Sep192013
How will the Federal Reserve’s continued printing money impact housing?
I recently asked, Can the fed taper housing market stimulus with no ill effects?. Apparently, the federal reserve doesn’t think so. Last month I reported that rising interest rates are spoiling efforts to reflate the housing bubble. The weakness in the market is apparent to everyone since mortgage rates rose, and since the banks need continued rapid appreciation to bail out their bad bubble-era loans, a cooperative federal reserve decided not to taper its bond and MBS purchases.
I can’t say I’m surprised. The federal reserve won’t stop printing money or raise interest rates until it absolutely has to. That is the history of this organization. Unless inflation gets out of control or the currency starts to strongly devalue relative to other currencies, the federal reserve will keep printing money or lowering rates until one of those two events forces them to do otherwise. Slowing down the printing of money might have been the prudent thing to do, but until they’re forced to, don’t expect the federal reserve to stop printing or raise rates.
Fed shocks market, decides not to taper
Rising mortgage rates halt beginning of QE wind down
Christina Mlynski — September 18, 2013 2:17PM
The Federal Open Market Committee decided Wednesday to keep purchasing additional agency mortgage-backed securities at its current pace to foster the ongoing housing recovery and fight unemployment.
In other words, the market was tricked — no tapering just yet — despite numerous predictions of a $10 billion reduction in monthly asset purchases by the Fed.
The FOMC made that conclusion after members met this week and announced that although the housing sector is strengthening, “mortgage rates continues to rise further and fiscal policy is restraining economic growth.”
Before everyone gets excited about lower mortgage rates, I want to point out that such an outcome is not a given. First, buyers may not get too excited about jumping into an asset class (bonds) they know is completely dependent upon federal reserve support. The same issues that caused investors to bail in May are still present today. I expect a short-term move lower, but after a few days of digesting the information, markets may decide otherwise. Many investors may see this as a selling opportunity because they know there will be buying interest to sell into and get a better price. The foreign central banks who own huge bond holdings and were recently selling may increase their sales. There is still little reason to buy 10-year Treasuries.
Further, the federal reserve still has the bigger dilemma of maintaining control of long-term rates. If they print too much money for too long — and nobody knows where that threshold lies — inflation expectation will cause investors to sell. If we reach that point, nothing the federal reserve does works. If they stop buying, bond prices crash and interest rates rise. If they keep buying, inflation expectation brings out sellers, bond prices crash, and interest rates rise. Apparently, we haven’t reached that magic threshold yet, but if we do, interest rates can rise very quickly.
The impact on housing is straightforward. Rising rates will hurt housing sales and ultimately prices. Falling rates will help housing. As I pointed out future housing markets will be very interest rate sensitive.
As a result, the central bank will continue purchasing agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion a month. Yields on 10-year Treasurys dipped from a daily high of 2.9% to below 2.8% on the news. Yields on Fannie Mae and Freddie Mac bonds also dropped, according to Bloomberg, with spreads between MBS and the 10-year swap winding 6 basis points closer.
“The committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy,” FOMC members said.
They added, “However, the committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
Over the last several weeks all of the talk was about why the federal reserve must taper and how they would do it. The analysts were all wrong.
The vote for the statement was 11 to 1 with Esther George, president of the Federal Reserve Bank of Kansas City dissenting because she was concerned that the continued high level of bond-buying program increased future economic risks.
The majority of mortgage analysts noted that the Fed’s decision to not begin scaling back its monetary stimulus wasn’t bad news — it was just not what was desired.
“Concerns over budgets, deficits and payments along with other news are tending to keep consumer and business confidence from expanding as rapidly as one would expect,” explained National Association of Realtors economist Jed Smith.
It could also be concerns over the soundness of our currency and the ongoing economic malaise that prevents consumer and business confidence from improving.
He added, “Currently, existing-home sales are at levels significantly above those of last year and should remain positive for the foreseeable future – in terms of sales and price. Given interest rates, household formations and gradually easing conditions most economists project increasing growth.”
As the NAr economist, he had to put in some spin and bullshit.
I don’t believe we will see both price and sales increasing over the winter unless we see a return of sub-4% interest rates. Do you believe this announcement will cause interest rates to fall that far?
