"I dream of a world where chickens can cross the road
without having their motives questioned." More folks are crossing the road
in Florida. According to the U.S. Census Bureau's statistics on population,
between July 1st, 2013 and July 1st, 2014 an average of 803 new residents
were added each day in Florida and it passed New York to become the third most
populate state. Florida's population has reached almost 20 million whereas
the population of New York is 19.7 million. California is still ranked as the
most populous state at almost 39 million residents followed by Texas with 27
million. Georgia's population has also exceeded 10 million for the first time,
landing the eighth spot on the list. North Dakota was the fastest growing state
followed by Nevada and Texas compared to six states that lost population,
including New Mexico, Alaska and Vermont. Overall, in 2014 the total U.S.
population increased by 2.4 million to 319 million.
Certainly certain areas are attracting more growth than others.
As the housing industry attempts to attract young adults and promote home
buying among millennials, the young adults who are interested in homeownership
are more inclined to buy in certain areas, according to an article published by
Zillow. It used data from the Minnesota Population Center to take a closer look
at homeownership rates amongst working-age emerging adults. The majority of
these adults have been most successful at buying homes in the Midwest and South,
with the least amount of young adults buying in expensive coastal metros,
particularly in California. Conversely, the young adults who don't own a home
and don't pay rent mainly reside in Southern Texas, Eastern Pennsylvania and
Riverside, CA. Finally, the areas with the largest generational homeownership gap
between millennials and baby boomers include New England and California, while
the smallest gap can be found in the South and West, as well as Las Vegas, NV,
Fresno, CA and Oklahoma City, OK.
Zelman and Associates November Mortgage Originator Survey predicts
a re-accelerating housing market with low rates and lax credit standards.
With improvements to the GSEs' rep and warrant policies and the CFPB's curing
abilities, more lenders will look to reduce overlays which will benefit
borrowers in the coming months. The survey identified that 52% of lenders
expect underwriting standards to ease over the next year and none expect credit
standards to tighten. With the new integrated disclosures taking affect in
August of 2015, most lenders are prepared for the change and the new
disclosures should not adversely impact underwriting standards. November
purchase applications increased 4% YoY and refinance applications were down 10%
YoY. The analysis reported that the credit quality index dropped to 67.5 from
68.9 a year earlier, with 32% of third quarter securitized loans below 700
credit score and the average GSE credit score dropped to 754 from 759 a year
before, reflective of credit standards beginning to ease.
While we're speaking about macro issues, Comerica writes, "Despite
the expected GDP reset, we observe strong momentum in the U.S. economy at year
end. Labor markets continue to improve. A robust 321,000 payroll jobs were
added in November. Hours worked increased, and so did wages. The combination of
more workers, working longer hours, for higher wages provides a powerful boost
to the U.S. economy. The unemployment rate for November held steady at 5.8
percent, but is set to resume its decline through early 2015. Auto sales
have roared back. The 17.2 million unit sales rate of November cannot be
sustained indefinitely, but it provides strong evidence that U.S. consumers are
in a better mood this holiday shopping season. "That got me
thinking...which is a good thing, otherwise I'd spend my time watching videos of squirrels running
obstacle courses...how are auto sales doing? The answer is an easy one as sales
in November haven't been this robust since 2001; up nearly 5% from a year
earlier with five of the top six automakers selling more cars and trucks than
analysts expected, compliments of a surging economy, heavy discounting and
falling fuel prices luring consumers into U.S. showrooms. Case-in-point,
according to the Wall Street Journal, luxury
SUVs are up 17% YoY, and with the recent talk of SISA and NINA loans I'd swear
it was 2004 all over again.
