Morning Report: Refinances up 80%

Vital Statistics:

 

Last Change
S&P futures 2778 -81.25
Oil (WTI) 33.00 -1.49
10 year government bond yield 0.71%
30 year fixed rate mortgage 3.37%

 

Stocks are after the Bank of England cut interest rates by 50 basis points. Bonds and MBS are up.

 

Coronavirus update: 120,000 worldwide, cases in the US breaches 1,000. A big pocked in the US centers around Westchester County in New Rochelle.

 

Washington is working on some sort of fiscal stimulus to support the economy while we deal with the Coronavirus. Republicans are pushing for a payroll tax holiday while Democrats want paid sick leave. They will probably come to some sort of deal. What politician doesn’t like to spend money in an election year, especially with an excuse as bulletproof as this?

 

Speaking of politics, Joe Biden is looking more and more like he will be the D nominee.

 

The MBA has raised its 2020 origination forecast to $2.6 trillion from $2.1 trillion. 2019 volume was $2.2 trillion. Refis are forecast to increase to $1.2 trillion, while purchases are expected to come in at 1.4 trillion.  “This month, our forecast is for mortgage rates to average around 3.4 percent for 2020, and we have revised our refinance forecast to a total of $1.2T for 2020 roughly double our previous forecast of $665B,” they said. “The revised refinance estimate is a 37 percent increase in refinance volume in 2020 relative to 2019. Additionally, we expect purchase originations to be stronger in 2020, showing an 8 percent increase for the year given the strength in new residential construction and in purchase applications to date. ”

 

Separately, mortgage originations increased 55.4% last week as purchases rose 6% and refis rose 79%. “Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Homeowners rushed in, with refinance applications jumping 79 percent–the largest weekly increase since November 2008. With last week’s increase, the refinance index hit its highest level since April 2009.”

 

The consumer price index rose 0.1% MOM in February and is up 2.3% on a YOY basis. Ex-food and energy it rose 0.2% MOM and 2.4% YOY. Of course with the Fed knocking on ZIRP’s door, the inflation numbers are completely irrelevant to the bond market.

 

Mortgage credit availability dipped in February. “Mortgage credit supply decreased in February, as both conforming and jumbo segments of the market saw a decline,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “There were also reductions in ARM program offerings, as well as in low credit score programs offered by investors. Last month’s activity was the calm before the storm. Mortgage rates dropped steeply in the last week of February and a large surge of refinance activity followed. Investors may adjust their future mortgage credit offerings based on the sudden upswing in demand.” With pipelines full, many mortgage bankers are simply saying no to new loans.

35 Responses

  1. I had not thought the marginal analysis on refis had reached the point where with closing the loan costs the savings would be significant for most folks, but my appraiser buddy says that it has, but what he is seeing is folks maintaining the same payment level but pulling cash by raising the amount of the mortgage. Small sample, but what do you know, Brent? I would prefer people used the opportunity to pay down the mortgage faster, but I don’t need the cash, so I don’t get my druthers.

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    • a lot of people are doing this and using the cash to pay off higher rate debt like credit cards.

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      • I just did it and rates dropped. Because of course they did. My payment is up non-trivially, but I took out a wad of cash and shaved 5 years off the mortgage. Mainly because the interest rate difference between the 30 year and a 20 year was enough to justify paying an extra $170 a month.

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  2. I don’t know how true this is but if it is, and he knows what he’s talking about, that’s a lot of sick Americans overwhelming our ability to care for them.

    The attending physician of Congress and the Supreme Court, Brian Monahan, briefed Senate staff on Tuesday afternoon in a closed-door meeting and said that he expects 70 million to 150 million people in the U.S. will contract the coronavirus, two sources tell NBC News.

    He went on to say that 80% of people would be just fine.

    https://www.nbcnews.com/health/health-news/live-blog/coronavirus-updates-live-u-s-cases-top-1-000-spread-n1155241

    I also have a sense today that Trump will be looking for a much larger stimulus than he probably actually wants. R’s in the Senate are beginning to think so too. We may get something before their break.