The decision not to start tapering reflects the Fed’s view on the health of the overall economy, specifically the state of the housing market.
I thought we were in the midst of a raging bull market built on solid fundamentals? Isn’t that the story embraced by bulls and popularized in the MSM? Apparently, the federal reserve doesn’t think so, or they wouldn’t have explicitly said so in their decision not to taper.
Trulia (TRLA) chief economist and vice president of analysts Jed Kolko believes the central bank’s choice to not begin winding down its MBS purchases for two reason.
“Mortgage rates will rise less, or fall more, than if they had started tapering, and economic growth should be faster with the tapering delay, which could help housing demand if young adult’s job prospects improve,” Kolko noted.
In other words, the federal reserve wanted to keep the pedal to the metal.
In August, FOMC members confirmed that they were ‘broadly comfortable’ with the timeline Fed chairman Ben Bernanke put into action for tapering its monetary stimulus as long as economic conditions continued to improve.
However, with a volatile market since May into September, changing the pace of asset purchases did not seem appropriate given the recent rise in mortgage rates, drop in refinance volumes and debate over who will head the Federal Reserve.
Overall, the Federal Reserve has been committed to low rates for some time and the recent announcement is a continuation of that.
“Ultimately mortgage rates will continue to drift upwards, with some downward pressure on price increases,” pointed out Cato Institute director of financial regulation studies. Mark Calabria
I believe mortgage rates will resume their upward trend after a brief pullback.
He concluded, “Mortgage rates also incorporate inflation expectations, so to the extent the Fed does not keep those expectations in line, rates will also increase.”
That is the nightmare scenario the federal reserve most worries about.
So what are your predictions on mortgage interest rates? It should make for amusing quotes from the archives several months from now. Do you have the courage to go on record?
How to spend your home in four easy steps
The owners of today’s featured short sale will end up leaving the property with nothing. They are one of the many sellers who were underwater until prices rose over the last year, so now they are hoping to make a graceful exit and move into a rental. This is particularly sad given that they’ve owned the property for 21 years.
The bought it back in 1992 for $313,000. I don’t have their original mortgage data, but they obviously borrowed less than they paid. Their four steps toward losing their home are as follows:
- On 4/3/2001 they refinanced with a $316,000 first mortgage. This wiped out nine years of amortization and extracted their down payment.
- On 6/1/2002 they obtained a $37,665 HELOC.
- On 2/10/2004 they refinanced with a $450,000 first mortgage and obtained a $80,000 stand-alone second.
- On 6/29/2007 they refinanced with a $651,000 first mortgage.
Twenty-one years, and rather than being close to paying off their original mortgage, they are about to sell short and leave with no equity and bad credit.
[raw_html_snippet id=”newsletter”]
[idx-listing mlsnumber=”PW13178840″ showpricehistory=”true”]
5 ELDORADO Lake Forest, CA 92610
$700,000 …….. Asking Price
$313,000 ………. Purchase Price
8/13/1992 ………. Purchase Date
$387,000 ………. Gross Gain (Loss)
($56,000) ………… Commissions and Costs at 8%
============================================
$331,000 ………. Net Gain (Loss)
============================================
123.6% ………. Gross Percent Change
105.8% ………. Net Percent Change
3.7% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$700,000 …….. Asking Price
$140,000 ………… 20% Down Conventional
4.55% …………. Mortgage Interest Rate
30 ……………… Number of Years
$560,000 …….. Mortgage
$142,320 ………. Income Requirement
$2,854 ………… Monthly Mortgage Payment
$607 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$146 ………… Homeowners Insurance at 0.25%
$0 ………… Private Mortgage Insurance
$70 ………… Homeowners Association Fees
============================================
$3,677 ………. Monthly Cash Outlays
($623) ………. Tax Savings
($731) ………. Principal Amortization
$237 ………….. Opportunity Cost of Down Payment
$108 ………….. Maintenance and Replacement Reserves
============================================
$2,668 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,500 ………… Furnishing and Move-In Costs at 1% + $1,500
$8,500 ………… Closing Costs at 1% + $1,500
$5,600 ………… Interest Points at 1%
$140,000 ………… Down Payment
============================================
$162,600 ………. Total Cash Costs
$40,800 ………. Emergency Cash Reserves
============================================
$203,400 ………. Total Savings Needed
[raw_html_snippet id=”property”]
With regard to the entire taper/no taper event, uncertainty is much more prevalent than before, but 3 things are certain:
1) a trial balloon was floated
2) a 3-handle on the 10yr yld is the break point
and the most damaging of all certainties
3) institutional credibility continues to tank
Think about this:
(Dove Event #1) Last Friday Wall Street & the TBTF banks squeezed Larry Summers to resign his candidacy for the chairman of the Fed.
