Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.
And for this MMCC, we wish we had better news.
The housing and mortgage lending markets of the next year will see measured but slow recovery, and it won’t be what pulls the economic cart. That donkey, if it can ever get hitched up, is going to be jobs and wage growth, while housing will be riding in the back.
“Going forward, the housing market recovery will become more localized; those areas that experienced the most robust run-up continue to lag behind the national recovery, while those areas with a more limited benefit during the good times are now leading the recovery in the aftermath of the Great Recession,” says Sterne Agee chief economist Lindsey Piegza. “In each case, the pace of the recovery will depend on local conditions including population growth, unemployment, and hiring. Of course, new demand on the national level remains somewhat stifled by rampant regulation that has aggressively moved away from the easy lending standards of the early 2000’s, now limiting access to credit.
“Furthermore, higher prices, while a benefit to homeowners and a sign of market improvement, are rapidly outpacing income growth and restraining would-be homebuyers, particularly first-time homebuyers, from entering into the market,” she says.
Although the housing market was the killer of the economy, kicking off the financial crisis that brought a consequent wave of corporate regulation and a swing of the pendulum to the progressive side in politics, housing will not, over the next year, be the savior of the economy.
Consumers, rightly, are no longer using their homes as ATM machines to supplement spending.
“With further improvement in starts and sales, housing will remain a positive contributor to growth, but the contribution will be limited, likely half of what it once was,” Piegza says.
So it's no wonder that confidence in the mortgage finance market is waning. According to an article in Forbes, the Royal Bank of Scotland will exit the secondary market.
"Five months after announcing plans to cut hundreds of jobs in its U.S. mortgage trading unit, RBS has reconsidered its decision and is now looking to shutter this unit. The U.K.-based banking group, which is majority-owned by the British government, had initially hoped to trim this business to one-third its size over the next two years, but it will now exit its mortgage backed-security, commercial real estate and commercial mortgage bond sales and trading operations completely over the same time frame."
What about non-agency MBS issuance going forward? Glad you asked. Chris Flanagan, MBS and ABS manager at Bank of America/Merrill Lynch, answers:
“Credit risk transfer deals look cheap relative to HY CDX; with the spread tightening has lagged in the past month. Non-agency MBS issuance is expected to remain low; risk transfer should see upwards of $10 billion issuance in 2014,” he says.
“(We) remain neutral on agency MBS basis; look for continued support from benign technicals. Due to liquidity concerns, it may take a while to get the expected year-end credit spread rally going,” Flanagan says.
This week brings some key housing metrics.
On Tuesday we’ll have the National Association of Home Builders housing market index for November.
The NAHB housing market index for October was down 5 points to 54. The key in October's report was the traffic component which was down a full 6 points to 41. Lack of traffic pointed to lack of interest including lack of interest from the important group of first-time home buyers. The report's two other components were also down with present sales down 6 points to 57 and future sales down 3 points to 64.
On Wednesday, we get housing starts for October. Housing starts data continue to be volatile. Starts and permits rebounded in September after declines in August after sharp gains in July, but was mostly in multifamily. Housing starts for September rebounded 6.3% after dropping 12.8% in August. September's pace of 1.017 million units topped market expectations for 1.010 million units and was up 17.8% on a year-ago basis.
The multifamily component rebounded a monthly 16.7% after plunging 28.7% in August. The single-family component rose 1.1% in September, following a 2% decline the prior month.
Federal Housing Finance Agency Director Mel Watt wil alsol testify before the Senate Banking Committee on Wednesday, Nov. 19.
On Thursday we’ll receive existing home sales data for October. Existing home sales rose a solid 2.4% in September to a higher-than-expected annual rate of 5.17 million. This followed a dip of 1.8% in August. Year-on-year, however, sales remained flat at minus 1.7%.
No banks were closed the week ending Nov. 14, according to the FDIC.