|10 year government bond yield||1.78%|
|30 year fixed rate mortgage||3.88%|
Stocks are higher this morning on strong earnings out of IBM. Bonds and MBS are flat.
Home prices rose 0.2% MOM / 4.9% YOY according to the FHFA House Price Index. We are seeing growth pick up in New England and the Middle Atlantic, which have been laggards since the bubble burst.
Mortgage applications fell by 1.2% last week as both purchases and refis fell slightly. “Mortgage applications dipped slightly last week after two weeks of healthy increases, but even with a slight decline, the total pace of applications remains at an elevated level,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The purchase market has started 2020 on a strong note, running 8 percent higher than the same week a year ago. Refinance applications remained near the highest level since October 2019, as the 30-year fixed rate was unchanged at 3.87 percent, while the 15-year fixed rate decreased to its lowest level since November 2016.”
Kathy Kraninger of the CFPB apparently sent a letter to Congress last week discussing the “QM patch” and recommending that regulators move away from debt-to-income ratios and use alternative measures as a way to determine ability to re-pay. The CFPB indicated that it does intend to extend the QM patch for a short while as the industry adapts to the new rules. The QM patch (which allows loans with DTIs over 43% to qualify for safe harbor provided they are saleable to Fannie and Fred) is set to expire in January 2021. The MBA made a statement on the proposal: “MBA appreciates CFPB Director Kathy Kraninger’s intention to temporarily extend the GSE patch and move away from the use of a standalone debt-to-income ratio,” Broeksmit said. “MBA has urged the Bureau to eliminate the use of DTI ratios as a standalone threshold in the QM definition, which would also remove the need to use the rigid, outdated Appendix Q methodology for calculating borrower income and debt. We look forward to working with the Bureau, and other stakeholders, on the proposed rule.”
Fannie Mae is out with a prediction that 2020 will be a good year for housing. Given Friday’s 1.6 million housing starts number, 2019 ended on a strong note – the highest in 13 years. While we have become accustomed to housing starts around 1.3 million since the bust, that is well below normalcy. In booms, it is not unusual to top 2 million. Fannie took up their GDP estimate a hair from 2.3% to 2.4%. In addition, they expect rates to remain stable. Origination volume is expected to moderate about 5% to $2.06 trillion, with purchase volume increasing 8% and refi volume falling 25%. Note that Realtor.com thinks there is a 4 million unit shortage right now.