Monday Morning Cup of Coffee takes a look at news across HousingWire's weekend desk, with more coverage to come on bigger issues.
Later this week the Secretary of Housing & Urban Development, Julián Castro, will deliver remarks at the Credit Access Symposium, the first industry and consumer symposium organized to discuss ways to increase access to mortgage credit through the use of alternative credit scoring systems. The event will be at the National Association of Realtors headquarters in Washington.
The fact is, as one wag noted at the recent Mortgage Bankers Association servicing conference, credit has only loosened in press releases.
Executive editor Jacob Gaffney noted Friday, a lot of people are even taking themselves out of the game before they start, and others can’t make it to the finish line. Something has to give.
With the arrival of spring comes all things awesome – baseball, warm weather, flowers, and baseball. (I like baseball.)
Spring’s arrival also brings, according to Chris Flanagan at Bank of America/Merrill Lynch, some encouraging economic data.
“The 8% pop in new home sales in February brought activity to the highest level in seven years, and was a reminder that low mortgage rates make a difference for expansionary housing activity,” Flanagan says. “This, along with other factors such as rising purchase mortgage applications, declining initial jobless claims, and an apparent bottoming of the Citi economic surprise index in the last week, leads us to believe that most of the downside pressure for rates has been realized and the low end of our anticipated range of 1.90%-2.20% on the 10-year for February-April (and possibly longer) will not be breached for a material amount of time.
“Conversely, an affordability-adjusted view of new home sales, which shows activity is still 25% below the 1990-1991 recession low, tells us that rates will be hard pressed to move materially higher than our expected range,” he says.
Although the range trade should be positive for agency MBS spreads, heavy securitized products issuance relative to last year, when the Fed was still a net buyer and the yield curve was about 100 basis points stepper, pressured spreads wider in March, he says in a client note.
“Just as the brutal weather has turned, we think the spread story is also about to turn, and look for a repeat of the past couple of years of seasonal spread tightening in the months ahead,” Flanagan says. “We view the Fed's renewed dovishness last week, based possibly on winter weather distortions, as a big positive.”
On Monday the industry will get the pending home sales report from the National Association of Realtors.
Pending home sales in January surged to the highest level since August 2013 after a steep drop in December. In January, all major regions except for the Midwest saw gains in activity in January thanks to improved buyer demand at the beginning of 2015.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 1.7% to 104.2 in January, from an upwardly revised 102.5 in December, and is now 8.4% above January 2014 (96.1).
It was one of the few metrics that showed strong at the start of 2015.
The S&P Case-Shiller home price index will come out on Tuesday, and it will offer an additional perspective on home prices. Last month the Case-Shiller index itself was positive – the 10-City Composite gained 4.3% year-over-year, up from 4.2% in November – but comments that came with its release from David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, sent waves through the industry.
“The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession” Blitzer said. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.”
How much did Americans spend on construction in February? We’ll see on Wednesday when the Census Bureau puts out its report. In January, spending slowed.
You can probably expect a seasonal slowdown at least, but it could be worse than that. Construction spending during January 2015 was estimated at a seasonally adjusted annual rate of $971.4 billion, 1.1% below the revised December estimate of $982.0 billion. The January figure was 1.8% above the January 2014 estimate of $954.6 billion.
Finally Friday – which is Good Friday with the markets closed but the banks open, we’ll see the all-important jobs report from the Bureau of Labor Statistics. You can’t sell houses to people without jobs. Last month employers added 295,000 jobs even as a record number of people left the workforce again. We’ll see how March shapes up.
No banks were reported closed by the FDIC for the week ending March 26.