Morning Report: The MBA revises its origination forecasts

Vital Statistics:

  Last Change
S&P futures 3610 2.6
Oil (WTI) 41.73 0.31
10 year government bond yield   0.87%
30 year fixed rate mortgage   2.84%

Stocks are flattish despite positive vaccine news. Bonds and MBS are up.

Housing starts rose 14% YOY to 1.53MM in October. Building Permits were up 2.8% compared to a year ago. Starts fell in the Northeast, but were up pretty much everywhere else, especially the South. Meanwhile, the NAHB Homebuilder Sentiment Index hit another record high.

The MBA revised upward its 2020 and 2021 origination forecasts. As a general rule, the MBA is conservative on origination forecasts. 2020 is now expected to be $3.4 trillion and 2021 is now expected to come in at $2.6 trillion. Interestingly, the MBA still thinks refi activity in 2021 will be below $1 trillion. They expect the 30 year fixed rate mortgage to end 2020 at 2.9% and then rise to 3.4% by the end of 2021. As I discussed in yesterday’s note, the Fed has a real incentive to maintain mortgage rates as low as possible to support the economy. The last thing it needs is for home prices to fall as rates rise.

One thing market participants need to understand is that the bond market, at least as it relates to mortgage rates, is not a market. The Fed is engineering rates by purchasing mortgage backed securities. Forget about inflation expectations, trade flows, etc. They don’t matter. Here is what you need to know. The economy is weak. The Fed’s playbook is to support the economy by supporting asset prices. Residential Real estate is the biggest asset most people own. The Fed doesn’t want to risk weakening the economy during a pandemic by letting mortgage rates rise. For mortgage bankers, this couldn’t be a better set of circumstances, although those that retain servicing will probably have a bumpy road ahead.

Mortgage applications were flattish last week as purchases rose 4% and refis fell 2%. There wasn’t an adjustment for the Veterans Day holiday. “Mortgage market activity was mixed last week, despite the 30-year fixed rate mortgage staying below 3 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The purchase market recovered from its recent weekly slump, with activity increasing 3 percent and climbing above year-ago levels for the 26th straight week. Housing demand remains supported by the ongoing recovery in the job market, and an increased appetite from households seeking more space because of the pandemic.”

21 Responses

  1. Quality reporting at Slate. In North Carolina the race for Chief Justice of the State Supreme Court – an elected position, apparently – is very tight and going to a recount. How does Slate headline its story?

    North Carolina’s First Black Female Chief Justice May Lose Her Seat to Aggrieved White Colleague

    Like

    • Whether or not the article is factually correct the headline definitely fits it.

      Like

    • The North Carolina Supreme Court has confronted systemic racism, reckoned with the state’s Confederate history, and protected voting rights under the leadership of Cheri Beasley, the first Black woman to serve as its chief justice. Beasley is currently trailing her challenger, Paul Newby, by just 406 votes out of nearly 5.4 million cast. The race will now head into a recount. Newby, a white male Republican who serves on the court alongside Beasley, has loudly and frequently objected to the court’s clear-eyed acknowledgment of racism, using his dissents to attack Beasley, a Democrat, as a judicial activist. If Newby wins, his victory will be a major setback for racial justice in North Carolina.

      Basically it’s a hostile campaign screed for Cheri Beasley. But when all the big papers go left, what’s a venue like Slate left to do? They have to go even further.

      Alarmed by Robinson’s success and worried that the statistics he presented would prevent the state from executing any Black person, the newly Republican-controlled legislature narrowed the RJA’s scope and limited inmates’ ability to use statistical evidence to show systemic racism.

      Yes, I’m sure that’s what the Republican legislature was most concerned about–they were terrified they would never be able to execute another black person.

      That being said: The legislature then repealed the whole act in 2013, cutting short the appeals in process and reinstating the death sentences that had already been overturned.

      That seems a little unfair.

      In the wake of the election, Newby has adopted a Trump-like position on voter fraud, asserting without evidence that the state has counted illegal ballots that detract from his total.

