All Things in Moderation

Vital Statistics:

Stocks are flat this morning as earnings come in. Bonds and MBS are down as we await the FOMC decision at 2:00 pm

Morgan Stanley is out with a call saying that optimism for the economy out of the Fed could be bearish for stocks. The fear is that the Fed will begin removing accomodation before the economy has fully recovered. FWIW, the December Fed Funds futures are handicapping a 12% chance of a rate hike this year.

Mortgage applications fell 2% last week as purchases fell 5% and refis fell 1%. The 30 year fixed rate mortgage fell for the third week in a row. “Mortgage applications decreased last week, even as mortgage rates dropped for the third week in a row,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks. The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”

The CFPB has officially delayed the new QM rule until October of next year. This was the rule that changed the relevant metric from a 43% debt to income ratio to something based on a mortgage’s proximity to the average mortgage rate. It also keeps the GSE patch in place, although FHFA has told Fannie and Freddie to limit their 43 DTI + loans, so I guess this really isn’t going to make a substantial difference unless the FHFA letter to Fan and Fred from last January is rescinded.

The homeownership rate ticked down in the first quarter, according to the Census Bureau. FWIW, it is still artificially high due to the foreclosure moratorium. I am not sure what drove the Q220 and Q320 spike, but it looks strange and I suspect it is some sort of data issue.

Consumer confidence rose in April, according to the Conference Board. We are back to pre-lockdown levels as consumers’ current assessment of conditions increased.

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