Morning Report: More pain in the real estate sector

Vital Statistics:

S&P futures3,816-19.00
Oil (WTI)87.80-1.12
10 year government bond yield 4.17%
30 year fixed rate mortgage 7.15%

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

Mortgage applications fell 0.1% last week as purchases rose 1% and refis fell 4%. “Mortgage rates edged higher last week following news that the Federal Reserve will continue raising short-term rates to combat high inflation,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “The 30-year fixed rate remained above 7 percent for the third consecutive week, with increases for most loan types. Purchase applications increased for the first time after six weeks of declines but remained close to 2015 lows, as homebuyers remained sidelined by higher rates and ongoing economic uncertainty. Refinances continued to fall, with the index hitting its lowest level since August 2000.”

As refinances fade into the background, I suspect the seasonality of the mortgage business is going to become a lot more pronounced.

Stamford Connecticut based Luxury mortgage is pausing originations while it looks for a new partner. Starwood was in a deal to purchase the Connecticut lender however there have been reports that Starwood backed out of the deal.

Loan Depot reported earnings yesterday, narrowing is losses as it exits the wholesale business. The company also announced the launch of its digital HELOC program, which it hopes will drive earnings in 2023. As of now, the company is firmly in expense reduction mode.

Mortgage banks aren’t the only ones getting slammed these days. Fintech, which was once the darling of the stock market, is getting hit too. Redfin has sunk to fresh lows after Opco downgraded the stock and said its business model is “fundamentally flawed.” “We believe that Redfin’s business is fundamentally flawed, as the company continues to use a fixed-cost model for agents,” the analyst writes. “This prevents the company from optimizing margins when the housing markets decline and limits share gains when markets rebound.” 

Opendoor and Zillow are also announcing big layoffs.


Author: Brent Nyitray

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

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