Morning Report: Purchase locks fall, but maybe buyers are beginning to come back

Vital Statistics:

S&P futures3,980 11.25
Oil (WTI)71.930.89
10 year government bond yield 3.53%
30 year fixed rate mortgage 6.35%

Stocks are higher this morning as we head into Fed Week. Bonds and MBS are flat.

The week ahead will have two major reports, with the Consumer Price Index tomorrow, and the FOMC meeting on Wednesday.

The Fed funds futures see a 77% chance of a 50 basis point hike and a 23% chance of a 75 basis point hike. Given some of the language from different Fed speakers, we could see a pretty wide range for the 2023 Fed Funds forecast in the dot plot.

Purchase locks fell 22% in November, according to Black Knight. Overall lock volumes fell 21.5% and are down 68.5% compared to a year ago. A combination of the normal seasonal slowdown and affordability issues are making a perfect storm for mortgage bankers. “Mortgage rates pulled back slightly in November based on what the market perceived as good inflation news,” said Scott Happ, president of Optimal Blue, a division of Black Knight. “The spread between mortgage rates and the 10-year Treasury yield narrowed by 13 basis points during the month to 283 basis points in a sign that investors and lenders may be seeking to accelerate the impact of falling rates. But, despite the improvement in rates, lock activity remained subdued.”

Homebuyer demand ticked up slightly as lower rates are beginning to get some potential buyers interested. “This week has been relatively calm and quiet as we approach the end of one of the most volatile years in housing history,” said Redfin Deputy Chief Economist Taylor Marr. “But it’s not over yet. Next Tuesday’s inflation report is the 500-pound gorilla in the room, and the Fed’s press conference the next day will bring us much more clarity on how soon and how quickly we can expect mortgage rates to come down in the new year. Since we expect only a small decline in prices next year, mortgage rates will dictate housing affordability, and as a result, demand and sales, in 2023. If rates continue declining, more buyers may wade back into the market, as they’ll have lower monthly payments.” 

Good read from CNBC reporter Ron Insana on what ails the economy. In his opinion, the US economy suffers from a shortages all over the place, particularly in the labor market. The Fed’s prescription is to increase the unemployment rate to 5% in order to bring the supply and demand imbalance more in line. Will that make the economy stronger? The answer is probably no. He recommends that we ease immigration rules to let in more people to fill the supply gap in the labor market.

It is an interesting prescription. The US has encouraged college at the expense of skilled labor for the past few decades, and now it seems we have a glut of over-educated and indebted people with few tangible skills, and a deficit of people who can weld, wire an electrical panel or swing a hammer. Increasing immigration will do wonders for the latter, but I don’t know what it will do for the former.

9 Responses

  1. Worth noting:

    “U.S. to announce fusion energy ‘breakthrough’
    Scientists hit a key milestone in the quest to create abundant zero-carbon power through nuclear fusion. But they still have a long way to go.

    By Evan Halper and  Pranshu Verma
    December 11, 2022 at 9:29 p.m. EST”


  2. Meta commentary on Twitter:

    Worth a read as well.

    This is one of the better summations of the general principles of the left that I’ve seen:

    “I believe that the natural human condition is one of inequality and that the basic human moral and political task is to combat this inequality. (Civilization is man’s war on the rational.) Our project is thus to increase certain types of equality in a way that ameliorates suffering and promotes human well-being, under the belief that a society’s well-being can only be improved if it is improved for all.”


    • The most natural human condition is one of poverty. Extreme poverty has described 99.9% of human existence. The choice is either unequally distributed prosperity or equally distributed poverty.


    • jnc:

      But it’s useful seeing the competent version of the position clearly stated.

      I’m not sure it is either competent or clear. For example, what does this actually mean?

      I believe that the natural human condition is one of inequality and that the basic human moral and political task is to combat this inequality.

      Inequality is 1) a relative measure and 2) encompasses literally every characteristic of human existence. Does he really mean to say that he thinks it is a moral and political imperative to make all human beings “equal” in every aspect? If one person is born without a functional left hand, does that mean it is a moral/political imperative for him (and every other person) to immobilize their left hands in order to be “equal”?

      I don’t think it is competent and clear. I think it is vague and ill-thought out to the point of being incoherent.

      This I find completely baffling:

      Civilization is man’s war on the rational.

      What in the world does that mean? I genuinely have no idea.


      • I am guessing they mean that civilization is man’s war on selfishness (or self-interest)


      • He’s conceding that the “state of nature” is inequality (which a lot of Marxists don’t do), but arguing that the moral thing to do is to try and change it anyway.

        I.e. Civilization isn’t natural. It’s an act of will.

        Did you read the full post?


        • jnc:

          Did you read the full post?

          I did. I contemplated doing a full fisking, pointing out his incoherencies and contradictions, but figured it would be TLDR territory for everyone else here.

          He’s conceding that the “state of nature” is inequality…

          Sure, but inequality in what respect? Being a Marxist he probably means in an economic sense, but in a state of nature there is no economics. There is only individual skill/strength/ability. Is that what he insists must be “equalized” as a moral imperative?

          Also, of course, since his moral/political imperatives require the imposition of coercion against others, far from ending “inequality”, they actually require it. Specifically, they require that people (like him?) who are to make the decisions about when and where this “inequality” exists and how to rectify it have infinitely more (ie unequal) power than anyone else in society. Otherwise, these moral imperatives cannot be imposed on those who do not voluntarily relinquish whatever “unequal” status they are deemed to have.

          Anyway, I could go on and on, but like I said, I would be entering TLDR territory. And preaching to the choir, most likley.


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