Monday Morning Cup of Coffee: Mortgage market beginning to thaw?
Bubble, bubble, toil and trouble in housing markets
Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.
As The Economist notes, finance acts as an economic time machine, helping savers transport today’s surplus income into the future, or giving borrowers access to future earnings now. We pay too little attention to the slumps that shape modern finance, but the Economist walks through crises going back to 1720.
Anthony Sanders, professor of real estate finance at George Mason University, walks through The Economist listing plus a few other takes and brings it full circle to show what happened in the second half of the last decade was a prolonged expansion of bank credit correlated with rising real median household income that resulted in a housing bubble.
Regardless of whether you think “income inequality”is a problem or not, the issue is here and it’s only going to become more a part of the conversation as we roll into the mid-term elections this fall. Lance Roberts at STA Wealth Management discusses five things everyone should ponder in deciding where they fall on the issue, and what, if anything, should be on the table in dealing with it.
So often anecdotal reports state that the mortgage lending market is still too tight. An article in the Wall Street Journal provides some clear evidence that the mortgage lending business is beginning to thaw. Nick Timiraos provides examples of lenders loosening purse strings and supplies some nice data to back it up.
Why the change of heart? Lenders need to attract more business.
With refinances down sharply, "everybody is fighting for a smaller portion of the originations pie," said Mike Copley, executive vice president of lending at TD Bank as quoted in the article.
That bank is now offering a 3% down mortgage and Copley is convinced the loans will perform well.
Only in New York (and maybe London) – $5,000 a month for a two-bedroom. That’s not a mortgage – that’s rent. And the growing trend is, apparently, to say that’s worth it. CNBC reports that luxury rentals of the kind you haven’t seen since the housing crisis are making a big-time comeback.
This is not just a reporter doing the “one-two-trend” counting – there’s evidence to support the anecdotes.
Aleksandra Scepanovic, co-founder and managing director of Ideal Properties Group, which focuses on the Brooklyn market: "About 30% of our rental business is in the high-end product."
Developers such as Mack-Cali Realty's Roseland Property are also trying to capitalize on the growing high-end rental trend. They've been constructing luxury rentals along the Hudson River's so-called "Gold Coast" in New Jersey.
It’s going to be a busy week for reading tea leaves. Aside from the next wave of quarterly earnings statements – nearly 150 S&P 500 companies alone drop this week – here are some things that will drive markets this coming week.
We start off Monday with the Conference Board’s Leading Indicator Index, the composite index of 10 key economic indicators. It combines everything from yield spreads and factory workweeks to credit index and consumer expectations.
Tuesday will see both the Federal Housing Finance Administration’s house price index and existing home sales. Wednesday holds the weekly mortgage purchase application report from the Mortgage Bankers Association, and the new home sales report from the Census Bureau.
Thursday and Friday hold myriad smaller reports like durable goods orders, the Bloomberg consumer comfort index, and the consumer sentiment report that, taken together, will inform the alert reader of where the market is going. Or one could just read HousingWire, where we follow this stuff like bloodhounds on a hunt.
The Federal Deposit Insurance Corporation reported no bank closings for the week ending April 18, 2014.