Morning Report: Mark Calabria will run FHFA

Vital Statistics:


Last Change
S&P futures 2648.75 -3.5
Eurostoxx index 348.48 -1.12
Oil (WTI) 50.5 -0.64
10 year government bond yield 2.90%
30 year fixed rate mortgage 4.72%


Stocks are lower this morning on no real news. Bonds and MBS are flat.


The consumer price index was flat month-over-month in November, and was up 2.2% on a YOY basis. Ex-food and energy, it was up 0.2% MOM and 2.2% YOY. Inflation remains under control, which gives the Fed an excuse to stand pat next week. The Fed Funds futures are handicapping an 80% chance of another 25 basis point hike.


Mortgage applications increased 1.6% last week as both purchases and refis rose. “Mortgage rates fell across the board last week, driven by a similar slide in Treasuries. Trade fears dominated investors’ concerns, and this was amplified by data released by the U.S. Commerce Department showing a widening trade deficit,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The 30-year fixed mortgage rate decreased 12 basis points over the week back below 5 percent, representing the largest single week drop since 2017.” Refis are still flat on their back.


MBA refi index


While the real estate market is cooling overall, the hottest markets like Seattle and Denver are seeing big drops in activity. Denver sales are down 24% and inventory is up 50%. In Seattle, sales are down 20% while inventory is up 135%. I wonder how much of this is Chinese money getting cold feet about the US (and their own) real estate markets.


Donald Trump has officially nominated Mark Calabria to run FHFA when Mel Watt’s term expires in January. The NAHB and the MBA support the nomination, while affordable housing advocates are unhappy. In the past, he has been critical of low downpayment loans, which raises the question of what will happen with Fannie and Freddie’s low downpayment / low FICO programs. He has also been skeptical of the GSE’s affordable housing mandates. He is also on record being critical of securitization itself, regarding it as too pro-cyclical, which means there is too much credit in good times, and when the housing market turns down, it disappears. Finally, he has called for ending the 30 year fixed rate mortgage, which is almost an American birthright and would be impossible to get without the government subsidies.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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