    Here in CA the majority of the cases are in Central CA…………around SF. We have several cases in Riverside County where I live but I don’t know exactly where. I continue to be worried about my daughter (in SF) and Walter. Her boss is letting her work from home, as are several other of her fellow employees. They’ve also cancelled all events until further notice. My daughter arranges most of those events for folks with disabilities and so they’re being careful with their health.

    We’re still going to the store, post office etc and doctor’s appointments or whatever. We’re getting together with friends this weekend, our age, for dinner and a card game. Otherwise, we’re sticking close to home. It looks like our plans for my birthday and Easter, with the girls and families flying in will be cancelled. I’m obviously sad about that because I’m dying to see my little grandson.

    Looks like the market took another dive. Walter’s becoming worried about a recession. Any opinions on that Brent or anyone?

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  3. Welp, they shut down the Houston Livestock and Rodeo.

    Liked by 1 person

  4. More college closings. Numbers out of Italy are disturbing:

    “Italy confirms almost 200 deaths in 24 hours

    Almost 200 people died from the coronavirus in 24 hours, Italy’s Civil Protection Agency confirmed Wednesday — the highest daily increase in absolute terms registered anywhere in the world since the respiratory illness emerged in China at the end of last year.

    In response, the country’s prime minister, Giuseppe Conte, told reporters the government would allocate 25 billion euros ($28.3 billion) to help mitigate the impact on the fragile economy. Only a week ago, he estimated it would need just 7.5 billion.

    From Tuesday to Wednesday, 196 people died, bringing the total number of deaths to 897, the Civil Protection Agency said in a statement. Confirmed cases across the country rose to 12,462 from a previous 10,149.

    After an initial lockdown in the north failed to prevent the spread, the government on Monday banned all nonessential travel and public gatherings throughout Italy until April 3, halted all sports events and extended a shutdown of schools.”

    https://www.nbcnews.com/health/health-news/live-blog/coronavirus-updates-live-u-s-cases-top-1-000-spread-n1155241/ncrd1155806

    That translates into a 7% mortality rate I believe, not .07, i.e. 897/12462.

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    • jnc:

      That translates into a 7% mortality rate I believe, not .07, i.e. 897/12462.

      Yes but the number of cases is almost certainly underestimated, probably by a lot. The actual mortality rate is probably much lower.

      Liked by 1 person

      • Italy has an aged demographic. One recent estimate I saw at a medical site was zero mortality for children and 20% mortality for 80+ YOs.

        Our zero mortality granddaughters live with us. Everybody is washing hands all the damned time now in my house.

        Liked by 1 person

  5. Name a better song featuring bongos than The Yardbirds For Your Love.

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    • planet caravan

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      • Ok, it’s good and Tony Iommi’s background guitar really sets the mood. Plus, Paranoid ranks up there as one of the greatest rock albums of all time, Paranoid, War Pigs, Fairies Wear Boots and Iron Man? C’mon man!

        That being said, I think For Your Love incorporates the bongos better in a catchier, albeit “poppier” manner. I’m willing to consider – consider, mind you, that it’s the #2 song to feature bongos.

        But it would be a distant second.

        By the way, is there a better mood evoking song than War Pigs?

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  6. Dude………..Trump read his speech and honestly………….I’d almost rather have the “asshole” Trump, he sounded like a robot!. Nothing new and yeah the only news is we have lots of new positives and maybe, maybe the small businesses in the USA will get some relief!

    Liked by 1 person

    • He’s terrible at reading speeches, agreed. Very Jeb-like low-t. The number of infections will explode as testing becomes more frequent, so brace yourself for another media meltdown.

      The good news Though is that as the infection rate grows the death-rate will decrease.

      And fingers crossed on a payroll tax suspension, I love my money!

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      • it is funny listening to CNN right now as all the hacks coordinate their talking points live time.

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        • Unfortunately our President didn’t do himself or the country any favors last night with his speech. Lots of confusion internationally and some people are paying $20,000 for a flight home. He definitely blind sided the rest of the world. He could have told us what’s going on with the slowness of testing and results. Trading was temporarily halted again before the bell so I’d say he’s got a tough road ahead of him, much of it his own fault. It’s all pretty discouraging to be honest.

