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So Long Housing - Mortgage Applications Collapse, And Sentiment Update
There are those who, not illogically, thought that the second interest rates start creeping up, that there would be a rush of mortgage activity to lock in rates as low as possible before 30 year mortgages roll ever higher. Of course, for that plan to work, one Benjamin Shalom Bernanke would need to have broad credibility among the general population, as he would need to be perceived as one who would not rush to purchase bonds in the future, should rates jump far too high, in the process impairing banks and PDs which still hold massive amounts of paper. If, however, that plan were to not work, then the latest recent attempt to force a rotation out of stocks and into bonds would have abysmal consequences on housing, as the entire mortgage issuance machinery would grind to a halt. Alas, it appears the latter has happened. Minutes ago we got the latest MBA Mortgage Application data and it was ugly. The broad Mortgage Application index collapsed by 7.4% in the week ending March 16, when rates experienced the bulk of the move downward, which was the 6th consecutive week of declines, following last week's 2.4% drop. And while refis have been down for 5 weeks in a row, with the index slamming 9.3% lower as higher rates have now obviously killed any interest in mortgages, so have purchase applications. MBA Purchasing index was down 4.4%, breaking a trend of 3 weeks of gains. Some other hard statistics: the Average 30 year fixed rate soared to 4.19% from 4.06% last week, while the refi % of number of loans dropped to 73.4% - the lowest since July 2011.
And so Ben Bernanke gives up on fixing the housing market, and his latest and only goal now is to boost the Russell 2000 as high as possible.
Some more on the overnight tone from UBS:
Mixed tone: Given the extensive ongoing rally ytd, a pause seemed in order as yesterday's market action was fairly subdued with early setbacks giving way to a mixed bag by day's end. To start the day, adverse headlines regarding potential softening Chinese demand (hard or soft landing) for basic materials (BHP seeing slowing steel production; Rio Tinto seeing China slowdown; China raising fuel prices), plus mixed US housing data (permits stronger, starts slightly softer) set a cautious tone early on. But, the balance of the day proved to be a recovery trade that left some noted divergences. Stock averages posted modest pullbacks (S&P500 -0.30%; Nasdaq -0.14%) while the CDX credit indices were mixed with IG the clear outperformer (IG17 -3 bp to 82.5 bp; HY17 -$0.12 to $98.88, equivalent to +3 to 528 bp). Yesterday's roll to the new IG18 series exemplified the progressive improvement for IG CDS as IG18 debuted in the morning at 92 bp, but closed at 87.75 bp. CDS outperformed cash as bonds were largely mixed and the calendar slowed (~$2bn of IG/HY) following Monday's robust pace (~$8bn). Although rates managed to edge lower (10-year Treasury -2 bp to 2.36%), rate volatility is poised to be an important focus for credit investors and issuers in the coming weeks.
Q1 earnings reports = next potential catalyst: Reduced trading volatility following substantial market gains ytd leave the credit markets well-supported near-term. Looking ahead, we believe that Q1 earnings season (Alcoa 'kicks off' on April 10) sets up to be the next major catalyst -- either promoting another leg tighter or challenging the ongoing rally. Although the last earnings season (Q4) also had positive market momentum as a lead-in, earnings expectations were softening then. As a result, even a lacklustre earnings beat ratio (62% vs. 68% average over past 8 years) ended up being well-received. This time around further market gains may require stronger results. But, it looks like we are setting up for solid reports. The economic backdrop has been encouraging as the UBS growth surprise index remains near a high. And, earlier this month, our equity strategists upped their S&P500 EPS forecasts (to $103 from $99 for 2012, $24 for Q1), citing better US data, less severe European headwinds, higher oil, and reduced financial sector stress. Yesterday, two early reporters provided a favorable preview to Q1 results. Tech benchmark Oracle reported solid results (EPS of 62c vs. 56c estimate; revenue modestly above consensus, $9.06bn vs. $9.02bn) on better-than-expected new software license sales while broker Jefferies posted a beat (33c vs. 29c estimate), supported by fixed-income trading revenue that more than doubled the prior quarter's total.
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our equity strategists upped their S&P500 EPS forecasts (to $103 from $99 for 2012, $24 for Q1), citing better US data, less severe European headwinds, higher oil, and reduced financial sector stress.
Like that "higher oil" setting up for improved S&P prices
Aren't you glad to participate?!
Turn that frown =[
upside-down =]
QE3 isn't coming (no, 'sterlized QE'/Twist/ZIRP aren't QE as they don't expand the existing balance sheet of The Fed) and interest rates will continue to rise.