(Dove Event #2) Yesterday “no tapper” from the FOMC meeting.
Yet all these two very dovish events could muster was about .20 basis points on the 10 year bond. Look at what’s happening today … yields are rising again. Basically, there’s selling into the rally.
This is very bad news for the Fed influencing the long end of the bond market.
JMO, the 10 year will yield 3% before it yields 2.5% … likely this year.
The mantra of some real estate agents is, “All real estate is local.” That is only partially true. Local real estate is hugely affected by factors which are not local.
http://www.examiner.com/article/dollar-no-longer-primary-oil-currency-as-china-begins-to-sell-oil-using-yuan
It used to be El O would give me anxiety..
Hopefully dollar losing that status will cool things down a bit without too much destruction in our lifestyle.
the world’s largest debtor nation losing its world reserve currency status and “cool down a bit”? not likely.
“We have got to turn the page on this kind of bubble-and-bust mentality that helped to create this mess in the first place, we have got to build a housing system that’s durable and fair and rewards responsibility for generations to come. That is what we have got to do” ~ Barack Obama, Aug 6, 2013
And yet with each step, with each new policy, we get farther and farther away from that goal.
Politics 101: campaign amd talk about goal A (what voters want), but really do goal “C” ( what your political “doners” want), then blame the result on the opposing party.
obama’s egalitarian bullshit. eat it up voters.
Fed Damages Credibility Due To “tightening of financial conditions”
While noting “improvement in economic activity and labor market conditions,” the Federal Open Market Committee voted Wednesday to continue its policy of near-zero interest rates and its $85-billion-per-month bond-buying program.
At the same time, the Fed’s own economic projections suggested the economy might not grow this year as fast as it expected just three months ago.
In a statement concluding its two-day monetary policy meeting, the FOMC said it “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
The Committee adopted the policy by a 9-1 vote with only Esther George, president of the Kansas City Fed, dissenting. St. Louis Fed President James Bullard, who had joined with George in her dissents earlier this year, voted in the majority as he had at the July meeting.
“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” the FOMC said in its statement. “The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
The reference to “the tightening of financial conditions” was seen as a comment on the recent increase in mortgage rates, some of which resulted from the Fed’s own discussion of tightening its monetary policy.
The reference to “the tightening of financial conditions” was seen as a comment on the recent increase in mortgage rates, some of which resulted from the Fed’s own discussion of tightening its monetary policy.
The FOMC said its actions “should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate [of price stability and maximum sustainable economic growth].”
Fed Chairman Ben S, Bernanke had originally said the FOMC would wait until the inflation rate rose to 2 percent and the unemployment rate fell to 6.5 percent before the Fed would begin “tapering,” that is gradually tightening its stimulative monetary policy. In recent weeks though Bernanke hinted the FOMC might act before its targets were achieved. Bernanke came under criticism from some economists who suggested by acting before its own criteria were met, the FOMC would damage its credibility.
Wall Street Thrilled Over No Taper
Wall Street was more than thrilled with the Federal Open Market Committee’s decision to continue purchasing additional agency mortgage-backed securities at its current pace to foster the ongoing housing recovery and fight unemployment.
Many industry experts went to Twitter to express their thoughts on the lack of tapering:
Chandan EconomicsPresident Sam Chandan tweeted, “An insipid victory for housing markets; Fed doesn’t believe rebound can be sustained absent artificially low mortgage rates.”
“Less than 3% from Dow 16,000. No chance this momentum goes away any time soon,” tweeted Todd Schoenberger, Managing Partner and Portfolio Manager for LandColt Capital.
