Vital Statistics:
|
Last
|
Change
|
Percent
|
|
|
S&P Futures
|
1685.0
|
-7.5
|
-0.44%
|
|
Eurostoxx Index
|
2913.5
|
-9.5
|
-0.32%
|
|
Oil (WTI)
|
102.8
|
-0.2
|
-0.21%
|
|
LIBOR
|
0.248
|
0.000
|
0.10%
|
|
US Dollar Index (DXY)
|
80.22
|
-0.307
|
-0.38%
|
|
10 Year Govt Bond Yield
|
2.63%
|
-0.02%
|
|
|
Current Coupon Ginnie Mae TBA
|
105.4
|
-0.3
|
|
|
Current Coupon Fannie Mae TBA
|
104.7
|
0.1
|
|
|
RPX Composite Real Estate Index
|
200.7
|
-0.2
|
|
|
BankRate 30 Year Fixed Rate Mortgage
|
4.28
|
Markets are lower
ahead of Continuing Resolution Weekend. Personal income rose .4% in August,
while personal spending rose .3%. The prior months were revised upward. Bonds
and MBS are up.
The government's
new fiscal year begins on Tuesday, and unless Congress comes up with a way to
keep the lights on the government will shut down. You have all-out war between
Democrats and Republicans and a civil war in the Republican party. Here is the
state of play: The House passed a continuing resolution that funds the
government through the end of the year, but it contains language that de-funds
obamacare. The Senate passed a continuing resolution that funds the government
through the end of the year, but it removed the obamacare language and sent it
back to the House. So that leaves Boehner with 3 possible outcomes: 1) He can
convince the Tea Party Republicans to go along with a clean continuing
resolution, 2) He passes a bill with primarily Democratic party support (and
that support won't be free, plus it will probably cost him the Speakership), or
3) He attempts to pass a clean CR and it fails, which shuts down the
government. Democrats are confident that any shutdown will be a replay of 1995,
where the public sided with Clinton. How to handicap it: I think the fact
that the Republican leadership is so vocal against the rebellious Tea Party
republicans is important and it brings them on board. #1 is the most likely
scenario, followed by #2. If we do have a shutdown, it will be short.
If the government
shuts down, what does that mean for the mortgage markets? Ginnie Mae will be
open for business, according to HUD's contingency plan
from 2011, which supposedly would be used in this case. I have yet to see
what FHA will do. Bottom line, I don't foresee any major disruptions to the
financial markets. Macroeconomic
Advisers estimates that a 2 week shutdown will lop .3% off of 4Q GDP. Mark
Zandi of Moody's estimates
that number to be 1.4% if it goes 3 - 4 weeks. (Mark, you didn't get the
Treasury Secretary gig - you don't need to keep carrying water for the
Administration).
Pending Home
sales fell
1.6% in August, according to the National Association of Realtors. The NAR
blames the drop on an acceleration of home sales in early summer, as buyers
accelerated purchase decisions as interest rates began to rise. The NAR is
anticipating 2014 sales to be flat with 2013 and median existing home sale
prices to increase 5% - 6%. Note that almost half of all home sales right now
are all-cash transactions and that number is usually close to 20%. So even if
existing home sales are flat next year, year over year, the mortgage business
could still improve markedly as distressed / cash sales run their course.
The number
of loans in the process of of foreclosure at
the end of the second quarter decreased 40% to 744k. This is an interesting
statistic, MBA estimates the shadow inventory of homes to be 3.3 million. I
know MBA also includes 90 day DQs, which may account for some of the difference
- 90 day DQs in judicial states which haven't been permitted to move to the
foreclosure process yet. Other tidibits - the overall percent of loans that
were seriously delinquent fell from 15% a year ago to 3.8%. Almost 91% of all
loans in the report were current and performing.
Does the high
shadow inventory number necessarily mean that cash sales will continue to be
half of all existing home sales? Probably not. Professional investors who
bought property for rentals are noting the increase in prices, and will
certainly think about ringing the register. They won't be selling to other
professional investors, so that inventory will be coming soon. Plus, as we have seen
in the D, many of these homes will be bulldozed, not sold.
Brent Nyitray, CFA
Dellacamera Capital Management
iDirect Home Loans
1010 Washington St, 6th floor
Stamford CT 06901
T: 203-817-3614
C: 917-841-4938
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