Market update January 2014

1. I s su e
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J an u ar y
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Positive Signs to Kick Off 2014
The Week Ahead -> The “Keys”
Tim McLaughlin
- Very quiet week data wise in the market
This week, the U.S. Department of Housing and Urban
Development (HUD) and the U.S. Department of the
Treasury released the December edition of the Obama
Administration's Housing Scorecard: a comprehensive report
on the nation’s housing market. The latest data shows
progress among many key indicators. Home values continue
to rise, contributing to both an increase in homeowners’
equity and a decline in underwater borrowers.
Prediction
Last
MBA Mortgage Applications
-
11.9%
1/23
Chicago Fed Manufacturing
-
0.60
1/23
Initial Jobless Claims
330K
326K
“December’s Housing Scorecard shows that we are
continuing to make progress helping struggling homeowners
get back on their feet,” said Associate Deputy Assistant
Secretary for Economic Affairs Edward J. Szymanoski.
1/23
Continuing Claims
2900K
3030K
1/23
US PMI Preliminary
55.0
54.4
1/23
House Price Index (MoM)
0.3%
0.5%
Another positive note is that home values continue to
rise. As of October 2013, the Federal Housing Finance
Agency (FHFA) purchase-only index rose 8.2% from last
year and ticked up 0.5% (seasonally adjusted) from
September, showing that home values are now on par with
prices in early 2005. The S&P/Case-Shiller 20-City Home
Price Index for October posted returns of 13.6% over the
past 12 months and was up 0.2% (not seasonally adjusted)
over September, indicating that home values are at the
same level as in mid-2004.
1/23
BB Consumer Comfort
-
-31.0
1/23
Existing Home Sales
4.95M
4.90M
1/23
Existing Home Sales (MoM)
1.0%
-4.3%
1/23
Leading Index
0.2%
0.8%
1/23
KC Fed Manufacturing
-
-3
Additionally, homeowners’ equity continues to rise.
Homeowners’ equity jumped $418 billion, or 4.5%, to $9.67
trillion in the third quarter of 2013, which is slightly higher
than its value at the end of 2003. The equity homeowners
have in their homes (total property value less mortgage debt
outstanding) is up $3.4 trillion or 55%, since the end of 2011.
In regards to impaired borrowers, millions of home
owners are no longer underwater. The number of underwater
borrowers has fallen 47.5% since the beginning of 2012,
from 12.1 million to 6.4 million in the third quarter of 2013,
lifting 5.7 million homeowners (who owed more on their
mortgages than the value of their homes) above water. The
national share of mortgages that are underwater fell from
25.2% to 13.0% over the same period.
Positive trends indeed for a housing sector that is
beginning to gear up for its spring market. With affordability
and interest rates both in a positive range for potential
buyers, and housing on the upswing, there is no better time
to capitalize on the house of your dreams. Talk to your
Weichert “One Stop team” today…we can help!!
Date
Economic Release
1/22
Secondary Marketing Takeaways: The biggest focus
as we start 2014 from a trading desk perspective is the
“new” Fed, with new Fed Chairwoman Janet Yellen at the
helm, and the direction and speed of MBS tapering.
If you remember, the Fed started to pull back last
month on the amount of Mortgage Backed Securities it
purchases each month, moving from $45B to $35B. With
that, the sentiment from the voting members was that they
wanted to continuing pairing back $5B to $10B each
meeting until their purchases were down to $0. However,
that was before the abysmal December employment report
was released showing Nonfarm payroll drop from 241K
revised in November to only 74K in December.
Now, the big question: was December an aberration
and should the Fed continue to pare back with the
expectation that the numbers will correct themselves, or is
the data real and trending and does the Fed need to
pumped the brakes as to not upset the pace of the
recovery, which is fragile at best?
Time will tell, and to be candid, tapering has more of a
psychological impact on interest rates than a direct impact
given the supply and demand in the market, but the net
effect is real and will be felt, so we will watch this closely.
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