Wall Street Strategies CEO and Principal Analyst Charles Payne went to Twitter to say, “Fed admits failure- no tapering no tapering no tapering & down goes Frazier, down goes the $ and down goes sanity- but Wall Street thrilled!”
Corker, Warner: Long-Overdue Housing Finance Reform Within Grasp
This month marks five years since Lehman Brothers filed for bankruptcy. Many Americans can recall the shock and anxiety they felt over the next few weeks as banks of all sizes went insolvent, the stock market plunged nearly 800 points in a single day, and national housing prices sank 30%.
Yet five years later, major components of the crisis have been left completely unaddressed: Fannie Mae, Freddie Mac and our system of housing finance.
Despite being at the center of the storm and requiring a $200 billion taxpayer bailout, these two mortgage behemoths have not been reformed. The model of private gains and public losses should be eliminated once and for all.
With one proposal working its way through the House, another gaining traction in the Senate, and President Obama moving the issue to the forefront last month, we are on a trajectory to dramatically modernize the way our country’s housing finance system works. This is good news. But the stakes are high, and we must get this right.
Reform should begin with a fundamental understanding of Fannie and Freddie as government-sponsored enterprises with collective balance sheets of close to $5 trillion. At their best, the GSEs provide valuable technology, systems and legal infrastructure to connect banks in towns all across our country to global investors from London to Frankfurt to Hong Kong. At their worst, they are corporations that have historically leveraged their special relationship with the taxpayer to run thinly capitalized institutions that enriched shareholders when the economy was humming but relied on the taxpayers when the economy tanked.
Our public policy challenge is: how do we deal with twin entities that currently play an integral role in our economy but are rooted in a fundamentally flawed arrangement as semi-private, semi-public firms? Fannie and Freddie have crowded out competitors and prevented innovation in the secondary mortgage market.
Compounding this challenge, we know we must ensure a system of housing finance that isn’t prone to frequent disruption and can consistently provide sufficient credit to meet the needs of American homeowners and our multitrillion-dollar mortgage market. And we cannot accidentally tip the competitive balance in favor of the largest financial institutions – the ones that can access the global capital markets without an intermediary – while leaving community lending institutions in the dust. To these ends, we have spent the past year assessing what is worth preserving in the current system and what needs to be scrapped.
Our bipartisan bill, the Housing Finance Reform and Taxpayer Protection Act, would keep the technology and infrastructure of Fannie and Freddie, but redeploy it into an updated system where duopolies can no longer exist. In addition, capital levels for private-sector participants that take on credit risk would be substantially higher than they were in the past. We would require at least 10% capital – more than twice the amount Fannie and Freddie lost during the last crisis before there can be any taxpayer exposure.
Further, our bill would ensure that companies issuing mortgage-backed securities are legally separated from the entities that take on the risk of credit loss, so that if one firm makes bad bets and gets into trouble it can be allowed to fail without disrupting the rest of the system. And our proposed Federal Mortgage Insurance Corp. would explicitly charge for the taxpayers’ backstop risk – much like the FDIC’s operation – by assessing an up-front fee on loans that go into a government-insured mortgage-backed security. Finally, we maintain and improve existing efforts to help creditworthy Americans access homeownership, including the popular 30-year fixed mortgage. But we would completely wall off the government’s risk management and taxpayer protection roles from social initiatives and make them more accountable, transparent and subject to strict oversight.
It is past time to address this unfinished business remaining from the financial crisis. The bill we are advocating along with eight other members of the Senate Banking Committee – a strong coalition that continues to grow – can usher in a 21st-century model of housing finance that will create a dramatically better model for responsible, sustainable homeownership in this country.
Maybe they all have good intentions, but Democrat, Republican, they all make the same mistake; they create more legislation to fix problems which were created by legislation. They create more government to fix problems which are created from too much government.
Vote for less government.
Wisdom is admitting when you’re wrong. – awgee
Ha ha! Legislation is created to make an industry money. Its packaged to the voters as a good intention! Wake up. Its about money and power. Not intentions!
