Homeowner Confidence Declines; Census Bureau Shares Housing Data; NY Fed Discusses the TBA MBS Market

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."

Is that a great quote?  At the start of the year, not only were the smartest guys in the room talking about how mortgage rates would go up when the Fed ended their $1.2 trillion purchase program, but that rates would be going up in general given the expected economic rebound. Of course, neither turned out to be true and every originator can't believe their good fortune by experiencing yet another refi boom, assuming their rolodex has borrowers with equity and decent credit.

Yesterday's economic news did nothing to suggest that higher rates will arise in the near future - assuming foreign investors don't mind the US's level of debt compared to GDP. (The US Treasury said it will sell $109 billion of government debt this week, not far off analysts' expectations for issuance of $107 billion to $108 billion.  The Treasury will sell $7 billion of reopened 30-year TIPS on Monday, then $37 billion of 2-year notes on Tuesday, $36 billion of 5-year notes on Wednesday, and $29 billion of 7-year notes on Thursday.)

Take Leading Economic Indicators, for example, coming in +.1% but lower than many had hoped. LEI is comprised of 10 series: the factory workweek, new consumer goods orders, nondefense capital goods orders, stock prices, the Treasury yield curve, initial jobless claims, vendor deliveries, building permits, consumer expectations and M2 money supply. Five of the 10 indicators in the leading index contributed to the increase in July, led by the interest-rate spread between the overnight federal funds rate and the yield on the 10-year Treasury note. An increase in the factory workweek and longer delivery times also added to the monthly gauge. Four components retreated, including a drop in consumer expectations and fewer building permits.

The Philadelphia Federal General Economic Index, which like most numbers pales in comparison to the overall European debt crisis, for example, was yet another sign of a slow economy here in the US. It fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July - shrinking for the first time in a year. (Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.)

"Zillow", which for better or worse certainly seems to generate a large number of economic indicators, announced that "Homeowner Confidence in Real Estate Market Dips; 1 in 3 Think Worst Is Yet to Come, While 38% Think Local Home Values Have Reached Bottom."

After all of this news, compared with a miserable Jobless Claims number, 2-yr notes sank to another record low yield. If we go into a "double dip", or, as some believe, never came out of the initial recession to begin with, rates are not going anywhere higher. The signs of weakness are broadening and visible in housing, retail, manufacturing and the labor market (10% unemployment), although GDP in the US is expected to increase roughly 2% in the second half of this year.

There is no doubt that the mortgage industry has lost a lot of jobs in the last few years. Regarding future job security, one secondary marketing veteran likes to say, "Well, I'm not buying any green bananas."

At last, the Federal Reserve Bank of NY published a research paper that even I can understand - this time on mortgage-backed securities and certainly worth a read for anyone in secondary marketing and any mortgage sales person. "Most mortgages in the United States are securitized through the agency mortgage-backed-securities (MBS) market. These securities are generally traded on a "to-be-announced," or TBA, basis. This trading convention significantly improves agency MBS liquidity, leading to lower borrowing costs for households. Evaluation of potential reforms to the U.S. housing finance system should take into account the effects of those reforms on the operation of the TBA market." HERE is the paper

For anyone giving a presentation on the economy, or housing, a good source of numbers and charts comes from our very own Census Bureau. (Yes, they do something besides hire and lay-off large numbers of workers.) Although the actual report won't be released until around Halloween, the Census Bureau released a number of tables from the 2009 American Housing Survey. For example, there are about 76 million owner occupied housing units, and 24 million of them were owned free and clear! There were 24 million mortgages originated that had an interest rate above 6%. HERE is the data

Wednesday mortgage prices got whacked - you couldn't give MBS's away, but yesterday they came roaring back and were "unbuyable". Origination dropped to a little over $2 billion, but buyers showed up, all types, and it was reported that most of the MBS sales took place in the first few hours of trading. Sales were mostly 4% MBS's, but there was a smattering of 3.5%'s in order to hedge that 3.75-4.125% production. 30-yr bonds were up (better) by about 1.75 points, dropping down to 3.65% (weren't we just there with the 10-yr yield?), 10-yr notes were better by over .5 in price dropping to 2.57%.

The economic calendar has zip today as we head into one of the final summer weekends. Bonds traded well overnight - it will be interesting to see if the investor rate sheets catch up a little with the market today. The 10-yr is sitting around 2.55%, and Fannie 4's are a shade better than the close Thursday.

A couple made a deal that whoever died first would come back and inform the other if there is sex after death. Their biggest fear was that there was no after life at all. 

After a long life together, the husband was the first to die. 

True to his word, he made the first contact: 

" Marion ... Marion " 

"Is that you, Bob?" 

"Yes, I've come back like we agreed." 

"That's wonderful! What's it like?"

"Well, I get up in the morning, I have sex. I have breakfast and then it's off to the golf course. 

I have sex again, bathe in the warm sun and then have sex a couple of more times. 

Then I have lunch (you'd be proud - lots of greens). Another romp around the golf course, then pretty much have sex the rest of the afternoon. After supper, it's back to golf course again. 

Then it's more sex until late at night. I catch some much needed sleep and then the next day it starts all over again"

"Oh, Bob are you in Heaven?" 

"No...........I'm a rabbit in Arizona!"