Morning Report: New home sales rise

Vital Statistics:

Stocks are lower this morning as investors continue to fret over the debt ceiling. Bonds and MBS are up small.

The MBA Secondary Conference just finished, and the consensus is that things are rough out there, but the mood seems hopeful that the worst is over. Here is Bob Broeksmit’s comments at the conference. Much of it discussed over-regulation, however he did say some things that give originators a sliver of hope over the spate of Fannie and Freddie repurchases:

Another policy fight we’re actively waging involves loan repurchases. As you’re well aware, Fannie and Freddie are demanding that lenders repurchase more and more loans, including seasoned performing loans, with minor underwriting issues.   

Let’s put this issue in perspective. Many of these issues were the result of the unprecedented number of loans you processed in the early days of the pandemic. They reflect your swift action, during a national emergency, to help as many people as possible, as quickly as possible.   

Not long ago, that action earned you well-deserved praise. Now, for all your heroic efforts, the GSEs are punishing you. They want you to buy back loans when interest rates are twice as high. That would be disastrous, putting further strain on your balance sheets.   

But it doesn’t have to be this way. When it comes to loans with minor issues and seasoned performing loans, you should be allowed to address those issues through steps far short of repurchase. We’re making this point to the GSEs and FHFA regularly, and I’m confident you’ll see relief soon.  

In the face of declining volumes and margins repurchases can put a lender out of business as we saw in 2008.

Mortgage Applications fell 4.6% last week as purchases fell 4% and refis fell 5%. “Mortgage applications declined almost five percent last week as borrowers remained sensitive to higher rates. The 30-year fixed rate increased to 6.69 percent, the highest level since March,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications. Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40 percent below last year’s pace.”

If you look back long-term the state of the mortgage market is the worst in 25 years.

New home sales rose 4.1% on a MOM basis to a seasonally adjusted annual pace of 656,000. New home sales rose 11% on a YOY basis. The median new home price fell 8.2% YOY to $420,800, while the average home price fell 10.9% to $501,000.

Home prices peaked around June of last year, so we should start seeing the decline in prices percolate through to the inflation indices. That said, the Fed seems to be on a mission to take advantage of the robust labor market to build some distance from the zero bound which gives it more breathing room to ease if the economy slows.

The Fed Funds futures are now handicapping a 38% chance of another 25 basis point hike in June.

19 Responses

  1. Interesting history, especially in light of what FDR did later by abrogating all gold clauses:


  2. From Taibbi:

    “My Crazy IRS Case
    A House Subcommittee investigation reveals new details about my IRS case that should unnerve any journalist, or any American, for that matter

    Matt Taibbi
    May 24, 2023


  3. Amazing great news if true:


  4. New, universal definition of “banned” just dropped, y’all.

    Glad that’s cleared up.


  5. Pretty interesting discussion between Bill Barr and Vivek Ramaswamy. Best part, discussion of the FBI, starts around the 38:45 mark


  6. hearing a deal on the debt ceiling.
    broad parameters, house action after the weekend.


    • Yep, not surprising.

      Atlantic had an interview with McConnell to remind everyone of how these things always go:

      “The Case for Debt-Ceiling Optimism

      All of the public feuding is good, actually.
      By Russell Berman

      The public feuding is actually a good sign, and so, in a way, is the delay. “They need this to run to the very last minute,” Brendan Buck, a former aide to Speakers John Boehner and Paul Ryan, told me. As Buck sees it, the theatrics between GOP and Democratic leaders is a necessary precursor to a deal, because it shows partisans on their respective sides that they fought as hard as they could before reaching a compromise.

      Biden and McCarthy are trying to find a solution that can pass both a Republican-controlled House and a Democratic-controlled Senate. A quick-and-tidy agreement is likely to be viewed suspiciously by both parties, and particularly the GOP’s hard-right faction, which made McCarthy sweat out 15 votes to become speaker. “There’s no way McCarthy could have walked in two weeks ago, had a one-hour meeting with the president, and come out and said, ‘We have a deal,’” Matt Glassman, a former congressional aide who is now a senior fellow at Georgetown University’s Government Affairs Institute, told me. “That would be just deadly for him with his conference.”

      It’s all a game.

      And now the messaging has shifted since the Post-Trump GOP won’t go after entitlements:

      “Why the GOP Wants to Rob Gen Z to Pay the Boomers

      The budget clash, in many ways, represents the fiscal equivalent to the battle over cultural issues raging through Republican-controlled states.
      By Ronald Brownstein
      Kevin McCarthy”


  7. Of course he does:

    “Billionaire Funding ‘Abolish the Police’ Activists Invests in Private Security Start-Up

    Pierre Omidyar stands to gain financially from the rapid growth in private security.

    Lee Fang
    May 25, 2023
    ∙ Paid”


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