China Adds U.S. Mortgage, Agency Bonds
China, the biggest foreign buyer of U.S. debt, in July bought a record amount of U.S. government agency debt and mortgage-backed securities, even as it sold Treasurys, according to data from the Treasury Department.
China’s purchases are the latest sign the country hasn’t stepped away from funding the U.S. even as prices on Treasurys and mortgage debt fell sharply this summer, sending yields higher and diluting the value of investors’ fixed-income holdings, said analysts. China was a net buyer of Treasury notes and bonds in May and June when many other investors cut back their holdings amid signs that the Federal Reserve was weighing reducing its bond purchases.
“There is no evidence that Chinese investors are losing confidence in the U.S. market,” said Ian Lyngen, a senior government bond strategist at CRT Capital Group LLC. “In fact the notion that they are buying dips [in bond prices] is longer-term constructive” for the U.S.
In July, China increased its holdings of high-grade securities sold by government-sponsored enterprises such as Fannie Mae and Freddie Mac FMCC 0.00% and securities backed by home mortgages guaranteed by the U.S. agencies, by $20.2 billion, according to the Treasury Department data on capital flows. The purchases broke the previous record of $16.9 billion in purchases in April, according to Mr. Lyngen.
Mr. Lyngen said the July amount was the biggest on a monthly basis since 1977, the earliest year the data provided by the Treasury.
While buying the U.S. agency debt, China reduced its holdings of Treasury notes and bonds by $6.48 billion in July, after a $34.7 billion net increase in the previous two months. Many investors perceive agency bonds and agency mortgage-backed securities as an attractive alternative to Treasury bonds because they are highly rated bonds and offer higher yields than Treasury debt.
Analysts continue to play down any concerns that China might dump its U.S. bondholdings, a move that could potentially expose the U.S. government to an interest-rate shock and dealing a blow to the U.S. economy.
Despite the selling in Treasury notes and bonds in July, China’s overall holdings of Treasury debt actually rose by about $1.5 billion to near a record high of $1.277 trillion thanks to its purchases of shorter-term U.S. Treasury debt called bills, which mature in a year or less.
China’s portfolio reshuffling came at a time when overseas investors were warming up to U.S. bonds again, particularly in July as the market stabilized after the spring swoon. Fed Chairman Ben Bernanke had soothed investors’ worries about rising yields that month by suggesting that there was no “preset course” for the U.S. central bank to wind down its bond-buying program.
The benchmark 10-year Treasury note’s yield hit a 23-month peak of 2.756% on July 8 and fell to 2.58% at the end of July. Bond prices rise when their yields fall.
Overall in July, foreign investors increased their holdings of long-term U.S. assets by $31.1 billion following a decline of $67 billion in June, according to data Tuesday from the Treasury.
“Slowing down the printing of money might have been the prudent thing to do, but until they’re forced to, don’t expect the federal reserve to stop printing or raise rates.”
I have the feeling that everything just go more political with the rates. It was very political before, but now it will be pushed to the front.
I completely agree Mike …
The politics of this are what’s going to force the Fed to end this madness. And it may end much quicker than many on Wall Street expect.
The Fed’s largest peril is the instability of the population.
http://www.zerohedge.com/news/2013-09-19/druckenmiller-blasts-biggest-redistribution-wealth-poor-rich-ever
Taper.
No taper.
Not sure it matters. The trajectory is not good.
And of course the MBA must “OMG we found a granule of sugar to report on!”, like so:
http://www.fool.com/investing/general/2013/09/18/mortgage-applications-ricochet-higher-ahead-of-fed.aspx
“The Mortgage Bankers Association reported today that applications for home loans notched a double-digit increase last week. The industry group’s market composite index climbed by 11.2% compared to the previous seven-day period. This marks the only the third time in 10 weeks that the index has headed higher. At the present level, it’s off its May high by 54.1%.”
54%.
Dude.
As if we weren’t in uncharted water before yesterday…now where are we, and where are we headed???
Everyday that passes, the mid-00’s of GWB economy looks more like the good-ol-days in comparison. When did a normal economy leave the building?
I remember when I used to have a job, and I used to believe I could always find a different job if I lost the one I had. Now, that’s no longer true.
