Morning Report: A big mortgage lender exits the business

Vital Statistics:

S&P futures3,92711.82
Oil (WTI)107.51-0.14
10 year government bond yield 3.18%
30 year fixed rate mortgage 5.85%

Stocks are higher as markets continue to rebound. Bonds and MBS are down.

We are heading into a pretty big week for data, although the jobs report will slip into next week. We will get home prices and consumer confidence tomorrow, the final revision to Q1 GDP on Wednesday, personal incomes and outlays on Thursday, and ISM data on Friday. Markets will have an early close on Friday ahead of the 4th of July weekend.

First Guaranty mortgage laid off almost all of their staff on Friday. It sounds like they were short on cash and unable to strike a deal to raise more. Instead of ponying up more cash, main backer PIMCO decided to pull the plug instead.

Durable Goods orders increased in May, according to the Census Bureau. Orders were up 0.7% while shipments increased 1.3%. The report shows that demand remains strong, and some of the supply side numbers show that supply chain issues may be easing a touch, which is good news for the inflation numbers and the economy overall.

Pending Home Sales rose 0.7% in May, according to NAR. The Northeast saw the biggest gain, with home sales rising 15.4%. “Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” said NAR Chief Economist Lawrence Yun. “Contract signings are down sizably from a year ago because of much higher mortgage rates. Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy,” Yun added. “The better way to balance the market is through increased supply, which also helps the broader economy.”

His point about housing construction being the answer to soaring home prices is spot-on. Historically housing has led the economy out of a recession. It wasn’t unusual to see housing starts spike above a 2 million annualized pace coming out of recessions in the past. This was almost par for the course in the 1970s and 1980s.

The 2008 financial crisis never witnessed a rebound in home construction as we did have an overhang of foreclosures and excess new construction. That overhang was probably balanced out by the mid teens, and now we have an abject shortage of housing. The government would love to see new home construction, however the constraints are on the supply side – materials and especially labor.

I suspect the recovery from the current / imminent recession will finally be the one that ushers in a wave of new home construction. The big question will be whether we have the workers to do it.

29 Responses

  1. Interesting analogy:

    “Roe Is the New Prohibition

    The pro-life movement needs to know that such culture wars result not in outright victory for one side but in reaction and compromise.

    By David Frum”


    • I suspect the people most bent out of shape about this decision reside in states where there is zero risk of anything changing.


    • jnc:

      Interesting analogy:

      I think it is a great and insightful analogy, but not in the way Frum thinks. The correct analogy isn’t between Prohibition and Dobbs. It is between Prohibition and Roe. Dobbs is the analog to the repeal of the 18th amendment, the end to a federal imposition on all the states, and hopefully we are about to embark on the end of the culture war over abortion. Just as the repeal of the 18th amendment put an end to the war over alcohol.


      • Yes, note that he states that in the headline and then changes it in the body of the piece.

        “Roe Is the New Prohibition”


      • I’m dubious about any lightening of the culture war over abortion, and I’m concerned that enough Republicans will overplay this victory that they contribute to the continuation of the abortion culture war (which honestly has far more value to the left than to the right; abortion gone as a cultural issue would be very bad for the left).

        But I see where Frum is coming from. I just think he might be mistaken. Prohibition was an amendment that was repealed, but originally done correctly even if it should never have been done as a constitutional amendment. Roe was a magical decision that found whatever the left wanted in the constitution. This reverses that. But comparing court decisions to amendments doesn’t seem like the best metaphor.


        • KW:

          But comparing court decisions to amendments doesn’t seem like the best metaphor.

          I think he was comparing one culture war to another, ie the wars over access to alcohol and access to abortion, And he was just identifying comparable stages in those culture wars. Which I think is a pretty interesting insight. His mistake, I think, is that he was equating the wrong stages. While he argues that the end of Roe is comparable to the beginning of Prohibition, I think the implementation of Roe is the more sensible comparison to the beginning of prohibition, and the end of Roe is more comparable to the repeal of prohibition.

          His primary point, captured by the sub-headline, is this:

          The pro-life movement needs to know that such culture wars result not in outright victory for one side but in reaction and compromise.

          He is right, but this is something not that the pro-life movement needs to know, but that the pro-choice movement is now learning, to its dismay. They thought they had achieved outright victory in 1973. But there was a reaction against it, and now that Roe has been overturned, the process of compromise can finally take place.

          Frum goes through a list of potential horribles that are likely to give pause to erstwhile pro-lifers, just as the realities of Prohibition gave pause to people who had previously supported it.

          Likewise, many of the men and women poised to cast Republican ballots in 2022 and 2024 to protest inflation and COVID-19 school closures may be surprised to discover that anti-abortion laws they had assumed were intended only to prohibit others also apply to them. They may be surprised to discover that they could unwittingly put out of business in vitro–fertilization clinics, because in vitro fertilization can involve intentionally destroying fertilized embryos. They may be surprised to discover that a miscarriage can lead to a police investigation. They may be surprised that their employer could face retaliation from lawmakers if it covers the costs of traveling out of state for an abortion. The concept of fetal personhood could, if made axiomatic, impose all kinds of government-enforced limits and restrictions on pregnant women.

