Morning Report: Controversial CA housing bill dies in committee 4/18/18

Vital Statistics:

Last Change
S&P futures 2716.75 10
Eurostoxx index 380.83 0.06
Oil (WTI) 67.63 1.11
10 Year Government Bond Yield 2.84%
30 Year fixed rate mortgage 4.44%

Stocks are higher this morning as earnings from the financials continue to pile in. Bonds and MBS are flat.

Mortgage Applications increased 5% last week as purchases rose 6% and refis rose 4%. The refi share was 37.8%, the lowest in a decade. Purchase activity was up on a YOY basis however. Mortgage rates were generally flat as international tensions and the FOMC minutes dominated the news.

2017 was a tough year for the mortgage industry, as profits per loan were more or less cut in half, from $1,346 to $711. Revenues per loan were up, as higher loan balances driven by home price appreciation were offset by lower margins due to competitive pressures. Volumes were down 20% overall, and down 9% on a comparable basis. While revenues per loan increased, costs were up more, and productivity fell.

The IRS’s computer system crashed yesterday due to all the last minute e-filers. If you were unable to file yesterday, you are in luck – the IRS gave you an extra day to get it in without penalty.

Most consumers don’t rate shop when getting a mortgage. This is a surprise since the savings is actually pretty big: between $1,000 and $2,000 over the life of the loan when getting a single competing quote. It increases to $2,000 – $4,000 when the borrower gets 5 competing quotes. Why more don’t do that is a mystery.

An unprecedented bill (SB 827) allowing the state to overturn local zoning ordinances died in committee yesterday. California has an acute housing shortage, and affordable housing advocates had been pushing hard for a bill that would force cities to accept dense multi-family housing complexes within a half mile of rail stops. The bill’s early demise was a blow to affordable housing advocates and environmentalists, who want to reduce the need for driving.

The IMF is warning that years of 0% nominal interest rates have created risks in the financial system, with valuations of risky assets stretched and some late-stage credit cycle behavior. The subprime auto sector in the US is one case in point, and we have multiple residential real estate bubbles globally, especially in China and Canada. That said, the banking system is much more safe and capitalized now than it was 10 years ago. They warn that investors aren’t positioned for a sharp increase in inflation and interest rates over the next several years. Which is probably the right bet – if the Chinese credit and real estate bubble implodes, it will be deflationary, not inflationary.

A very NYC scene..

13 Responses

  1. Someone is trying to do a 2016 autopsy for the Democrats:


    • But after 2016, I’m pretty open to having most of my assumptions about politics challenged.

      Consider me highly skeptical.

      Liked by 1 person

    • I think Douthat nailed it, and that is that the Democrats have absolutely no idea how people who are not in the tribe perceive them. Politics is ultimately a sales business, and if you don’t have a clue how you come across to the potential client you’re going to have a bad time.

      Liked by 1 person

      • If they get the house back I guarantee you they will take the entirely wrong lesson. They will turn up the tribe-talk.


        • If the Ds get both Houses they will attempt to raise taxes on the wealthy, but if they succeed they almost surely won’t apply the revenue to deficit reduction. It is no stretch to predict they will find grand new spending bills so that expenses will exceed income.

          They seem to me to have taken an arrogant wrong turn on Pompeo for SecState, even as a minority. Right there with Rand Paul.

          I don’t agree with Pompeo on a range of issues. However, he is far more qualified in every way to conduct FP than the current POTUS.

          He isn’t a complete chickenhawk like Bolton. He actually has some relevant experience. He is not in bed with Russian investors, like Flynn and Manafort were.

          He is probably the best of the actual range of options within the limited scope of DJT. Ds, who had no problem with him as CIA Director but who now are attacking him, should consider that.


        • What’s funny is that Republicans did raise taxes on the rich and didn’t apply it to the deficit either.


  2. Tautological headline of the day:

    Mental health risk higher for transgender youth

    I understand tomorrow they will be reporting on a study about how dwarves are at greater risk of being short.


  3. Yes, how dare the rubes not take our bullshit investigation’s Calvinball rules seriously!!!


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