Morning Report: Existing Home Sales fall 2/21/18

Vital Statistics:

Last Change
S&P Futures 2715.3 1.3
Eurostoxx Index 379.1 -1.4
Oil (WTI) 61.8 0.1
US dollar index 83.8 0.2
10 Year Govt Bond Yield 2.88%
Current Coupon Fannie Mae TBA 103.591
Current Coupon Ginnie Mae TBA 103.688
30 Year Fixed Rate Mortgage 4.4

Stocks are flattish this morning on no real news. Bonds are lower after a tough auction yesterday.

Mortgage Applications fell 6.6% last week as purchases fell 6% and refis fell 7%. Higher mortgage rates are beginning to bite.

Existing Home Sales fell 3.2% in January, according to the National Association of Realtors. Lawrence Yun, NAR’s Chief Economist said: “The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month. While the good news is that Realtors® in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.” The median home price rose 5.8% to $240,500. Inventory rose, however it still remains extremely tight at 3.4 month’s worth of supply. The rise in prices and scant inventory may be scaring away the first time homebuyer which dropped to 29% of sales. Historically, that number has been closer to 40%.

The FOMC minutes from the January meeting are scheduled to be released at 2:00 pm EST today. Investors noted a slight change in the January FOMC statement, where the need for “gradual adjustments” in interest rates was changed to “further gradual adjustments” in interest rates. They hope to get more clarity on what message the Fed intends to send with that change of language, however we probably will have to wait until the March meeting when the Fed releases their new dot plot of expected interest rate movements. As of now, the consensus seems to be a total of 3 hikes this year, at least according to the Fed Funds futures. New York Fed Chairman William Dudley said in an interview that the statement was meant to reflect further strength in the economy.

Homeowners will be able to deduct mortgage insurance premiums on their 2017 returns thanks to a last-minute change in the budget. Borrowers must have adjusted gross income below $100k and the insurance must apply to their principal residence. No word on whether this will continue, and it will probably be a moot point anyway as taxpayers with AGIs under 100k will probably be better off taking the standard deduction most of the time. The tax liability on principal forgiveness also was extended for another year. This would apply to homeowners who get principal forgiven in loan modifications, short sales, and foreclosures. The tax code treats forgiven debt as ordinary income, and the people who go through mods or foreclosures are usually in such financial trouble to begin with that the last thing they need is an additional tax bill.

The Supreme Court yesterday declined to hear a lawsuit brought by Fannie Mae shareholders which challenges the government’s sweep of all of Fannie’s profits into the Treasury. This isn’t the end of the road for the investors however – they have one more claim pending in the U.S Court of Federal Claims in DC. Fannie Mae stock is down about 5% pre-open.

Merger mania in the mortgage banking space continues. Mr. Cooper has been bought by WMIH in a cash and stock transaction worth $3.8 billion in cash, stock and assumed debt. Mr. Cooper and WMIH are the new monikers for old stalwarts Nationstar (or IndyMac) and Washington Mutual. Separately, Flagstar has bought the mortgage warehousing operations of Santander Bank.

16 Responses

  1. …taxpayers with AGIs under 100k will probably be better off taking the standard deduction most of the time.

    That must be the case for the great majority unless the definition of AGI has changed more radically than I think it has.

    Liked by 1 person


    The nastiest moment of the meeting came when an attendee made a comment about Tillman’s daughter, who lives in Boston but was present last night. According to Tillman, the commenter asked him where his daughter lived and, when he answered Boston, she reportedly said that she wished his daughter had been blown up (presumably in the Boston Marathon bombing).

    Liked by 1 person

  3. It’s hard for me to overstate how much I love this comment.

    The proper context was that Trump was yelling at his rallies that “the system is rigged”.  Trump said maybe a 400 pound guy on his couch could have been the hacker.  President Obama was in a tough spot with all of that going on.  Look we all thought Hillary was going to win & Obama didn’t want to be seen as “tipping the scales” for her.  Trump and his allies would have contested the election and governing would have been impossible for Hillary.
    Please log in or sign up to continue.
    NYDan Feb 21 · 09:23:49 A


  4. CNN being non-partisan

    Liked by 1 person

  5. Very interesting development.

    This is the original article referenced by HotAir.

    Lynne Lane, a union steward at Cloverhill, says there are tensions as the two groups work side by side. Lane, who is black, says it was black workers at the bakery who called a government hotline to report the Mexican workers to immigration authorities.

    Liked by 1 person

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