Morning Report: Black Knight forecasts originations will hit $4 trillion this year

Vital Statistics:

S&P futures329632.6
Oil (WTI)35.15-0.49
10 year government bond yield 0.84%
30 year fixed rate mortgage 2.87%

Stocks are higher this morning as we head into an important week for the markets. Bonds and MBS are down.

Aside from the election this week, we also have a FOMC meeting. Plus, we have a slew of important economic data including the jobs report on Friday. Lots going on.

An election surprise could prove to cause some increase in market volatility. I remember in 2016 after Trump won, the S&P futures were down 100 points in the overnight Asian markets. Paul Krugman was penning his New York Times essay predicting Great Depression II, while famed investor Carl Icahn was buying every contract he could get his hands on in the overnight session. The stock market closed up about 1% on the day after the election. People forget the bond market also had a pretty substantial move. The 10 year yield increased 39 basis points in the immediate aftermath of the election.

The polls all show a Biden victory, but pollsters are increasingly in the opinion moving business, not the opinion measuring business. So a lot of the margin is nothing more than wishful thinking. I am wondering if the move up in yields lately is the bond market hedging its bets.

The manufacturing sector is still expanding, despite COVID-19. The ISM Survey for October came in at 53.4, which was higher than expected.

Redfin is getting sued by a bunch of housing organizations over its minimum listing price. The lawsuit claims that this amounts to discrimination since many urban neighborhoods especially in the cities they cited (Detroit, St. Louis) are low-priced. Redfin says it is a business decision, but the activists believe it has no legitimate business purpose. The problem is that many properties in these areas are extremely low priced (around $10,000 – $20,000) due to property tax arrears that have piled up for years. A real estate broker simply isn’t going to get excited about putting in the work for a $300 check. Redfin will pay a minimum commission for brokers, but someone has to eat the difference.

Ever notice the MBA’s origination forecasts seem to be low and raised only grudgingly? The latest MBA forecast for 2020 origination (which was only recently raised) came in at around $3.2 trillion. According to Black Knight Financial’s rate lock data, 2020 originations could come in over $4 trillion.


Author: Brent Nyitray

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

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