Morning Report: Luxury home prices falling

Vital Statistics:


Last Change
S&P futures 2605 -8
Eurostoxx index 349.68 -0.7
Oil (WTI) 51.56 -0.75
10 year government bond yield 2.72%
30 year fixed rate mortgage 4.48%



Stocks are lower this morning on no real news. Bonds and MBS are flat.


The NAHB Housing Market Index rebounded slightly in January, but it is still way lower than the index peak in December 2017. The recent drop in rates is helping, but affordability issues and input costs are still dogging the homebuilding industry. Lennar and KB Home still reported decent numbers, and we have yet to see builders having to offer large incentives to move inventory. The supply / demand imbalance is still solidly in favor of the builders, but affordability issues are contributing to a decline in foot traffic.


CoreLogic estimates that refinances will account for only 25% of all mortgage origination in 2019, the lowest in 25 years. Rate / Term refis will become even less important, as prepayment burnout has taken hold at these levels. The opportunities will be largest in cash-out, where homeowners can refinance high interest rate credit card debt, and in product swapping, where FHA borrowers with sufficient home equity will be able to refinance into a product with no MI.


refi share


The Fed’s Beige Book noted that growth is slowing, but is still decent. The language in the report changed from growth being “solid” or “strong” “moderate to modest.” Many companies noted that input prices are rising, but they are unable to pass those increases on to customers. While residential real estate is rising in price, commercial and industrial real estate is not.


More problems for real estate prices at the high end. Greenwich CT prices continue to fall, which is about luxury real estate prices as much as it is about the changing nature of the financial industry. Note however that prices have fallen 7.3% in San Jose. Apple is reducing hiring due to weaker than expected iPhone sales, and the fizz is pretty much out of the social media craze.

12 Responses

  1. Brent, Pelosi has put all the bomb throwing female freshmen on the Financial Services Committee. The one from NY and the one from MN and the one from MA and the one from CA. Four of them. Considering that Maxine Waters is the Chair of that committee I have to wonder five things.

    1] How annoying that committee could be.
    2] How completely ineffective it could be.
    3] How much Pelosi dislikes Waters.
    4] How likely Pelosi thinks consigning her opponents to that Committee puts them out of her way.

    Fifth, at a serious structural level, now that Regular Order is a thing of the past, and the leadership makes the legislation in large part, we have been seeing fewer and fewer committees staffed by persons with familiarity with the subjects of their work. Coupled with the stripping of staffs that began with Gingrich and which in the Senate began with Reid, I think, research is more largely the function of the lobbies than it has ever been.

    As to this last observation I would like to hear NoVa’s take, as he has been in the middle of providing information to Congress for much of this period of devolution of Regular Order.


    • I don’t think the House Financial Services Committee does much that can really affect the industry. I think they will just lecture the banks about income inequality and imagined discrimination.


      • The amusing thing is their trying to exercise oversight of the CFPB, given that it has it’s own independent funding stream, by design, because the Democrats wanted to prevent the Republicans from threatening to defund it.


        • The CFPB in its early days was staffed almost entirely with leftists, so even if you have a conservative leading it, the culture isn’t going to change all that much.

          But as long as regulation by enforcement action ends, the industry will be able to deal with it.


  2. Worth noting:


  3. I’m happy that it’s now ok to run trains.


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