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Monday Morning Cup of Coffee: MBS tapering by Christmas is possible, but unlikely

November 18, 2013

Monday Morning Cup of Coffee is a quick look at the news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

Some market analysts say all they want for Christmas is a tapering of the Federal Reserve's asset purchases, while others remain uncertain about the issue.

But as CNBC reports, the week ahead could provide a few clues as to the Fed's current position.

The big question is whether the Fed is ready to begin winding down its monthly Treasury and mortgage-backed securities purchases by the end of this year. Past reports suggest it’s unlikely, but CNBC is not ruling out the possibility just yet. Some analysts are even wondering if a December taper is coming, the news agency says.

The answer to that question – or at least a hint of what's to come – could arrive as early as this week even with job numbers still well below preferred levels.

In the days ahead, the markets will hear from Fed Chair Ben Bernanke, who speaks Tuesday in a prelude to the Federal Open Market Committee meeting minutes on Wednesday. If QE tapering is to begin in 2013, those two events could reveal the Fed’s next steps or at least provide investors some clues. 

Fitch Ratings is offering bond investors a look at one area of housing that generally remains somewhat off the radar screen. Bonds backed by military housing remain suprisingly stable as occupancy levels hold steady against the backdrop of strong turnover, a recent report from Fitch Ratings finds.

The research firm says "adequate project operations and alignment between currently appropriated basic housing allowances and underwriting projections have created a stable environment."

Housing unit turnover is currently higher than expected, Fitch noted, but average occupancy remains at 95.6%.

Everything is more expensive in San Francisco. But, if you think you can save money by renting instead of buying, think again.

High demand combined with a low housing supply has led to frequent surges in rent within the Northern California metro.

One couple interviewed by the San Francisco-Chronicle is about to watch their monthly rent double from $2,000 a month to $4,000. This steep climb occurred after the couple's landlord obtained an exemption from rent-control regulations. Now the couple – like many others – is having to move from the place they've called home for several years. They only have a few months to find a new rental in the housing-challenged area.

The Volcker Rule enacted by Congress in 2010 to ensure banks separate their trading and depository activities was supposed to be rolled out by this year, but regulators tweaking the rule have yet to finalize it.

What’s holding it up? The National Journal says it’s not the complexity of the rule, but the structure of the prudential regulators themselves.

Apparently, the big issue is the regulators taxed with working together on the Volcker provisions are struggling to come up with a final strategy and rule.

The rule has already missed a few deadlines, and the 2013 deadline may suffer the same fate, the publication suggested.

Nevertheless, a busy week is in store for the housing market, with two key reports coming out in the next few days. The National Association of Homebuilders Housing Market Index is scheduled for release on Monday, followed by the existing home sales report on Wednesday. Click here to access the HousingWire U.S. Economic Calendar.

No additional banks failed in the U.S. last week, according to data from the Federal Deposit Insurance Corp.

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