Increased activity in the mortgage market since the GDP revision July 29 has created a noticeable gap between the Primary (borrower) market and the Secondary (Investor) market, as indicated by the wider “spread” shown in Fig.1. You’ll see it’s now almost twice as wide as it was prior to the... Read more
We care about “real interest rates” (which simply reduce the nominal yield an investor would receive by considering the implied cost of inflation) because lower levels of real interest reduce savings and investment and risk taking the economy further away from any long-term sustainable growth. Short-term low or even negative real yields... Read more
The events of the past week have created an obvious level of tension in global equity and debt markets – so I wanted to place some of this in perspective with a quick graphic. The levels and magnitude of change have broken some records recently and it’s helpful to consider... Read more
Two important records have been broken… RECORD # 1 ‐ 2yr Treasury notes this morning have set a new record low of 0.30% (the prior record was established Nov 4th, 2010 at 0.3276%). (No Graph) RECORD # 2 – The more important record in my view is the new low... Read more
One measure of evaluating the change in price of goods is by using a “price deflator,” which considers not only the change in price against a base year (2005), but also the fact that people’s buying habits for what they consume also changes. The “deflator,” therefore, is not based on a... Read more
Fig.1 below reflects an “Intra‐Day” perspective for FNMA current coupon yields and the decline of ~0.18% over the past three days, which is in direct conflict to what would have been expected given the looming debt ceiling concerns. Economic fundamentals today outweighed concerns over the debt debate as a weaker-than-expected... Read more
I’ve been asked a few times for perspective on how tighter lending standards are influencing not only origination flows but also consumer access to credit. Figure 1 highlights the change over time by vintage (when the loan was originated). There is a noticeable rise in FICO between 2008 (680... Read more
The Case -Shiller Home Price Index, released this morning, reflected further declines in its top 20 cities, which was on target with forecasts — given that the index lags the market. One of the most notable elements is the magnitude of the aggregate decline — down 4.51% Year over Year, which... Read more
As we approach the Oct 1st deadline when we expect to see the repeal of the higher loan limits for conforming originations, expect true jumbo loans to regain market share. Currently the highest conforming jumbo loan limit is set to the lower of 175% ($729,750) of the national loan limit ($417,000)... Read more
The unemployment rate increase to 9.2% was a surprise to the market this morning, and accordingly we saw a flight to quality from equities into the relative safety of bonds. While this will translate into lower rates for consumers we can all agree that long-term this was bad news for home... Read more