Category Archives: Housing

How Concerned is Bernanke about his possible legacy?

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I suspect the Chairman is seriously concerned about living out his life with his legacy, as told by the mainstream, going something like this:

“Blindsided by an intense financial crisis, the Chairman, a champion of full employment and student of the Great Depression, did everything he could come up with to support growth and employment. However, after nearly 5 years of 0 rates and massive QE were beginning to hint at positive results, and just as his term ended, he fell asleep the switch, allowing mortgage rates to spike by over 1%, sending the economy back into recession.”

;)

The latest housing starts spike seems most likely to be revised lower or followed by a big drop.


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Purchase Applications:


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Housing Starts:


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MBA Purchase Applications December 18, 2013

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Scary stuff for a Fed chairman who sees asymmetrical risk to the downside.

MBA Purchase Applications

Mortgage applications plummet amid uncertainty

By Diana Olick

Total mortgage applications are down 56 percent from a year ago, with the plunge in refinances leading the way. Purchase applications though are down 10 percent, mirroring a slowdown in home sales in many previously hot markets.

California Realtors reported Tuesday that November sales fell 15 percent in Los Angeles and 13 percent in San Francisco year over year.

With credit still tight, and Fannie Mae and Freddie Mac announcing fee hikes, fewer borrowers can afford a home loan.

Compounding this, the government’s mortgage insurer, the Federal Housing Administration, has lowered loan limits in hundreds of local markets starting in 2014. That will make thousands of potential borrowers ineligible.

The share of all-cash buyers remains high, accounting for more than one-third of home sales in October, according to the National Association of Realtors.

Same number of all cash buyers is a higher percentage of the lower total ;)

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TOL call, mtg purchase apps

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>   
>   Here’s Bob Toll on the TOL conference call yesterday. Given its
>   market niche, I would expect TOL to be the strongest of the
>   homebuilders—and note that 20% of sales were all cash. (I don’t
>   know how that compares with historical experience, but it seems
>   high.) This was from the prepared remarks, fyi.
>   

Since August 1, 2013, the beginning of our fourth quarter, through this past weekend, which is halfway through our first quarter, our business has been basically flat compared to the same period of time one year ago. During that 19-week timeframe last year, two weeks were highly unusual. Hurricane Sandy hit on Thursday, October 25, 2012, and wiped out sales in about half our markets that weekend. The contracts which would have been signed that last weekend of October 2012 were pushed into the first week of November 2012. Because November is a new fiscal quarter for us, our reported results and comparisons to last year are affected. Excluding this first week of November 2012, our last five weeks of business have been flat to one year ago.

And as mentioned, the full 19-week period since August 1 has also been flat. We believe this leveling of demand will prove temporary based on still significant pent-up demand, the gradual strengthening of the economy and the improving prospects of our affluent customers.



Highlights
A big jump in rates held back mortgage applications in the December 6 week which, after very steep declines in the prior week, inched only 1.0 percent higher for purchase applications and 2.0 percent higher for refinance applications. Down 10 percent year-on-year, the purchase index remains especially depressed in a what is a negative indication for underlying home sales. The average rate for 30-year mortgages with conforming loans ($417,500 or less) jumped a steep 10 basis points in the week to 4.61 percent.

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Mortgage purchase applications down year over year again

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No sign of life here yet. It’s now been down year over year for quite a while.

Multi family permits were reported up yesterday, which helps, but note multi family units are a lot cheaper than single family starts.

Durables/cap ex just released and looking soft as well.

The 4-week average of the purchase index is now down about 5% from a year ago.

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Fannie and Freddie plan gets Washington attention

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First, it’s a step in the wrong direction. My proposal is for the FFB to offer fixed rate financing with no prepay penalty to the agencies at the govt’s ‘policy rate’ for said mortgage funding.

Second, they are only doing this because after decades of successfully getting people into houses who arguably wouldn’t have been there, presumably serving numerous aspects of public purpose, they suffer ‘losses’ when in 2008 govt policy causes 8 million people to lose their jobs pretty much all at once.

Nor are those offering to ‘help’ doing out of charity…

Fannie and Freddie plan gets Washington attention

November 25 (FT) — Bob Corker, the Republican senator co-sponsoring a bill to wind down Fannie Mae and Freddie Mac, has become the first senior politician to express openness to a hedge fund proposal to take over core operations of the US mortgage finance giants. He found the plan interesting, he added, saying that it validated his legislation because it would work only in a reformed housing finance system. The Fairholme plan would eliminate Fannie and Freddie, and transfer their future mortgage guarantee business to two new private sector companies. The new entities would be capitalised with assets equivalent to the $34.6bn face value of Fannie and Freddie’s preferred shares, plus the proceeds of a $17.3bn rights issue, potentially backed by private equity.

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Bernanke and Yellen pushing back on higher mortgage rates

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Seems to me the Fed is making an all out effort to push back on the higher longer term rates, particularly mortgage rates. However, at least so far those rates remain elevated and at least so far mortgage purchase applications remain down year over year.

Again, seems to me it comes down to the notion that if forward guidance works to firm the economy, rates will move higher/sooner than if it doesn’t work to firm the economy.

This means forward guidance works to bring long rates down only if markets don’t believe it helps the economy.

So what’s a Fed to do to bring long rates down?
Seems to me the only tool left is unconditional guidance or purchasing securities on a price basis, rather than a quantity basis. Which does of course work, to the basis point.

That is, if the Fed announced it had a 2% bid for unlimited quantities of 10 year notes they would not trade higher than 2% while that bid was active. My recollection was that this was done during WWII.

And that we didn’t lose.
;)

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Housing Market index down a bit

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I imagine the Fed is concerned about mortgage rates that have come down some but remain elevated from earlier in the year. About all that’s left is ‘unconditional forward guidance’ which has yet to be considered, at least not in public.

Also, while I was away impersonating an economics professor in Italy ;), where I stated that all the regulations sprouted from Brussels :( and reminding Cliff about the merits of lateral motion (congrats again to Cliff!), and getting past a pink grip on a tennis racket Francis loaned me, several posts were not emailed but can be viewed at www.moslereconomics.com

NAHB Housing Market Index

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