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.
We’ve already covered how plunging oil prices could throw off everyone’s predictions for rising mortgage rates in 2015.
But what will it do for the real estate recovery? Consider this The United Arab Emirates Energy Minister, Suhail Al-Mazrouei, said over the weekend that OPEC will stand by its decision not to cut crude output "even if oil prices fall as low as $40 a barrel" and will wait at least a quarter before considering an emergency meeting.
In other words, they are in exactly no hurry to float oil prices.
Now consider this, of the 12 hottest housing markets in 2014 where home price appreciation accelerated the most according to RealtyTrac, 11 of the 12 can thank the oil and gas deposits they sit on top of for their growing economies.
So, you know, plan accordingly.
As we’ve noted here before, when the New York Times editorial board talks about the mortgage industry, it’s even odds they’ll get something wrong. In their Sunday editorial opinion, they don't disappoint. In the piece, the board lauds the recent decision by FHFA director Mel Watt to lower down payment requirements, and then turns it into a launching point for revising history, Pravda style.
When Melvin Watt, the federal mortgage regulator, recently unveiled new government plans to encourage low-down-payment mortgages for cash-strapped buyers, the move was correctly understood as an effort to revive the still-ailing housing industry. But it is more than that. It is a challenge to the enduring misperception that most of the people who lost their homes in the housing bust should never have been homeowners in the first place.
That view has always been too simplistic. Worse, it has resulted in unnecessary barriers to homeownership for lower-income families with few if any other ways to build wealth.
In the ivory tower of the New York Times, personal responsibility is a profane concept, and individuals are always victims of businesses and corporations.
Are there some mortgage bankers and bank presidents who should be hanging from metaphorical lamp posts? Of course. Are there some bundlers of mortgage-backed securities that should be exiled to Devil’s Island? Of course. Were some lenders willing to write the proverbial mortgage to anyone who could fog a mirror? Yes.
But you know what?
Someone had to fog that mirror. To write a liar loan, you first need a liar to walk through your door.
And to ignore the risk of opening the credit box too much, or to pretend that a substantial portion of the population isn’t financially and personally responsible enough for the demands of homeownership is progressive naiveté.
Robert Shiller, no fiscal conservative of any sort, told CNBC even he’s concerned the pendulum may be swinging too far back.
Lax lending standards were widely faulted for triggering the 2008 financial crisis. If recent developments are any indication, those conditions may be making a comeback.
But could an ultralow down payment create a housing market boom, or could it lead to another mortgage bubble? A prominent housing market expert who made his name predicting the 2008 bust has at least some doubts.
"It sounds a little risky," Nobel Prize-winning economist Robert Shiller told CNBC. "Risky for the lender, and for the mortgage insurer who is going to insure" the mortgage obligations, he added.
This week will see some critical housing metrics, including the unusually popular homebuilder’s confidence index from the National Association of Home Builders.
The NAHB housing market index for November was up 4 points to 58 which, outside of September's 59, is the best reading of the year and of the recovery. Gains appear through the three components led by a 5-point gain in current sales to 62, which points to strength for November new home sales.
Future sales were up 2 points to 66, with the traffic component, which continues to lag, up 4 points to 45. Regional data show wide gains led this month by the Northeast, which is now in positive ground at 51 (readings over 50 indicate month-to-month growth). Housing remains comparatively flat to other sectors of the economy though the latest report does hint at increasing strength.
NAHB 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.
Tuesday will see the report on housing starts. Housing starts in October pointed to an uncertain sector as starts slipped while permits gained. Housing starts numbers continue to oscillate. October weakness was in the multifamily component, which swings sharply on a monthly basis. The single-family component may be gaining mild strength. Housing starts declined 2.8% after a 7.8% spike in September. The 1.009 million unit pace was up 7.8% on a year-ago basis. Market expectations were for 1.028 million units. Housing permits, however, showed momentum with a 4.8% gain in October after a 2.8% boost the month before. The 1.080 million unit pace was up 1.2% on a year-ago basis.
And Wednesday, in addition to the weekly mortgage applications report from the Mortgage Bankers Association, we’ll see the Federal Open Markets Committee policy announcement.
The FOMC announcement at 2 p.m. ET for the December FOMC policy meeting is expected to leave rates unchanged at a range of zero to 0.25 percent. The debate within the Fed likely will focus on the conundrum of a declining unemployment rate and below-target inflation. Traders will take note of any changes in guidance for when the first increase in the fed funds rate might occur. Also, the Fed will release its quarterly forecasts at the same time as the statement.
No banks were closed for the week ending Dec. 12, according to the FDIC.