The only way that any QE or LSAP that increases the present level of the Fed's balance sheet comes is if we literally see an equity market meltdown that's above 20%-30% in less than, say - 2 or 3 months or so - and even then, I would not bet the farm on anything close to what will be remembered by public consciousness as 'big government' in the most simplistic terms 'rigging the system,' hence being a very big black eye for The Non-Federal Reserve-less Non-Bank; so much so, in fact, that probably 10x as many 'average people' know that the Federal Reserve exists today than prior to 2009 (and many of those even have a basic understanding that it represents something very controversial, even if they can't illuminate the specifics), hence the 'transparency' and 'propaganda' campaign of The Bernank as of late, traveling to public schools and college campuses, tweeting and holding quarterly press conferences (an actual advertising campaign by an entity that used to be content with slinking in the shadows).
The Bernank shot his wad rather conspicuously from 2009-2011, and extremely few people benefitted, while the economy at large and overwhelming majority of people have suffered as a result, and there's this clear, unmistakeable awakening now, even if it isn't detail oriented, that "the system is rigged" and that "things are fundamentally worse now despite green paint on some indexes", and most importantly, prices paid for everyday items are "far higher than they were in 2009."
Now hate away, 'cause hatas gonna hate!
CDid you just say Shalom?
I believe that is anti-Semitic.
-Chaime Levin
isn't that his middle name?
Somebody didn't get the memo about tweaking numbers
Nothing has been fixed. Extend and pretend has its limits.
And ... while "they" may lie with statistics ... if you are unemployed or on food stamps ... you just don't buy a house.
or refinance
I think this bullshit is worse. Sometimes they don't care about dicking around with the numbers. They just present them, and then if anyone notes the absurdity they say "so what". The epitome of fucking arrogance. They are shooting for the lemmings not anyone who understands the utter sham this is.
So, fuck you to me and all of you, that's just the way it is. I listened to some asshole on the radio defending what is going on these days - run in the stock market, unemployment going down and I just have to sit and wonder. No one will bother to look behind the curtain.
I wonder what fire insurance fraud rates are like these days?
I would say the fraud of selling someone insurance to lock in a low 30 year interest rate that no one on earth could honor if overnight lending locks up or QE backfires is as rampant as ever.
I'm in the housing industry and I can confirm that we are still waiting for our "Morning in America" moment. Six years of "Mourning in America" is too much.
wait for the 10 o'clock existing home sales data, hopefully a miss.
http://www.cnhedge.com/
http://www.jinrongbaike.com/
Any crappy but real data is always better than expected by the market.
Mortgage rates are still great, but the consumer has to accept the opportunity to get the lowest rates may have passed.
Bullshit. Rates have nowhere to go but down... if you accept that the treasury will be demolished by having to rollover the national debt and deficits at higher rates and if you accept that the FED and the treasury are tied at the hip, then rates are capped on the high end.
Further, practically speaking, in order for there to be any lending or any attempt at credit expansion, there has to be a willing debtor... in the present environment, all credit worthy prospective debtors don't want to touch any debt with timmy's pencil dick. There isn't any real demand for debt even at these interest rates... in other words, again, rates are capped on the high end (and only headed lower). [note: there aren't any prospective investments that will provide a return greater than even the uber low rates].
There is also the issue of the FED using crises elsewhere to push muppets into treasuries during a panic... (what little "real" money there is left in the market)... and this hasn't happened for a little while. [note: obviously this mechanism works until it doesn't, but I don't see where deduction necessitates we have no ability to do this anymore].
Coming soon to your housing market...FREE FALL!
<Record in Utah> Now
Just a remider that tax season is full steam ahead and people tend not to refi when they have to pay the government hard earned dollars.
On the other hand this is the time of year where rich people and large corporations do not pay taxes...maybe go hit them up for a refi?
DC area is nuts right now. A decent house in the $150k-300k range has a contract within hours. My sister short sold her house 2 years ago and just got approved for a home loan to buy a new one so lending standards are lax again as well. She has been out looking for the past few weekends and can't find anything that isn't already under contract or isn't having a bidding war. Now if only the prices in my illegal alien/section 8 renter infested neighborhood would keep going up so I can get the fuck out of this shitbird town...
Bah, big swinging dicks on fraud street are prepping to scoop up the same homes they wrote CDS on then sent the shitty paper by the box load to the fed for mark to gravy terms and are now using the same money to buy back the asset so they can put the shitbox in a section 8 govt rent program and when it all goes to shit again it will be backed by the FFraud twins. Welcome to hell.
