Morning Report: Home Purchase sentiment returns to 2011 lows.

Vital Statistics:

S&P futures3,61414.75
Oil (WTI)89.31-0.04
10 year government bond yield 3.96%
30 year fixed rate mortgage 6.89%

Stocks are higher after the NASDAQ officially hit a bear market. Bonds and MBS are down small.

Inflation at the wholesale level rose 0.4% MOM and 8.5% YOY, according to the Producer Price Index. Ex-food and energy, the index rose 0.3% MOM and 7.2% YOY. The headline number was a touch above expectations, although tomorrow’s Consumer Price Index report will be the main focus.

Mortgage applications hit a 25-year low last week, falling 2% as rates hit their highest mark since 2006. Purchases and refinances fell by the same amount. “Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81 percent, the highest level since 2006,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Mortgage rates increased across all product types in MBA’s survey, with the largest, a 20-basis-point increase, for 5-year ARM loans. The ARM share of applications remained quite high at 11.7 percent – just below last week’s level. Application volumes for both refinancing and home purchases declined and continue to fall further behind last year’s record levels.”

The pain in the real estate sector isn’t only limited to mortgage bankers. Realtors, brokers, and appraisers are adjusting to the new glacial pace of home sales. “There’s going to be a major shakeout,” said Ken Johnson, a real estate economist at Florida Atlantic University who is also a former broker. “There are roughly 1.5mn realtors, but that number will be down 20 per cent within 24 months. And those aren’t the only members of the real estate industry that are very dependent on the volume of transactions. There are these tertiary jobs like the appraisers, the mortgage lenders, all the way down to termite inspectors.”

Much of this overcapacity came as a result of the hiring spree in response to the COVID pandemic. Home sales rose as people fled the cities, and mortgage bankers feasted on easy refinance opportunities. “That growth was much stronger than the home sales opportunities that were available,” said Lawrence Yun, the chief economist for the National Association of Realtors. “The reality is that not everyone’s going to survive.”

Homebuilder sentiment is approaching all-time lows, according to Fannie Mae’s Housing Sentiment Index. For the first time since the beginning of the pandemic, most respondents expect home prices to decline going forward.

“The HPSI declined this month to its lowest level since October 2011,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Consumers’ expectation that home prices will decrease matched a survey high, with a higher percentage of consumers believing home prices will decrease rather than increase over the next year – a shift in survey sentiment that had previously only happened in 2011 and at the start of the pandemic in 2020. Moreover, 75% of consumers still think it’s a bad time to buy a home, with most citing high home prices and unfavorable economic and mortgage rate conditions as primary reasons. As long as supply is limited and affordability pressures continue to constrain potential homebuyers via elevated home prices and mortgage rates, we expect home sales will remain sluggish.”

The hits keep coming. Angel Oak is laying off 15% of staff. “Angel Oak Home Loans, a full-service, retail residential mortgage lender, reduced its headcount by 57 employees or 15% of its workforce to better position itself as it manages through the headwinds currently facing the mortgage industry,” the spokesperson said. “Angel Oak Home Loans continues to serve home buyers across the country and maintains staffing levels to meet the changing dynamics of the residential mortgage market.”

14 Responses

  1. By saying Trump was warned of potential violence on 1/6 isn’t that then a admission that Trump did not orchestrate the violence?

    Also, didn’t Trump offer troops prior to 1/6 and was rebuffed by both Washington DC and Pelosi and McConnell?


    • this is still going on?


      • Hilariously, yes.

        It went from Splashy And Breathtaking to really petering out.


        • they must be really worried about midterms if they are still peddling this


        • I actually think the opposite – it’s such a net drag on democrats their mercy killing it. In fact, they’ve delayed publishing their report until after the election.


        • Even the NYT Op-Ed page sees it:


        • The piece presupposes that a riot at the Capital is somehow a grave problem and I posit it’s not nor do the vast majority of Americans. Most view it as an isolated event with less import than the 2020 BLM riots. I find these pieces tiresome as they fetishize Washington processes, that no one believes serves the common good – rather it’s politicians performing Kabuki for themselves), over actual legislation.

          Everyone sees that Trump and his Presidency was an existential crisis for Washington DC and they are reacting as such. Even today, the most Trumpy of elected Republicans are still far more moderate than where I think the Republican base is. To paraphrase Clubber Lang, I predict pain.


        • Even the NYT Op-Ed page sees it:

          Because everyone outside of the Borg knows when the left bleats about “our democracy” it means nothing more than “democrats getting their own way.”


    • I expect the “offered troops” is probably more complicated and messy in reality. I doubt that really exonerates Trump per se.

      But also it wasn’t his or his administrations fucking job to prevent what happened on 1/6. That was the job of the Capitol Police, the DC mayor, and Pelosi and McConnell—not Trump.

      The Capitol Police should be on the hook for this more than anybody and it’s never brought up.

      Saying he was warned is exonerating and also begs the question: what was he being warned for? The president is not personally responsible for crowd control in the Capitol.


  2. This seems absurdly insane to me.

    The judgement against OJ Simpson for cutting off his wife’s head, which seems a lot worse to me than what Jones did, was $33mm. Surely this amount will be overturned on appeal, won’t it?


  3. Thought this was pretty interesting, re section 230 and the publisher vs platform issue.


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