 3000 last week to 241k, while the index of leading economic indicators rose again. The LEI report noted that pretty much everything is improving, except for housing and the manufacturing workweek.

Home Prices rose 0.7% in April, according to the FHFA House Price Index. On a YOY basis, they are up 6.8%. As inventory gets tighter, price increases are accelerating, which is a problem as house prices are now pretty stretched versus incomes. The West Coast is still experiencing close to double digit growth, while home price inflation in the Upper Midwest and Northeast lag the rest of the country.

Some Trump advisors are recommending that Janet Yellen be replaced when her term ends in February. Yellen is a dove, and Trump recently seemed to reverse his pre-election view on interest rates. As a general rule, politicians love dovish Feds, so this is unsurprising. Treasury Secretary Mnuchin says Trump “hasn’t given this much thought” since it is so far away. Among the other names being mentioned include Stanford’s John Taylor, Columbia’s Glenn Hubbard, and former Fed governor Kevin Warsh.

As rates have fallen, prepayment speeds have increased, which is generally good news for originators, but bad news for those who own servicing. Delinquencies have reversed their calendar-driven April rise as well, according to Black Knight Financial Services. In fact, loans 90 days down or in foreclosure hit a 10 year low.

The average closing rate for a mortgage inched up in May, according to the Ellie Mae Origination Insight Report. The typical FICO rose a point to 723, with an 80 LTV. The closing rate hit 70.4%.

What are the priorities for the MBA in the upcoming year?  Removing regulatory barriers to housing, GSE reform, GNMA servicing, and much more.

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