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Mortgage Market Update 04/13/2012
April 13th, 2012 3:00 PM by Nick Rapplean
Another week in these odd times, public policy and theoretical economics completely dominating markets...
Fed leadership, Vice Chair Yellen and NY Fed prez Dudley, gave same-day speeches which clarified the following: 1) the do-nothing, hawkish regional-Fed presidents' club is alone in its treehouse; 2) if anything, the Fed has not done enough since 2009; and 3) the Fed's commitment to ease through 2014 is more likely to be longer than shorter.
The Fed takes cover under its Congressional mandate, saying "unemployment is to high," which is true. But the greatest danger lies overseas: industrial production in the EU had the worst month in two years, China's economy is slowing faster than expected, and Japan is who knows. The Fed cannot risk a US stall now.
Bonds already had the hint, the March spurt in rates fizzled-out last week. Stocks got the more-easing message, too, a mid-week rally pulling the thing out of an incipient trench. There is some perversity in this stock market response. The Fed would be this easy only if badly worried about domestic and global risks, and a risky economy is unfriendly to stocks. Yet stocks still responded happily to the Fed's promise of action. Nice to know somebody still has faith in the Fed.
New domestic data tentatively confirmed the weakness in March payrolls. Weekly claims for unemployment insurance have risen from a sustained stretch sub-350,000 to 367,000 and then 380,000 in the last two weeks. Short term, not big, but not good. And the NFIB's small-business survey in March unwound months of gains, following the pattern of the 2011 spring swoon.
Housing. Kick any Wall Streeter today, and he'll say, "Housing has bottomed. Hit me for something else."
What would the turn look like, if really underway? My own back yard has turned in just the last 60 days. The Front Range of Colorado never had a housing bubble: we danced with the Technology Fairy 1999-2001, afterward built too many houses, and made too many stupid loans, but all of that was over by 2004 when we led the nation in foreclosures. Long time ago. We have the 6th-lowest level of mortgage delinquency of any state in the US. Our rental vacancy rate spiked to 12%, now below 5% for the first time since '99 (0% in Boulder!). Rents are moving up quickly. State population in the last dozen years has risen from 4.1 million to 5 million, and we're short of land to build (you could drop Rhode Island in here and never find it, but we are maniacs for "open space" reservations). Building permits have been off 85% since '07. Unemployment is down to 7%-ish. Our listed inventory of homes evaporated by 40% since last year. Buyers have lost their fear, the only problem finding something to show them.
Does your local market look like that? Mister housing-has-bottomed? Eh?
As perfect as our set-up, are prices rising? In rich, government- and tech-payrolled, land-starved Boulder County, yes. At last. Enough to unlock sellers? Ummmm later.Two philosophers have remarked incisively on speed. Stephen Hawking: "Time is what keeps everything from happening at once." Then, Satchel Paige's description of Cool Papa Bell: "He was so fast he could flip off the light switch and be in bed before the room got dark. One time he hit a line drive right past my ear. I turned around and saw the ball hit his ass just as he slid into second."
Housing is the polar opposite of Cool Papa Bell.
Here in Colorado, the 1980s were tougher than this patch, and in Boulder we had all the same, lovely conditions as above by the spring of 1990, and the first, timid price increases in nine years. It then took 18 months for prices to begin to rise on the far side of town. Bottom is one thing, better another, recovery something else entirely.
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Posted by Nick Rapplean on April 13th, 2012 3:00 PM
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