Morning Report: Disappointing economic data

Vital Statistics:

 

  Last Change
S&P futures 3962 6.4
Oil (WTI) 63.88 -1.56
10 year government bond yield   1.60%
30 year fixed rate mortgage   3.26%

Stocks are flattish this morning as we begin the March FOMC meeting. Bonds and MBS are up small.

 

Retail Sales fell 3% in February after a strong January. The retail sales control group, which excludes volatile items like autos, gas and building products fell 3.5%. While these numbers were a disappointment, January’s numbers were revised upward, which takes out some of the sting.

 

Another disappointing economic report. Industrial Production fell 2.2% in February, while the Street was looking for a 0.5% gain. Manufacturing Production fell 2.2% and capacity utilization slipped from 75.5% to 73.8%.

 

New home applications fell 9% in January, however they were up 9.2% from a year ago. “The economy and job market continue to improve, but new home sales activity slowed in February. Builders continue to be confronted with rising input costs and a lack of available lots, causing them to slow production,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Applications for new home purchase mortgages decreased last month but remained over 9 percent higher than a year ago, and MBA’s estimate of new home sales, at 748,000 units, was at its slowest annual pace since May 2020. After seven consecutive months of a strong 800,000-unit sales pace, supply and demand imbalances are likely creating bottlenecks.”

 

5.8% of all mortgages were at least 30 days delinquent in December, according to data from CoreLogic. This is up 2.2 percentage points from a year ago. The worst states for delinquencies are the Deep South and the Mid-Atlantic. Louisiana, Mississippi, NY, NJ, and Maryland were the top 5 states. Below is a chart of delinquencies. Foreclosures are being held down due to government actions, so those numbers will definitely be going up once the restrictions are lifted.

 

The number of loans in forbearance fell to 5.14% from 5.2% a week ago. “One year after the onset of the pandemic, many homeowners are approaching 12 months in their forbearance plan,” said MBA Chief Economist Mike Fratantoni. “That is likely why call volume to servicers picked up in the prior week to the highest level since last April, and forbearance exits increased to their highest level since January. With new forbearance requests unchanged, the share of loans in forbearance decreased again. Homeowners with federally backed loans have access to up to 18 months of forbearance, but they need to contact their servicer to receive this additional relief.”

22 Responses

  1. Brent, my first mortgage was with Farm and Home Savings of Nevada Missouri – @1972. Its biggest market was Texas. It did not survive the S&L nightmare that hit the SW in the late 80s, and closed forever in the early 90s.

    But it did survive the Great Depression. And it extended private moratoria to farm and ranchstead mortgagors in deep doodoo. F&H bragged that over 90% of the loans in limbo were paid good by the end of WW2.

    Do you think any mortgage lenders are likely to offer private forbearance for an extended term to any class of borrowers? I don’t, because these are no longer in house table loans and the paper has been traded down the line even for most credit unions, if not all. If that results in a flood of REO how will that affect the recovery?

    After the S&L bust it took years to clear that inventory and around here lenders did a generally poor job keeping up the property so it often made for rock bottom pricing [after years of holding at unrealistic asking prices] and sales to small contractors who fixed them up to flip. I don’t know how that worked in the states that were worse off than TX.

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    • My gut is that the demand for single family homes is so strong, and the supply so limited (we have underbuilt for 15 years now) that I don’t see a flood of REO depressing prices.

      Which means all of these loans will end up being money good.

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  2. Another illuminating discussion on the left’s goals in turning everything into a “social construct” that can then be changed through social engineering of one form or another:

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    • One of my most critical roles as a father has been red-pilling my son about everything the cultural left is up to.

      Luckily, these people will be out of your life once you leave school, except for your annual HR training videos you’ll have to endure.

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      • Except apparently they won’t any more.

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        • I am skeptical. These people add zero value to any organization. Ultimately they become a cost to be minimized.

          As companies operate more and more remotely, and everything gets done by email and Zoom call, the less demand there is for what they are selling.

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      • Brent:

        One of my most critical roles as a father has been red-pilling my son about everything the cultural left is up to.

        I have three daughters, and I have tried to do the same thing. I have succeeded in one instance, utterly failed in another, and the jury is out on the third (but I think the odds are good.)

        Luckily, these people will be out of your life once you leave school, except for your annual HR training videos you’ll have to endure.

        I used to think that too, but I no longer have your optimism. As evidence, literally just this morning I got an email announcing the establishment of a new position in our firm…the Chief Sustainability Officer.

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        • I suspect a lot of this ESG-driven stuff won’t last the next bear market.

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        • Chief Sustainability Officer.

          I would look at the job description. It could be useful or it could be eyewash.

          For example, It could be an EE position devoted to keeping the servers up to date, fast, efficient, and reliable, with just in time maintenance. It could include keeping abreast of useful tech. IOW, it could be a useful leadership position in house that reduced the need for expensive recurring consultants. Or it could just be somebody who goes to seminars and learns buzzwords, whose use is limited to lobbying, if any use at all.

          There are a number of actual uses as well as a number of BS ones such a title could cover. One serious criticism of American management has been a tendency to short term thinking. Just identifying key personnel in every department and keeping them when cost cutting is required rather than turning them all over for recent grads who get lower pay would be useful for sustainability.

          Just musing. I don’t know what would be useful in the financial industry as I generally dealt with construction and small tech. Avoiding unionization was sometimes my job – I considered it a sustainability one.

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        • Mark:

          I assume you have not been that involved in a while. “Sustainability” indicates only one thing nowadays, just as “diversity” indicates only one thing.

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        • I am beginning to feel quaint.

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    • I’m on the DEI committee at work. yeah, I know.
      apparently, I was specifically requested. I laughed out loud when my boss told me. he found it hilarious too. until I realized he was serious. so i agreed, but told him flat out — i’m doing this as a favor for you.

      it’s been … okay. but the discussion has almost entirely been about what’s going on outside of our organization rather than what’s in it. other than a
      but there is a small contingent of people who are making all the noise about needing more diversity. why we just don’t get rid of them i don’t understand. they’re all mid-20s and easily replaceable.

      but i told them — we’re a small shop. if you want to grow and develop, you need to leave. that … didn’t go over well. but it’s true. my direct reports get it. I’m very blunt with them. this is a 2-3 year gig. learn as much as you can and move on.

      Like

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