Morning Report: Shelter in place orders are being relaxed

Posted on April 27, 2020 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2856 28.1
Oil (WTI) 12.71 -4.29
10 year government bond yield 0.63%
30 year fixed rate mortgage 3.43%

 

Stocks are higher this morning on optimism that we have turned the corner on the COVID-19 crisis. Bonds and MBS are down.

 

In terms of economic data, the big number will be the first pass at Q1 GDP will be released on Wednesday. The consensus is that GDP contracted 3.8% as consumer spending falls 1.5%. Trump Administration Advisor Kevin Hassett thinks the economy could contract 30% in Q2.

 

The Fed will have the April FOMC meeting this week, and with rates already at zero, it probably won’t have the impact it normally has. Speaking of the Fed, they are ratcheting back MBS purchases again this week, with only $8 billion a day.

 

It looks like some states are beginning to relax the shelter-in-place orders, and even New York is looking to ease things in mid-May. If these states end up seeing no big uptick in cases, I expect the rest of the country to follow pretty quickly. Especially if the number of deaths settles in under 100k. FWIW, I think if most of the country is back to normal by Memorial Day, we can take the Great Depression II economic forecasts off the table.

 

Ex MBA President wrote a scathing editorial in Housing Wire regarding Mark Calabria and how he is the worst person for the job right now. In Mark’s defense, his job is to protect the GSEs and (and therefore the taxpayer), however Dave is correct that taking a cavalier attitude with non-bank servicers is not the best look right now when (a) the government imposed this forbearance period on everyone and (a) the GSEs are part of the government. If the government goes forward and imposes all of these costs on the industry, the least it can do is help mitigate those as much as it can. Perhaps the aid doesn’t need to come from Fannie and Freddie, but the government should provide it from somewhere.

 

Home price appreciation is slowing, but not dropping yet, according to Realtor.com. Inventory is tight, largely driven by sellers who are pulling their homes off the market. This could be due to fears of not getting the best price, or it could be due to people wanting to keep potentially sick strangers from entering their home.

 

Pulte noted on its Q1 conference call that pricing is holding up, and cancellations are unexpectedly small – about 2% and only due to job losses. Orders on the other hand are weak. In the first week of March, they got over 800 orders. By the last week of March it was 140.

 

Rent strikes are beginning to pop up in NYC. This one is not the usual tenant versus landlord situation where there is a dispute over fixing things. This is meant to be a political statement to goad lawmakers into doing something for renters. Bold strategy, Cotton…

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