Monday Morning Cup of Coffee takes a look at news across HousingWire’s weekend desk, with more coverage to come on bigger issues.
The pressure will be on for the Federal Reserve to boost inflation expectations to set the stage for higher rates despite the general weakness of the overall economy.
How will that and other factors affect rate volatility? Glad you asked. Because Chris Flanagan at Bank of America/Merrill Lynch has the answer in note to clients.
“Most of what we have said in recent months remains our view for the near term (1-2 months). The 1.90-2.20% 10-year range should persist for the near term, enabling rate volatility to decline; although the yield curve should flatten modestly, it should remain steep enough to provide a favorable backdrop for securitized products” Flanagan writes. “Spreads should manage to grind tighter, with 3-5 basis points expected tightening of the current coupon spread providing some indication of how much more tightening is left (not much).
“Meanwhile, the reflationary effects of ECB QE should continue to take hold, while pressure remains on the Fed to acknowledge the weak US data,” he writes. “Ultimately, we think the combined central bank efforts are likely to be moderately successful in boosting inflation expectations, which will set the stage for higher rates and rate volatility. The past couple of weeks of market performance tell us that process may be more dramatic than we might.”
A new chart shows the 30-day delinquency rate for mortgage loans on one-to-four unit residential properties decreased to a seasonally adjusted rate of 2.56% of all loans outstanding at the end of the first quarter of 2015.
Lynn Fisher and Joel Kan at the Mortgage Bankers Association put together the chart below which shows the 30-day delinquency rates from the last two quarters are the lowest in more than four decades. They cite the state of the job market and growing home equity cushions. The bottom line? Inflows into “serious delinquency” are much reduced and the rate of new foreclosure starts has also fallen dramatically.
Click to enlarge
“Loans that are more than 90 days delinquent or in foreclosure (together, serious delinquencies) are still elevated relative to historic norms, as judicial states with long foreclosure timelines are still working through backlogs,” Fisher and Kan write. “Increased mediation and resolution efforts by servicers also contribute extra time until resolution of the distressed loans.
“Over 80% of the serious delinquencies portrayed above were originated in 2008 and earlier, and more recent loan vintages are seeing significantly better performance given higher overall credit quality and improving market conditions,” they find.
HousingWire will be keeping an eye on the goings-on at the MBA’s National Secondary Market Conference 2015 in New York City.
The conference features legendary NBC newsman Tom Brokaw as the keynote speaker. Brokaw will take the stage Monday morning with David Stevens, the president and chief executive officer of the MBA.
Last year, Stevens set off a firestorm with his remarks on minority borrowers. Soon after opening the conference last year, a Twitter war developed between Stevens and Josh Rosner, a well-known analyst at Graham, Fisher & Co. HousingWire publisher Paul Jackson recapped the Twitter war here.
Stevens is set to address the crowd at MBA Secondary at 8:30 a.m. Eastern Monday.
On Sunday, Stevens may have provided a small preview of his remarks when he posted the following on Twitter:
HausingWire reporter Ben Lane is on the scene in New York and will have reports on Stevens’ speech and the other happenings in and around MBA Secondary.The Housing Finance Policy Center at the Urban Institute has published two new blogs definitely worth a look.
The first blog, titled “Give lenders more time to implement new borrower disclosure rules,” summarizes the recent Congressional testimony of Center Director Laurie Goodman who urged policymakers to allow a grace period for the implementation of the new mortgage disclosure rules and, more importantly, to finalize GSE reform.
The second blog, titled “Ginnie Mae should correct the glitch in first-time homebuyer data,” reports on an error HFPC researchers found in Ginnie Mae data, which they say could mislead policymakers about how far the first-time homebuyers share has fallen
The housing market index, also known as the inexplicably popular “homebuilder confidence index” has long been signaling strength in the new home market that has never appeared.
Homebuilders have been very confident in the 6-month sales outlook despite unusually weak buyer traffic.
Monday’s release of the May reading will likewise likely show a gain in confidence. Builder confidence in the market in April rose four points to a level of 56 on the index
The National Association of Home Builders produces a housing market index based on a survey in which respondents from this organization are asked to rate the general economy and housing market conditions. The housing market index is a weighted average of separate diffusion indexes: present sales of new homes, sale of new homes expected in the next six months, and traffic of prospective buyers in new homes.
Housing starts & permits have been some of the most disappointing data on the calendar, underscoring how weak the new home market really is. Excuses were abundant during the heavy weather of the first quarter but those excuses won’t apply to the latest report for April which comes out on Tuesday.
Privately owned housing units authorized by building permits in March dropped 5.7% on a monthly basis, coming in at a seasonally adjusted annual rate of 1,039,000. This is 2.9% above the March 2014 estimate of 1,010,000.
Privately owned housing starts in March dropped 2.5% on a yearly basis but rose 2% from February, coming in at a seasonally adjusted annual rate of 926,000.
The real bright spot in the housing sector, which, in total, is still struggling despite the onset of spring, has been existing home sales. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 6.1% to a seasonally adjusted annual rate of 5.19 million in March from 4.89 million in February—the highest annual rate since September 2013.
But the comparison with the 6.1% sales jump March is difficult, meaning that Thursday’s release of existing home sales has a big hurdle to jump to come in high.
Existing home sales tally the number of previously constructed homes, condominiums and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends.
No banks were closed the week ending May 15, according to the FDIC.