      Talking about voter fraud while intoning the words “without evidence” apparently is a mandate for all left-of-center righters.

      If you do a count of times the term “without evidence” comes up in recent days compared to the rest of journalistic history, I think you’ll find we’ve far exceeded all previous uses of the term in the last three weeks or so. I imagine there was a modest spike during the Trump term, but I’d be you couldn’t get find an example during Gore’s Florida fight in 2000, or in a story reporting on minority voter suppression–though such accusation typically have considerably less evidence (or at least no more) than accusations of fraud.

      Had voters delivered a resounding defeat to Newby, they would have demonstrated that white male candidates can no longer rely on thinly veiled race-baiting. Instead, they split almost evenly, and the race will come down to the wire. If Beasley loses, the North Carolina Supreme Court’s liberal bloc will hold a bare 4–3 majority, since her Democratic colleague, Justice Mark Davis, lost his seat. The future of the court remains uncertain.

      Yes, that’s how all white people win their elections: thiny vieled race-baiting. Or all Republicans, anyway. Also, the lamentation that the liberals will hold a bared “4-3” majority. I’m amazed at the amount of people lamenting that, though they won, they didn’t win enough.

      Like

      • KW:

        Talking about voter fraud while intoning the words “without evidence” apparently is a mandate for all left-of-center righters.

        This new innovation the media has come up with for framing stories within the approved narrative is so tiresome. I would love to do a media-wide accounting of use of the phrase “without evidence” or its equivalent with regard to claims made by politicians before and after 2016, as it has clearly exploded in the Trump era.

        I read a Bloomberg news story the other day that used the phrase “without evidence” or its equivalent 3 separate times to characterize various claims made by Trump, including in one instance a prediction about a future event! I wrote to the author and his editor pointing out that predictions about future events are by their very nature “without evidence” since, it being about something that has not yet happened, no evidence could possibly exist. I suggested that politicians routinely make claims about what will or won’t happen in the future if a given policy is or is not adopted, but Bloomberg does not regularly characterize such claims as being “unsubstantiated” or “without evidence”, so why in this case? I also pointed out that, elsewhere in the article, the author quoted Democratic claims about Trump’s nefarious motives, claims that themselves came with no evidence but were not labelled as such, so what gives?

        I closed with this:

        “As it stands, the only common thread that I can find to your use (or exclusion) of these kinds of characterizations is President Trump. Assuming that the Bloomberg stylebook does not reserve them exclusively as descriptors for claims of President Trump (does it?), what exactly is the standard applied when attaching them to reports of what other people have said?

        Thanks for your help.”

        Unsurprisingly, I haven’t heard back. It is entirely possible, I suppose, in this age of openly partisan journalisming, that the stylebook does indeed limit the use of the phrase to Trump claims only!

        Like

      • @scottc1: This new innovation the media has come up with for framing stories within the approved narrative is so tiresome

        Agreed. I though I didn’t care much for the press before but my dismissive disdain has turned into outright antipathy. Almost anything I see from the press now feels like a scam artist trying to bilk me, and I have a similar emotional reaction.

        These stories feel little different to me than a Nigerian prince asking for my bank account number so he can send me $20 million.

        I feel like even casual or readers biased in the same way are going to get tired of the framing. When I read people who I ostensibly agree with but are too heavy-handed in the framing, it gets annoying and I stop reading. Especially if my expectation is that I’m reading news or expert opinion. Even if you agree, there’s some inherently “talking down” about the need to preface every Trump claim as being “without evidence”.

        Also tired of pundits that can read minds and will tell us what people are thinking and feeling and what their motivations are. News has converted into opinion and opinion punditry has converted into the improvisational writing of political fan-fiction.

        Like

  2. From Volokh:

    11/18/1811: Justice Gabriel Duvall takes judicial oath. Professor David P. Currie said that an “impartial examination of Duvall’s performance reveals to even the uninitiated observer that he achieved an enviable standard of insignificance against which all other justices must be measured.”