I’ve been doing my own thing for four years now, and at times I’ve considered taking a job, partly because I could continue to do what I am and have the extra money from working at a job. Even if I wanted to, six years after the collapse, I don’t think I could find a job in land development, land planning, or project management. There are still many unemployed with these skills, and almost no jobs available.
For anyone in the homebuilding industry, this economy still sucks, and nobody has any job security.
I’m honest with myself to know I’m fully dispensible.
I come in, work hard, work outside my job role, and continually work to establish as many corporate relationships outside my organization as possible.
Short of a public sector union, I think everyone else will continue to live in an elevated level of job insecurity.
Job insecurity is elevated across many industries right now, including tech sector – even programmers, software, network engineering, etc. Healthcare and biotech might be an exception though because there is a massive tidal wave of people hitting 67+ this year, the majority of them on a fateful collision course with a cardiologist and the cornucopia of drugs, treatments and fees that follow. But the market sucks everywhere.
And those with jobs right now tend to be more overburdened with workload than ever before because companies are trying to get as much as they can out of existing perm workforce, and not hire more perms. Companies are also happier than ever just to say eff it and hire temps instead. Economic uncertainty and fear are driving these decisions, but I think the preference for temps and short-term consultants over perms may be here to stay.
Rising mortgage interest rates are a good reason for fewer loan apps, but I think job insecurity in the US and the likelihood of having to move in order to find gainful employment weighs heavier on the mind of prospective buyers than it did before or shortly after the financial crisis.
Talk about disposable! I am an senior electronics hardware tech w/36+ years experience (starting 1972) w/20+ years of advanced PWB layout design & prototype experience, yet after my layoff (2008), in my geographical area I am unemployable, pretty much everyone who hired people to do my kind of work has moved overseas and the few remaining jobs here in my line of work are filled by unemployed engineers working as techs. Don’t look to me as a potential homebuyer, fortunately I already have one that I own outright. That is the only reason we’ve been able to get by these last 5. As mark (above) states,
meaning the near future is going to be a really sh*tty place to make a living and I am grateful we have no children who will have to endure living in it.
Mortgage rates hit a five-week low
Mortgage rates for 30-year U.S. loans fell to a five-week low, a decline that’s likely to be extended after the Federal Reserve refrained from reducing its monthly bond buying.
The average rate for a 30-year fixed mortgage dropped to 4.5 percent from 4.57 percent, Freddie Mac said in a statement today. The average 15-year rate decreased to 3.54 percent from 3.59 percent, according to the McLean, Virginia-based company.
Federal Reserve Chairman Ben S. Bernanke said yesterday that more signs of lasting improvement in the economy are needed before the central bank tapers its purchases. Mortgage rates, which increased from near-record lows in May on speculation of a scaled-back stimulus, probably will fall for another few weeks, said Keith Gumbinger, vice president of HSH.com, a mortgage-data firm in Riverdale, New Jersey. That gives would-be homebuyers a limited opportunity to take advantage of lower costs.
“If you are in the game for a mortgage, or if you have been on the cusp of jumping in, it’s a good idea to capture these dips if you can,” Gumbinger said in a telephone interview yesterday. After the temporary decline, rates are “more likely to be higher as we go forward then they are to be lower.”
This week’s rate doesn’t fully reflect the market’s reaction to Bernanke’s comments because Freddie Mac’s data are mostly collected from Monday to Wednesday. The overnight average rate for a 30-year fixed mortgage dropped to 4.42 percent from 4.56 percent last week, according to Bankrate.com.
Wells Fargo Rates….
30-Year Fixed 4.500% 4.673%
30-Year Fixed FHA 4.250% 5.766%
15-Year Fixed 3.500% 3.795%
Jeez, three major economic and financial issues in the last two days this week:
*No Taper
*Obamacare
*US Debt ceiling debate
Talk about volatility,
“Mortgage rates for 30-year U.S. loans fell to a five-week low, a decline that’s likely to be extended after the Federal Reserve refrained from reducing its monthly bond buying.”