          He isn’t wrong about that, but he fails to recognise two important things. First, precisely this process has already happened in the wake of Roe itself, as many former supporters of legal abortion have seen the reality of what Roe meant. Most supporters of Roe didn’t think they were signing up for legal abortion up to the day of birth, but that is what they got. Plenty of supporters of Roe have been put off by the cultural change from “safe, legal and rare” to “Proud to have gotten my abortion, when are you getting yours?” They didn’t know that by signing onto Roe, they were giving up their parental rights to have a say over whether their teenage children will get an abortion. They also have discovered that the existence of Roe has turned every single Supreme Court appointment into a huge political campaign.

          The second, and more significant, thing that Frum fails to recognise is that, like Prohibition itself, the very existence of Roe prevented the kinds of compromise that he says will mark the end of the culture war. He may well be right that many abortion opponents will object to potential implications of prohibitions on abortion, but they will have the power to manage those implications through other legislation. This is the act of compromise that he is referring to. Now that Roe is gone, that kind of compromise is finally possible.

          I have long thought that Roe itself was responsible for the prominence abortion has played in our culture wars. Frum’s analogy to Prohibition just makes make me even more confident in that belief. He’s just drawing the analogy to the wrong aspects of the two culture wars.


        • He isn’t wrong about that

          I don’t think he is wrong about it, but I think that sort of overreach (police investigations of miscarriages) would require that the right hold cultural and institutional power that it does not have. The present overreach of the left comes from its domination of the culture and academia and bureaucracy.

          Agreed that Roe created the prominence of abortion in the national debate. Without I hope there is compromise but I’m not sure the left will let that happen easily.


        • KW:

          …but I think that sort of overreach (police investigations of miscarriages) would require that the right hold cultural and institutional power that it does not have.

          Agreed, but even more, it would require widespread support on the right for such a thing, and that does not exist either. That is why I think such an eventuality could only occur as an unintended consequence of some legislation, and since the problem exists within the realm of legislation, it can also be fixed by the people via legislators. This is quite unlike the problems produced by both Prohibition and Roe.

          Without I hope there is compromise but I’m not sure the left will let that happen easily.

          We’ll see, I guess, but I don’t think the left will have much choice. That’s the benefit of having the issue resolved by the people’s representatives through legislation. Outside of landslide electoral victories, the only way to do that is to haggle and negotiate with people on the other side.


  2. Taibbi’s latest

    “Taking the Neither Pill
    On talking with Ben Shapiro, the death of Roe v. Wade, and the end of Normie politics

    Matt Taibbi”


  3. Worth remembering:


  4. Hmmmmm, I thought it was a state’s rights issues!

    In an interview with Breitbart News, Pence said that the Supreme Court voting 6 to 3 to uphold a restrictive Mississippi law banning almost all abortions after 15 weeks of pregnancy “has given the American people a new beginning for life, and I commend the justices in the majority for having the courage of their convictions.”

    After saying that “life won” on Friday, Pence, who is considered a potential GOP contender in the 2024 presidential election, went one step further by arguing the court’s decision in Dobbs v. Jackson Women’s Health should lead to a national ban on abortion.


    • Those are religious convictions right?


    • lms:

      Hmmmmm, I thought it was a state’s rights issues!

      It is!

      If/when Pence starts stumping for a federal ban on abortion, I will be right there objecting to it on Constitutional grounds, just as I objected to Roe. I prioritise the Constitution over policy desires. How about you?


    • It is. If sincere I think it’s ill-considered and the exactly wrong direction to go.

      I think a challenge to such a law (which won’t happen) that reached SCOTUS would end with the law being overturned.

      That being said I think this kind of talk from Pence is cynical. He wants to rally the base (as he perceives it) to him to help him win the primary in 2024. That’s my take. And it doesn’t make me like him.


      • As I noted previously, once an activist organization wins on an issue, they don’t call it a day and disband.

        They find a more extreme position to push to maintain fundraising and employment for the activists.


        • jnc:

          As I noted previously, once an activist organization wins on an issue, they don’t call it a day and disband.

          It could be an exception, but the Prohibition forces seem to have done just that.


        • True, but I think that there’s been a rise of a professional activist class that’s been facilitated by TV & online fundraising that wasn’t present previously.

          Although,I supposed the traveling religious revivals may have been analogous ala Elmer Gantry.


        • once an activist organization wins on an issue, they don’t call it a day and disband.

          Witness how the LGBTQ lobby went from gay marriage to trans stuff without skipping a beat


  5. The whole “women’s issue” rhetorical tact on abortion has gotten so…..complicated.

    Very amusing.


    • Indeed it has, but even without the extra-layer of “aborting-persons” logic for “men who get abortions” the assertion is fraught with stupidity, as nearly as many women support restrictions on abortions (or outright bans) as men. The original Roe case was decided by men. This fantasy that “if men could get pregnant” abortion would be universally beloved is stupid.


      • “The original Roe case was decided by men.”

        That reminds me, I thought one of the reasons that they pushed Barrett so hard was that so she could actually author the opinion overturning Roe v Wade just to add insult to injury. Surprised that Alito ended up doing it in retrospect.


        • jnc:

          Surprised that Alito ended up doing it in retrospect.

          Good point…I had forgotten about that possibility. Would have been great to see Barrett write it.


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