    Liked by 1 person

  3. Just an FYI regarding Gov Newsome. Below is a quote from a California daily briefing I receive everyday. He’s getting blistered by supporters and foes alike. He may be a hypocrite but not all of his supporters are.

    Anger over the perceived hypocrisy of California lawmakers continued to boil over Wednesday, as newly published pictures raised doubts about Gov. Gavin Newsom’s claim that his French Laundry dinner was held outdoors and the names of more lawmakers attending a Maui junket surfaced.

    The photos in question, which were first published by Fox 11 Los Angeles on Tuesday night, show a group of 12 people representing six households sitting at a table in a private dining room with a roof, three walls and another wall open to the outside with sliding glass doors. The woman who took the photos told Fox 11 that at one point the sliding glass door was closed, but that detail has yet to be confirmed.

    [Read the story: “Photos raise doubts about Newsom’s claim that dinner with lobbyist was outdoors amid COVID-19 surge” in the Los Angeles Times]

    To add insult to injury, two top officials from the California Medical Assn. — a leading organization representing doctors in the state — were among those in attendance at the dinner, which was held to celebrate lobbyist Jason Kinney’s 50th birthday. Newsom apologized for attending the dinner on Monday, saying he should have practiced what he preached and again asking Californians to “minimize mixing” with other families.

    [See also: “Newsom, legislators face anger over party and Hawaii trip” in the Los Angeles Times]

    As our Sacramento bureau chief John Myers writes, “The timing of both gatherings — Newsom attended the party at an exclusive Napa Valley restaurant on Nov. 6, legislators are in Maui this week — could not have been worse in terms of political symbolism.”

    The state also issued a travel advisory Friday urging all Californians to avoid nonessential travel to other states, lest they further the spread of the virus. All of which intensifies the anger over the decision made by more than half dozen a California lawmakers to attend an annual policy conference at a luxury Hawaiian resort this week.

    [Read the story: “Facing increasing criticism, California legislators defend Hawaii trip during COVID-19 surge” in the Los Angeles Times]

    As my colleague Patrick McGreevy reports, the conference — which is sponsored by the Independent Voter Project and held at the Fairmont Kea Lani Hotel in Wailea — has faced criticism in the past because it is partly financed and attended by special interests, including businesses and labor groups, that lobby legislators.

    The complete tally of California lawmakers who are at the conference remains unclear. But those in attendance include Assembly members Blanca Rubio (D-Baldwin Park), Wendy Carrillo (D-Los Angeles), Jordan Cunningham (R-Paso Robles), Heath Flora (R-Ripon), Frank Bigelow (R-O’Neals), Chad Mayes (I-Rancho Mirage) and state Sen. Andres Borgeas (R-Modesto).

    Carrillo’s presence at the conference was confirmed after she seemingly forgot to disable location sharing on a tweet thanking her district for reelecting her. Her district spans from East L.A. to Echo Park, and the tweet was sent from Kihei, a beachfront town about 15 minutes from the Kea Lani.

    The opulence of both indiscretions — a nine-course dinner at a world-famous restaurant and several days at a Hawaiian resort where even the street-view rooms will set you back upward of $500 a night — certainly adds salt to the wound. Many Californians have been financially devastated by the pandemic, and the latest round of restrictions puts even more businesses and livelihoods in jeopardy.

    But the true offense goes far beyond the tropical mai tais or wine country small plates. We remain in the midst of a public health emergency in which the rippling effects of individual actions and gatherings will determine our collective safety. By publicly flouting state guidelines, our leaders have put the credibility of that very guidance at stake — right at the moment when they (and we) need it most.

    Liked by 1 person

    • To me it’s less about the straightforward hypocrisy, which all politicians engage in regularly, than his actions show that he doesn’t really believe the threat is at the level of his public statements.

      Otherwise he never would have put himself and his wife in that position.

      Ditto with the Hawaii trip.

      Liked by 1 person

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