Don’t be surprised if this turns out not to be the case.
not to be the case indeed…
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/09/20130919_30Y.jpg
”as of moments ago, the 10 Year has retraced over a third of its plunge and is back to 2.75% and rising once again; and the 30Y has retraced over 50% of its gains at 3.80%.”
A humorous headline and some entertaining reading… It should be clear to everyone by now that the Fed is not going to derail the housing bull market. The last paragraph has some great advice for the permabears, gold bugs, and hyperinflation fanatics of the world.
Bernanke Confuses Wall Street by Sticking Exactly to His Plan
“For all the whining among the “smart money” most money managers have a big problem with less than two full weeks left in the third quarter. The S&P is now up 18%, hugely outperforming the average hedge fund. The pros may sneer at the rally but that won’t cut it with their outside investors.
The choice for fund managers is clear: either double down on shorts or start chasing momentum and try to catch up. The Fed is driving growth at all costs. Like it or not that’s bullish for stocks. In the long-haul the jury is out as to the impact of Bernanke’s unprecedented experiment in stimulus. In the here and now fighting the Fed is a losing game.
One of the first rules of survival in the financial jungle is to trade the market you have rather than the one you want. Love it or hate it Bernanke’s policy is clear and undeniable. History suggests accepting reality is more lucrative than moral outrage.“
MR: It should be clear to everyone by now that the Fed is not going to derail the housing bull market.
———————————————————-
Sorry to rain in your silly ‘lil parade, but the fed derailed the housing bull market in the mid 2000’s (see fed fund rate action from 2002–2007). Oops! Also, it was clear to just about everyone that the fed was going to taper, yet no taper. Oops²
Reality is, nothing is clear.
The Fed wasn’t explicitly supporting housing the way it is now. Of course they have the power to derail housing and they have done so in the past to meet other goals, but this time around their recovery plan is dependent on repairing the housing market.
When I became a RE bull in mid- 2009, one reason was because the Fed and US government made it explicit that they would support housing at all costs. (This led to a 20 month 500k death grip in OC.) The Fed will yank their support at some point in the future, but not until they can point to some kind of success in revitalizing the economy.
Lastly, I don’t think it was clear to just about everyone that the Fed was going to taper, but it was the MSM narrative that was being pushed, and clearly one that you bought into. 😉
Silly MR… buying into the taper = unhedged, something I was NOT 😀
“revitalizing the economy” “repairing the housing market”
both impossible to achieve via money printing
So, the fed is driving growth at all costs and those who worry of hyperinflation are fanatics? Interesting indeed.
Matt – Why worry about hyperinflation? It is inevitable, and there are ways to increase one’s net worth knowing that. I don’t know if the folks who accept the inevitability of hyperinflation are fanatics or not. The sheeple label the non-conformists as fanatics or extremists or permabears or whatever. Maybe they are, but there is an old saying, “Those who don’t have a winning argument call names.” My experience is that successful speculation leaves no room for validation from the majority.
Hopefully matt138 takes your words to heart. He’s one of the worst name callers on this blog.
Loan modifications boost the housing recovery
An estimated 63,000 homeowners received permanent, affordable loan modifications from mortgage servicers in July, including mods completed under both proprietary programs and the government’s Home Affordable Modification Program, according to a report from Hope Now.
The July numbers indicate that an estimated 50,000 homeowners received proprietary loan modifications, with 13,183 homeowners receiving HAMP modifications, according to data from the U.S. Department of Treasury.
For the year, the total number of loan mods currently stands at approximately 519,000, compared to an estimated 378,000 foreclosure sales reported for the year so far.
July’s total of 63,000 modifications makes the total number of permanent loan modifications 6.6 million since 2007. In the same time period, approximately 5.36 million homeowners have received proprietary loans modifications.
Since HAMP reporting began in 2009, more than 1.2 million homeowners have received modifications through the program.
The Hope Now report revealed a large annual decrease in foreclosure sales, which fell from 485,000 in the first seven months of 2012 to 378,000 during the same period this year.
However, foreclosure sales in the month of July 2013 increased, with approximately 59,000 foreclosure sales completed. This is up 14% from June, when 52,000 sales were completed. Foreclosure starts rose slightly as well, with approximately 102,000 recorded in July compared to 98,000 in June — an increase of about 5%.