Monday Morning Cup of Coffee takes a look at news across HousingWire's weekend desk, with more coverage to come on bigger issues.
The recent strength of housing activity suggests the market is in a good place, relatively speaking, to handle the inevitable – though certainly not imminent – gradual increase in interest rates.
In a client note, analysts at Capital Economics – who tend to be on the optimistic side – say that they believe with credit conditions gradually loosening and affordability very favorable, they expect sales and prices to enjoy further gains.
“We expect the economy to rebound from the weather-related weakness at the start of the year. GDP growth should reach 2.3% this year and 2.8% in 2016,” says Ed Stansfield, chief property economist. “Interest rates will soon begin to rise. However, favorable valuations and affordability will support the housing recovery for some time yet.
Stansfield says that a long-overdue upturn in mortgage lending should support further growth in new and existing home sales over the next couple of years.
“The recent tightness of supply could cause price growth to accelerate to around 6.5% this year. Further ahead, price growth will slow as housing reaches fair value,” he says.
But, he warns, a lack of any further loosening in credit conditions could put a dampener on activity, causing price growth to slow over the next couple of years.
Turning to mortgage bond investment, total and excess returns were mostly negative for securitized products in June.
A client note from Chris Flanagan and hi team at Bank of America/Merrill Lynch, says that agency MBS posted -0.5% to -1.5% total returns and underperformed swaps by 0.1-0.5 percentage points. Lower coupon performed worse than higher coupon passthroughs. In non-agency space, Option ARMs continued to struggle as pricing remains relatively weak.
“Most of the credit risk transfer bonds posted negative total and excess returns in June due to spread widening in response to the uncertainties before the FOMC meeting in mid-June and Greece capital control,” Flanagan says. “However, low LTV first loss tranches provided the highest total and excess returns of 4.3%, and high LTV first loss tranches posted 2%.”
Flanagan says that due to massive spread widening after the latest Invitation Homes deal was launched, SFR posted negative total and excess returns in June.
“We maintain a neutral view for the agency MBS basis and the securitized credit products. We expect higher rates and higher rate volatility in the months ahead,” he says.
The New York Times wants to bring some sunshine to the shadow cast by the Treasury Department regarding the conservatorship of Fannie Mae and Freddie Mac, particularly what was involved in the controversial “Third Amendment Sweep” of shareholder profits back in 2012.
The newspaper, led by reporter Gretchen Morgensen, filed a motion to get access to testimony regarding former acting director of the Federal Housing Finance Agency Edward DeMarco in the shareholder lawsuit Fair Holmes Funds v. The United States, arguing that the government did not show good cause for sealing the documents related to his testimony in the case.
They also want access to documents pertaining to former senior Treasury official Mario Ugoletti, who is now a special advisor to FHFA Director Mel Watt.
Both men testified in the lawsuit in May.
The Gray Lady joins Fairholme Funds in wanting the “protected information” designation lifted.
Lone Wolf Real Estate Technologies has acquired Real Web Solutions, a leading provider of real estate website software located in Toronto, Ontario.
The purchase includes the “realiginTM” platform designed to help real estate professionals and companies easily and securely develop and enhance connections with consumers and each other; along with the Real Web AgentTM and Real Web BrokerageTM tools.
“This acquisition aligns with our vision for the growth of our product and service offerings to real estate agents,” says Lorne C. Wallace, CEO of Lone Wolf. “We have a strong foothold in the broker marketplace. Now we’re continuing to expand our presence in the agent marketplace through the growth of our complete eco-system of product, service and partner offerings to meet the needs of real estate professionals.”
It’s always worth the time to listen in on the perspective prolific social media personality and mortgage loan officer Logan Mohtashami, and this interview is no different. Here he discusses housing and the outlook for the economy in the second half of 2015.
Sometimes the concept of “equality” is a universal virtue – such as the idea of equality before the law. But divorced from context, “equality” isn’t necessarily a value or a virtue. Concern for “income inequality,” for instance, depends on what causes the inequality – is it an inequality arising from natural inequalities in ambition, talent, goals and dedication? And after all, if everyone's income rose 10%, the inequality between the top quintile and the bottom quintile would grow, even though everyone would be doing objectively better.
And while equality of opportunity is a universal good, the push for equality of outcome (or equality of income, for that matter) isn’t – if history shows anything worth learning. Forcing equality of outcome is often less about lifting those at the bottom than it is about punishing those at the other end of the spectrum – everyone equal, i.e. equally miserable.
Which brings us to the nebulous concept of “housing inequality,” a concern tweeted about over the Independence Day weekend by Urban Institute’s Rolf Pendall. The paper he cited showed that there's the greatest "housing inequality" in the Dallas area — home to some of the most dynamic economic and job growth happening and the destination for corporations like Toyota and Liberty Mutual, and that the greatest "housing equality" is found in Erie, Pennsylvania, home to one of the most stagnant economies and where everyone is more equal — equally economically depressed.
Well, it didn’t take long to scratch the surface of motivation.
Owing to the weird way Twitter embeds repeat, here's the rest of our conversation in a screen shot.
Which raises the question — what good does it do those on the lower rung to knock down those who made it to the top rung?
Want a free pic of Kevin Harvick, the racer sponsored by ditech? Of course you do. You can get it here.
Monday we’ll see Gallup’s self-reported consumer spending metric, which is a new behavioral economics measure based on the individual reports of a random sample of Americans.
The focus is on consumer discretionary spending, including on basics such as gas purchases at the pump and more optional impulse purchases online or in stores. Excluded are routine spending, including the consumer's monthly bills, and big purchase items such as automobiles and housing.
Tea-leaf reading anyone? On Wednesday we’ll see the release of the Federal Open Market Committee minutes from the last Federal Reserve meeting, and on Friday the Fed Chair herself, Janet Yellen, speaks in Cleveland. Eyes and ears ready.
No banks were closed the week ending July 3, according to the FDIC.
Finally, congratulations to the Untied States Women's National soccer team for winning the FIFA Women's World Cup Canada 2015. Third time is a charm.