Good. More people are gonna stay in their homes (because they'll lock too high interest rates and will be forced to default) and won't pay a mortgage... and the banks won't be able to foreclose on them because if they do, they got so many foreclosures already, they'll go bankrupt. This is bullish.
Stay in your house and don't pay mortgage = bank can mark it to rainbow pooping unicorns on their books.
Get foreclosed on : bank have to mark-it-to-market and it destroy their books... can't have that.
yeah, but at least after foreclosure the servicer will still collect fees on the loan from the trusts created with the mbs...
Mortgage rates for credit worthy borrowers should be 1.5 times the rate those same customers are paid on their savings accounts at the same institutions. The greed simply can't continue and won't support itself much longer, fuzzy math or not.
Collapse is too strong. Many borrowers are waiting for HARP 2.0, so they could spike over the next four weeks. But purchase apps continue to be MAH despite low rates.
http://confoundedinterest.wordpress.com/2012/03/21/mba-mortgage-applications-drop-7-4/
I will be on Fox Business at 11:30 today talking about existing home sales and mortgage apps. I call it the Peyton Manning Housing Market (too many injuries).
Must be weather related....
They are buying APPLE stock instead.....
Referring to Ben Bernake as Benjamin Shalom Bernake is the same as refering to Barack Obama as Barack Hussein Obama. In other words, purposely drawing attention to details while not relevant to their role or responsiblities in the events taking place, but as to their ethno-religious background, and your bias.
Out of all the ridiculous claptrap on zerohedge, you choose to get your feelings hurt about using people's full name? Grow a pair.
The killer on most mortgage applications is the requirement: "Please provide copies of your last 3 years of tax returns."
According to my neighbor, a high level mortgage exec at a TBTF bank, most potential applicants do not go any further after receiving the initial mortgage application package. BTW, an applicant must also have 5-7 years of continuous employment.
Where the fuck is this? Is this the academic version or what actually happens in the real world? I can say that I have NEVER even heard of these requirements and know too many people getting present loans (and the terms of those loans) who would not qualify... and, further, who were never asked to disclose these things...
fantasy land.
It has been a while since I looked into bond pricing and convexity, but in general, the interest portion of that PITI goes up much, much faster when rates go from say 4% to 5%, than when they go from 7% to 8%. Given the facts that houses are not priced on apprisals or recent sales, but rather the monthly nut - which is rising radily - then prices must fall - a lot .
IOW, only a fool (given these excessively low rates) would want to buy now and not wait until the prices get crushed on the inevitably higher rates. It is best to wait until rates have peaked and prices bottomed, and then buy to refinance as rates drop. The price today is determined on the monthly nut, but when you want to go to sell????? And then there are the boomers selling and going south.
What is the problem with my analysis? Two really: 1) 95% of the population has never heard of convexity, and 2) the population is still bought into the notion that buying a house is essential to happiness - or keeping up with the Jones. Also the realtors who have never heard of convexity either are beating on the sheep with the "buy now before rates rise" horses&^t.
http://preview.tinyurl.com/6vp2lz3
Wall Street Firms Let Us Rent out Your Foreclosed Homes
Bernache's next Quanitative Easing, I ask.
Ironic yes, starting with Fannie but I am sure that's also the FEDs solution for trillions of homes on their books - ie collateral for liquidity swaps from FED to banks. It is no surprise to start unwinding the inventory to banks/finance when they control 60-70% of the entire economy. I also noted the $18.50/hr need RQRMT vs avg wage of avg renter $14.50. If the minimum wage was more than doubled to $20 in a sense "people" would see at least some fairness - more of a win/win. But that is not going to happen in our lifetimes: welcome to Pottersville. I guess it beats the many cities that are bulldozing perfectly good homes since the paperwork disarray at MERS makes it impossible for municipality to track down bank owner and collect taxes/secure, maintain property, etc. Where is this story in mainstream media? The politicians on both sides were only too happy to oblige bankers in the push for homeownership over the last thirty years. They could collect more in property taxes vs rental property which has ample deductions/tax strategies. And we all know since Bush Sr s famous reversal (read my lips) no politican wanted to raise income taxes given the greater visibility. Now the bankers, who exchanged the properties for zero interest FED loans, will buy them back from the FED at discounted prices (essentially another less transparent "quanitative easing"). And the losers, all the rest of us (renters - high rents, owners - more rent to own units depress prices) and the local municipalities (lower property taxes). When you connect all the dots, it is just another dirty example of crony capitalism not "free markets."