Morning Report: Some predictions for 2020

Vital Statistics:


Last Change
S&P futures 3242 -1.25
Oil (WTI) 62.87 -0.74
10 year government bond yield 1.80%
30 year fixed rate mortgage 3.88%


Stocks are flattish this morning as Iranian tensions ease. Bonds and MBS are flat as well.


The trade deficit fell to a 3 year low as imports fell and exports rose. The Trump Administration has said that a Phase 1 deal with China will be signed at the White House on January 15. Separately, the Senate is expected to vote on the new USMCA (the replacement for NAFTA) this month.


The Bernank is suggesting that the Fed not rule out the use of negative interest rates. “The Fed should also consider maintaining constructive ambiguity about the future use of negative short-term rates, both because situations could arise in which negative short-term rates would provide useful policy space; and because entirely ruling out negative short rates, by creating an effective floor for long-term rates as well, could limit the Fed’s future ability to reduce longer-term rates by QE or other means.” He also supported the Fed’s current “makeup” policy where the Fed will allow inflation to run above its intended target for an extended period to “make up” for the past decade where it had run below its target.


Interesting new model for home ownership. Fleq is a Los Angeles based startup that buys homes on behalf of a buyer and rents it back them while offering them the chance to buy it from Fleq bit by bit. It is different than the “rent-to-own” model. The buyer (really a tenant) will pay market rent, which is then reduced as the tenant buys more of the property. If the tenant has 5% equity, they 5% of all taxes and maintenance costs. They also get to treat the property as if they own it, meaning they can paint it how they want, etc. I guess it makes sense for someone who falls in love with a house but can’t get a mortgage at the moment. It allows them to move into the home without having to get a mortgage and lets them repair their credit / income / whatever and then go the traditional mortgage route. Don’t know how much interest there will be in this, but it is a novel concept.


Some predictions for the 2020 housing market. “In 2020, more home-building activity and consequent growth in supply should tame down home price gains,” said Lawrence Yun, the NAR’s chief economist. “That’s a healthy development for potential home buyers. Southern cities should once again do better than most other markets.”. Another: “Real estate fundamentals remain entangled in a lattice of continuing demand, tight supply and disciplined financial underwriting,” said George Ratiu, senior economist at “Accordingly, 2020 will prove to be the most challenging year for buyers, not because of what they can afford but rather what they can find.” Punch line: rates will stay around 3.8%, and existing home sales will fall as fewer properties will be available for sale. Of course, that assumes builders will remain cautious. The NAHB expects single family starts to grow 4% to 920,000, which is still below the number we need to keep up with population and obsolescence. The chart below shows population-adjusted starts by decade:


starts by population



23 Responses

  1. Elizabeth Warren’s bankruptcy reform plan:

    It includes mortgage cram down and student loan discharge.


    • if the government eats the losses on bankruptcy cramdown, it won’t raise mortgage rates. If they expect the creditors to eat it, say hello to higher interest rates and you can kiss FHA mortgages good bye.

      Liked by 1 person

    • What do you think? It doesn’t sound that bad to me, but I could easily be missing something.


      • As a general rule, I want all debt treated mostly the same. Mortgages should be subject to cram down as should autos and student loan debt should be dischargable after a certain period.

        Reducing the availability of loans to marginally qualified people is actually a good thing that will result from this.

        The only thing that leaps out to me is her disparate treatment of local fines vs civil rights violation fines which is virtue signaling to Woke Twitter.


        • well, that would be the end of social engineering via the mortgage market. Because nobody in their right mind is going to make a 97LTV loan to a first time borrower with a 580 FICO without a government guarantee.


        • Another good consequence of it.

          I’d also spin off Freddie and Fannie 100% private with no government backing and move any and all government support of the housing market to the FHA and make it all potential liabilities 100% on budget.

          At the very least Brent, you have a nice hook for your newsletter tomorrow.


        • affordable housing advocates would have a conniption, and they are a big part of the D party’s base.


        • I don’t think they accept the linkage so there won’t be a conniption over the plan, just the results.

          Which they’ll blame on racism.


        • I don’t think cram down will be quite as big of a deal as it’s made out to be if:

          1. The borrower is delinquent anyway.
          2. They are likely to go into foreclosure anyway.
          3. The cram down is really to the fair market value of what the lender would have gotten if they had foreclosed, repossessed, and then resold the property.

          Under those circumstances, they’ve just saved a bunch of hassles and fees because the difference in the loan vs the property value that’s crammed down would be discharged anyway.

          Edit: The other important thing is the creditors get a day in court to challenge those things in front of the judge vs dealing with pressure from regulators to forebear “voluntarily”.


    • More detail from her actual write up:

      View at

      & NY Times:


  2. It’s crazy to watch PL defend Soleimani as a good guy who was just serving his country.


  3. Perfect:

    “The Ladies Who Launch Lingua Franca and the rise of the resistance socialite.
    By Marisa Meltzer

    One office of the fashion brand Lingua Franca is in a warren of spaces below the Jane Hotel, where Diane Jaffe, an embroiderer, is working on a white sweater with WE THE PEOPLE stitched in red and blue thread that will sell for $380.”


    • A: I agree with Pelosi. We are 100% responsible for Iran launching missiles at US troops.
      B: We were also responsible for German troops shooting at us when we stormed the beaches at Normandy. Japan was responsible for us nuking two of their cities. This is the story of armed conflict.
      C: So frackin’ what?

      Responsibility doesn’t matter. Winning or losing matters.


  4. Love Nerdrotic (being a big frackin’ geek myself). And this is a great video on Ricky Gervais at the Golden Globes. And he observes something very interesting about the critic take on the GG (and it seems that the primary requirement for becoming an entertainment critic in the present era is wokeness)–they all criticize Gervais as being “boring” and “irrelevant” and “unfunny” and so on.

    Which is an interesting approach. Also feels like there’s some kind of Journo-list for woke critics, because they were all on the “yawn” bullet point, as if it was generally decided that being dismissive and eye-rolling was a better strategy than anger. Some even argued that nothing he said was “daring” or “new” and indicated it was all tired and old, when it seemed like a breath of fresh air in Hollywood, to me. Eh, interesting.


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