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        • lms:

          It’s all pretty discouraging to be honest.

          I genuinely don’t understand why anyone would place so much hope and expectation on the actions of a single politician in a far away place. The idea that any president, whether you love him or hate him, can Do Something to fix problems like this is, I think, highly misguided.

          I was never disappointed by anything Obama did, because I never expected him to do anything to solve my problems or worries. I recommend that you adopt a similar approach to Trump, and indeed any other politician.

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        • Scott, I expect him to act like a world leader. I don’t personally expect anything from him.

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        • lms:

          Scott, I expect him to act like a world leader.

          I reconciled myself to the way Trump “acts” a long time ago. Personally all I really care about is what he does or doesn’t do as a matter of policy.

          In the current environment from a political point of view I think it is a bit of a catch-22 between addressing the virus and addressing the markets. I think that if the priority is to stop the spread of the virus, then the only real solution is to do exactly what the markets fear most, ie shut down most economic activity for some period of time. That is why I don’t think it makes sense for people to complain that he isn’t “doing something” about the virus while at the same time complaining that he is spooking, or at least isn’t calming, the markets.

          It seems to me that the one thing the the president, as president, could have done to actually control the spread of the virus in the US would have been to close the borders and declare martial law to put an end to the free movement of people….a month ago. Imagine how the markets (not to mention Democrats!) would have reacted to that!

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        • Scott, I don’t know about shutting down the borders and martial law a month ago, it probably would have shocked the economy even more than what is happening right now but I’m not that versed in economic matters.

          He definitely should have taken the threat more seriously and since we know the only effective way to stop the spread of the virus is by social distancing……………..that really should have been the word from day one in a big way. It seems to me it would have been impossible to shut the rest of the world out considering the amount of global travel, cargo and even cruise ships. I think the first death was from community spread rather than exposure through travel.

          The testing mess was a disaster and while the CDC seems to be mostly to blame for that I wonder if his purported lack of confidence in science played a part. I seem to remember it took him a long time to staff his science/medical advisers.

          I don’t know anything really but his mouth needs to close for awhile…………….haha

          Do you think there should be some kind of economic stimulus at all or just let the chips fall? I always think of you as a survival of the fittest kind of guy……………;-)

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        • lms:

          since we know the only effective way to stop the spread of the virus is by social distancing……………..that really should have been the word from day one in a big way.

          I suspect you rate the power of the bully pulpit a lot more than I do when it comes to this kind of thing. I suspect that the only thing that was going to produce meaningful “social distancing” would have been 1) government commands (involuntary) or 2) increasing panic (voluntary). And if, a month ago, Trump had taken steps to produce either one of those things, he would have been roundly vilified.

          Besides which, there is/was nothing stopping state and local officials from promoting “social distancing”. What steps did the mayor of San Fran or the governor of California take a month ago to effect “social distancing” and prevent the outbreaks that are now happening? Did they fail to take the threat seriously enough?

          I just have no time for the tedious if inevitable blame Trump narrative.

          I wonder if his purported lack of confidence in science played a part.

          I doubt media narratives about Trump played any part.

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        • lms:

          Do you think there should be some kind of economic stimulus at all or just let the chips fall?

          I’m not sure that stimulus will do anything unless and until panic over the spread of the virus subsides. Once that happens, we can take stock, look at the economic damage that has been done, and decide what to do. But until then, I think it will be like pushing on a string. You can’t spur an economy when everyone is (perhaps rationally) “socially distancing” themselves from everyone by staying at home.

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        • I just have no time for the tedious if inevitable blame Trump narrative.

          Got it

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    • Speech was awful. You could hear Reagan rolling over in his grave.

      Has anyone ever missed Obama more after that speech? Low point for his presidency, IMO, given the nature of what we’re facing and how important the psychological factor is here.

      Time for the Democrats to pounce and be The Party of Action to Save America!

      Will they do it? I’m guessing no.

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  7. Nova, is there any specific companies that will benefit the most from a shift to telemedicine?

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  8. Of interest:

    View at Medium.com

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