Monday Morning Cup of Coffee: Economic growth needs securitization

Drones, Zillow-Trulia and housing metrics galore

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

We hope you got all your President’s Day decorating and shopping done, because Monday is that magical day – the biggest holiday in America – and that means markets are closed.

Last week saw the biggest securitization gathering ever, with IMN/Structured Finance Industry Group’s ABS Vegas 2015. While the mood was “cautiously optimistic” and people foresaw “modest growth” – snazzy headline-killing expressions abounded – the consensus was that securitization needs will drive economic growth.

“Securitization allows packaging varieties and types of credit that don’t fit investors’ profiles in the form of whole loans and tailors them to fit investors with different risk/return profiles," says Ron D’Vari, CEO at NewOak. "Without securitization, lenders and originators will not be able to extend credit to many legitimate borrowers because of inadequate levels of capital, causing a significant reduction in potential economic activity."

"As a result, policymakers and regulators all around the world have acknowledged the need for securitization to various degrees,” he adds. “However, securitization, combined with leverage through derivatives, had been blamed as one of the key causes of the credit crisis and the great recession, and the securitization industry has been struggling to revive in critical areas such as U.S. private-label mortgages ever since.”

The National Association of Realtors is pleased with the FAA’s decision to allow commercial use of drones for real estate. Following the announcement of the clarified rules for unmanned aircraft systems, NAR president Chris Polychron said this will be a boost for early-adopter Realtors.

“The proposed rules announced today for the commercial use of unmanned aerial vehicles are good news for property owners and Realtors who desire to embrace cutting-edge technology to enhance the process of buying and selling real estate with images gathered by unmanned aerial vehicles,” he said. “NAR plans to submit comments to the agency and will continue to work with our members to educate them about the future safe, responsible and legal uses of UAVs; however, until the final rule is published, NAR discourages Realtors from using UAV photography or video for commercial purposes without an FAA exemption.” 

Zillow (Z) will not host a fourth quarter and full year 2014 earnings conference call, but Zillow management will host a conference call early Wednesday to discuss the close of the Trulia (TRLA) acquisition, the day after the expected close Tuesday.

On Tuesday morning we get the National Association of Home Builders housing confidence index for February.

The NAHB housing market index continued to report solid conditions with the housing market index at 57 in January versus an upwardly revised 58 in December. January was the 7th plus-50 score in a row. January's strength was led by the most heavily weighted component, present sales, which held steady at 62.

But the second most heavily weighted component, traffic, remained weak, down two points to 44 and reflecting a significant lack of first-time buyers in the new home market. The final component, future sales, did fall four points but remained very solid at 60.

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. A score of 50 is considered a neutral baseline.  

On Wednesday, in addition to the Mortgage Bankers Association applications report, we’ll also get the housing starts report for January.

Housing starts rebounded 4.4% in December after declining 4.5% in November. Expectations were for a 1.041 million pace for November. The 1.089 million unit pace was up 5.3% on a year-ago basis. But there is little forward momentum in housing as housing permits declined a monthly 1.9%, following a 3.7% decrease in November.

The 1.032 million unit pace was up 1% on a year-ago basis. Single-family permits rose 4.5% while multifamily permits fell 11.8%.

Thursday will give us the Bloomberg consumer confidence index.

The Bloomberg Consumer Comfort Index is a weekly, random-sample survey tracking Americans' views on the condition of the U.S. economy, their personal finances and the buying climate.

The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to spend. Confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. 

On Thursday we’ll also see the leading indicators report from the Conference Board.

The Conference Board's index of leading indicators was most recently boosted by Fed policy. But in the latest report, there is not much else to encourage optimism. The index of leading economic indicators rose a solid 0.5% in December in what, however, was a somewhat shallow gain reflecting the Fed's zero interest-rate policy (the interest rate spread in leading indicators), a policy that looks to be shifting higher, and the report's credit index that has long been signaling strength in lending activity but has yet to be confirmed by other data.

Otherwise, the month's strength was mostly negligible though a decline in unemployment claims was the third largest factor. A clear negative reading in the report was a decline in building permits.

Pardon a little self-promotion, but HousingWire continues to evolve and grow, and on the non-editorial side they’ve just launched a new job board in partnership with SimplyHired focused on the mortgage industry and mortgage finance space.

The HW job board features mortgage industry jobs — more than 100,000 of them currently, from across the web and full-search and filtering tools to allow job seekers to narrow their search. The board allows HW clients to purchase ads directly from the HW site simply by clicking on the "Post a Job" button and completing the purchase process. New jobs appear at the top of the job board, for maximum exposure.

Check it out here.

According to the FDIC, one bank failed in the week ending Feb. 13 – Capitol City Bank & Trust of Atlanta, Ga.  

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