Morning Report: Appraised value and homeowner perception gap widens

Posted on March 13, 2019 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2802 5
Eurostoxx index 374.06 0.81
Oil (WTI) 57.27 0.47
10 year government bond yield 2.62%
30 year fixed rate mortgage 4.28%

 

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

 

Inflation at the wholesale level came in below expectations, mirroring the consumer price index. The headline PPI rose 0.1% MOM / 1.9% YOY. Ex-food and energy the index rose 0.1% / 2.5% YOY.

 

Mortgage Applications rose 2.3% last week as purchases rose 4% and refis fell 0.2%. The MBA noted an uptick in FHA activity. “Purchase applications have now increased year-over-year for four weeks, which signals healthy demand entering the busy spring buying season. However, the pick-up in the average loan size continues, with the average balance reaching another record high. With more inventory in their price range compared to first-time buyers, move-up and higher-end buyers continue to have strong success finding a home.” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.

 

The gap between a homeowner’s perception of their home’s value and the number that the appraiser comes up with is starting to widen a touch. The Quicken Home Price Perception Index fell slightly in February, although the difference between perception and appraisal is pretty tight historically. For most MSAs, appraisals are coming in higher than homeowners expect, which is good news for the cash-out refi business. Given the direction in interest rates, home price appreciation is going to drive refi activity going forward.

 

Quicken HPPI

 

Wells Fargo CEO Tim Sloane appeared before the House yesterday to get called on the carpet for aggressive sales practices. “We have gone above and beyond what is required in disclosing these issues in our public filings, we have worked to remedy these issues, and, most importantly, we have worked to address root causes that allowed them to occur in the first place,” Sloan said in his written testimony to the House Financial Services Committee. “As a result, Wells Fargo is a better bank than it was three years ago, and we are working every day to become even better.” he said in a written statement.

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28 Responses

  2. markinaustin, on March 13, 2019 at 10:07 am said:

    Adler, the famous Viennese psychiatrist of the early twentieth century, consulted with the Austrian prison system on reforming crooks. He expected to find them mainly irrational. Instead, he found that repeat burglars and bank robbers were highly rational, but without conscience, and he concluded that old age would be the primary deterrent to their continued law breaking.

    No crime could be more irrational than bribing someone or committing a fraud to launch your unprepared teenager into four years at a competitive university. The fact is that while your graduate or professional school credentials may open some doors, the prospects from your undergraduate education rely largely on your diligence as a student.

    Here are some examples. From Money magazine: “Overall, the Fortune 500 crew attended 220 different colleges for their undergraduate degrees.”

    The article goes on to point out that Penn State, Wiscy, aTm, Miami of OH [a public liberal arts college!] and some other publics have more F500 CEOs than Yale or MIT or Vandy.

    Several of these vain idiot parents wanted their kids at USC, certainly a highly reputable if very pricey private. US News points out that in the same labor market graduates of inexpensive public Cal Poly San Luis Obispo earn starting salaries that average $4k more than USC grads.

    Again, I will concede the value of a Harvard MBA or a Yale Law degree. But undergraduate? Hell, one of these idiot mothers was afraid her daughter, who I think is flunking out of USC, was too fine for Arizona State, a university with literally tens of thousands of successful alums. Of course, she probably would have flunked out of ASU very quickly, as publics generally do not coddle drunks and absentees.

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    • Brent Nyitray, on March 13, 2019 at 10:13 am said:

      with grade inflation, do people even flunk out anymore? I thought everyone gets As and Bs.

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      • markinaustin, on March 13, 2019 at 10:23 am said:

        Not at most public universities. I will bet that Wiscy is still giving a lot of Cs and lower, Brent.

        At UT, STEM, Biz, and Arch are all ridiculously competitive. Bs can be attained if you do your work diligently, but As? Highly unlikely.

        Brent, my cousin Tom, a network consultant who owns a successful business, has twice been Baltimore’s entrepreneur of the year. U Wash Seattle grad. He and his closest college buddy, who is a Silicon valley CEO, both agree that they get better employees in tech from research publics than from Stanford or Hopkins, for example, because grade inflation makes it impossible to compare the private school grads credentials. Also, some private school grads act entitled as newbies. MIT and Caltech are exceptions – privates without grade inflation.

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        • ScottC, on March 13, 2019 at 6:34 pm said:

          Mark:

          Not at most public universities. I will bet that Wiscy is still giving a lot of Cs and lower, Brent.

          I’d like to see the research on that. Without having seen it, I would bet that there is pretty much no difference in grade inflation between public universities and private ones. Why would there be?

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        • markinaustin, on March 13, 2019 at 11:49 pm said:

          Here is a study that says the differential is not very great, although the private schools certainly lead.

          http://www.gradeinflation.com/

          There is the thought that most private schools have a keen interest in keeping the customers happy while many if not most publics are far less consumer friendly. Drop out rates at Ivies are very low compared with drop out rates at leading state universities, in part because the Ivy parents are seen as consumers and donors.

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    • Let the mutherfuker burn!, on March 13, 2019 at 10:19 am said:

      State Universities LOVE out of state students, they’re not subsidized and pay full tuition plus housing. They get quite a bit of leeway vs instate students.

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      • markinaustin, on March 13, 2019 at 10:29 am said:

        George, that may be largely true. However, I think most public unis are VERY selective on OOS students because they have low quotas for them, as demanded by the legislatures. That’s a trade off, I guess.

        Addendum from an observation from my sister, retired UNC prof. UNC has so few OOS openings available that they do not waste them on National Merit Scholars, but use them in the Athletic Department.

        This fits exactly in the Venn overlap of what you wrote and what I wrote!

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        • ScottC, on March 13, 2019 at 6:23 pm said:

          Mark:

          Addendum from an observation from my sister, retired UNC prof. UNC has so few OOS openings available that they do not waste them on National Merit Scholars, but use them in the Athletic Department.

          My youngest daughter was a National Merit Scholar and UNC wasted an OOS opening on her. (She declined, BTW.)

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    • jnc4p, on March 13, 2019 at 12:04 pm said:

      “Again, I will concede the value of a Harvard MBA or a Yale Law degree. But undergraduate? ”

      I think you are discounting the networking opportunities. Everyone also sees themselves as the dorm room sidekick to the next Zuckerberg or Gates who gets paid just for being there at the inception.

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      • markinaustin, on March 13, 2019 at 1:21 pm said:

        Everyone also sees themselves as the dorm room sidekick to the next Zuckerberg or Gates

        So, a Veblen Good?

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        • jnc4p, on March 13, 2019 at 2:31 pm said:

          Yep. (Had to look it up). Ivy league degrees have value precisely because of their exclusivity.

          If it was about education, they would live stream every class in a manner similar to the Khan Academy.

          Then everyone with an internet connection could have a shot at a Harvard education.

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    • ScottC, on March 13, 2019 at 7:06 pm said:

      Mark:

      The fact is that while your graduate or professional school credentials may open some doors, the prospects from your undergraduate education rely largely on your diligence as a student.

      I don’t think that is true at all. Lots of firms will recruit primarily or even exclusively at the Ivies and a select few others in the top tier for reputation. Yes, diligence as a student matters, but if you think that the name of the school on your diploma doesn’t matter much at all, particularly in the immediate years after graduating, I think you are fooling yourself.

      Here are some examples. From Money magazine: “Overall, the Fortune 500 crew attended 220 different colleges for their undergraduate degrees.”

      I don’t think it makes much sense to draw conclusions about the brand value of a school based on the tiny and rarified demographic of Fortune 500 CEOs. A vanishingly small percentage of people from any college are ever going to become a CEO at all, much less a CEO of a fortune 500 company. It’s kind of like concluding that it doesn’t matter whether an aspiring basketball player plays at Kentucky or SUNY Buffalo based on the fact that LeBron James didn’t go to college at all.

      Also, by the time someone rises to the level of CEO, the value of his college degree has long since been overwhelmed by all kinds of other factors. So, again, it doesn’t make much sense to me to look at where CEOs went to college as a metric of the relative value of various college names. For people whose sole achievement in life so far is nothing more than having graduated from university, the name and reputation of the university is of course going to be infinitely more important than for someone with 20 or 30 years of actual work experience doing something.

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  3. jnc4p, on March 13, 2019 at 12:06 pm said:

    Interesting how much effort the left puts into attacking the concept of merit.

    “The Moral Center of Meritocracy Collapses

    Family life itself has become part of the battleground of the classes.
    12:02 PM ET
    Matthew Stewart”

    https://www.theatlantic.com/ideas/archive/2019/03/college-bribe-scandal-about-class-inequality/584797/

    If anything, the fact that the FBI was involved with this and charged people criminally shows that the “moral center” of meritocracy is alive and well. The fact that a system doesn’t always live up to it’s professed standards isn’t something new. The test is how that system addresses those shortcomings.

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    • Brent Nyitray, on March 13, 2019 at 12:07 pm said:

      “Interesting how much effort the left puts into attacking the concept of merit.”

      Of course. If merit doesn’t exist, then success is random. And if success is random, then it makes sense to redistribute everything equally.

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    • markinaustin, on March 13, 2019 at 12:52 pm said:

      The fact that a system doesn’t always live up to it’s professed standards isn’t something new. The test is how that system addresses those shortcomings.

      Absolutely, and well said.

      Liked by 1 person

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    • Let the mutherfuker burn!, on March 13, 2019 at 1:29 pm said:

      But is the system addressing it? I see law enforcement is, and frankly, I’m not sure it should even be a law enforcement priority, but I don’t see these institutions exercising oversight of their admissions criteria. If anything they use every legal tactic available to them to keep their criteria from the public.

      To me, this scandal is on par with the Feds investigating NCAA recruiting violations. A monumental waste of taxpayer money to prop-up a select few’s past-time.

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    • Brent Nyitray, on March 13, 2019 at 2:18 pm said:

      Am I the only one who isn’t all bent out of shape about this?

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      • novahockey, on March 13, 2019 at 3:18 pm said:

        I’m following for the lulz, but otherwise, this really is just another episode or Real Housewives.

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      • novahockey, on March 13, 2019 at 3:20 pm said:

        “But we shouldn’t lose sight of the fact that this scandal, like so many others, is firmly rooted in rising inequality and the class system that has come with it.”

        I disagree with this though. We treat college admissions — not education mind you — as an inelastic good. So it’s no wonder that some will go to these measures to secure a slot in at a school with some perceived value

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        • Kevin S. Willis, on March 13, 2019 at 5:59 pm said:

          I definitely disagree with the “rising” part. Rich folks have been buying their kids way into things since the first rich guy had more grain or goats or whatever than everybody else.

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  4. Let the mutherfuker burn!, on March 13, 2019 at 8:30 pm said:

    This broad has balls.

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    • jnc4p, on March 14, 2019 at 2:15 pm said:

      Wow, the lack of self awareness is impressive. I do think the overly moralizing tone that she puts out won’t wear well over time.

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