SNL Financial's financial analysis found the top 4 largest US
banks and thrifts by total assets in order as of Q3 were JPMorgan ($2.5T),
Bank of America ($2.1T), Citigroup ($1.9T) and Wells Fargo ($1.6T). This group
adds up to a whopping $8.2 trillion in assets. Rounding out the top 10 list
are: US Bank ($391B), Bank of New York Mellon ($386B), PNC Financial ($334B),
Capital One ($300B), HSBC North America ($280B) and State Street ($275B). This
group adds up to about $2.0T. Finally, banks ranked 11 to 20 add up to $1.6T
and include: TD, BB&T, SunTrust, American Express, Ally, Charles Schwab,
M&T, Fifth Third, Citizens Financial and USAA. How many of these have
well-known mortgage operations? Meanwhile regulators have increased the
asset size threshold used to define a small bank for CRA purposes as one that
as of Dec 31 of either of the prior 2Ys has assets of $1.22B. And an intermediate
small bank is defined as a bank with at least $305mm in assets but less than
$1.22B for the same period.
The pace of bank closings, fortunately, dropped dramatically
from 2014 - but last Friday regulators closed Northern Star Bank ($19mm, MN)
and sold it to BankVista ($135mm, MN) under a P&A agreement. BankVista
received 2 branches as well as all of the deposits (at a 1.06% premium) and
essentially all of the assets. And merger and acquisitions continued to be
announced this week. Weymouth Bank ($212mm, MA) will acquire Equitable
Co-operative Bank ($106mm, MA). Cornerstone Bank ($1.3B, NE) will acquire North
Loup Valley Bank ($20mm, NE). As part of its move to streamline operations
Citibank will sell its Peru subsidiary with 8 branches and 130k customers to
Bank of Nova Scotia for an undisclosed sum.
Wednesday the commentary noted some information regarding the USDA
eligible areas. Bill Scammell from PMAC reminded me that, "USDA
Announcement (posted 12-22-14): President Barack Obama signed the
Consolidated and Further Continuing Appropriations Act of 2015 (omnibus
spending bill) into law last Tuesday. With the signing of this Act and
barring further congressional action, the USDA will implement the eligibility
maps on February 2nd, 2015. The changes will be those already
published on the 'Future Eligible Areas' maps posted on the USDA eligibility
website (USDA Future Eligible Maps).
A complete package for conditional commitment must be submitted to the USDA on
or before Feb 2nd, 2015 in order to fall under the current eligible
areas. Packages that are submitted to USDA after Feb 2nd will
be subject to the new 'Future Eligible Areas'." Thanks Bill!
Turning
briefly to the markets, Wednesday we learned that US Jobless Claims dropped 9k
to 280k, a seven-week low. The 4-week moving average was 290,250, a decrease of
8,500 from the previous week's unrevised average of 298,750. We had a 2.26%
close on the 10-yr Wednesday and this morning we're sitting at...2.26% and
agency MBS prices are roughly unchanged. There is no scheduled news, not much
exciting happened overnight, and no company is expecting much in the way of
locks.
Rate Market Report:
The stock market opened better this morning; the bond and
mortgage markets also started a little better.
Trading today should be on light volume with many taking the opportunity for a
long weekend. There are no economic reports out today. No hard data yet for
Christmas holiday shopping but the WSJ reported sales were on track to deliver
a welcome Christmas gift to retailers: the best holiday sales growth in three
years. The tally won’t be available for a few weeks but most retail analysts
are singing happy songs that consumers stepped up, particularly in the last
week prior to Christmas.
Not good news out of Japan this morning; its
inflation rate fell to its lowest level in over a year in November as the
economy struggles to emerge from a recession; 0.7% in November from a 0.9% rise
the previous month, according to government data released Friday. Most of
Europe’s markets are closed today. China continuing to relax reins on its banks
to use deposits to make loans. Analysts estimate the move is roughly equivalent
to injecting 1.5 trillion yuan, or about $242B. Talk out that China may miss
its GDP growth forecasts for 2014.
Oil prices in the news; the Saudi government saying
that crude prices will rebound with global economic growth boosting demand as
high-cost producers cut back, Oil Minister Ali Al-Naimi said on Dec. 21. “I’m
100 percent sure prices will go up, they have no other direction but to go up.”
At 9:30 the DJIA opened +37, NASDAQ +15, S&P
+6. 10 yr 2.25% -1 bp, 30 yr MBS price +6 bp from Wednesday’s close and 18 bps
better than at 9:30 am Wednesday. Trading today should be quiet ahead of the
weekend and with skeleton crews manning the trading desks.
US long term rates better this morning on news from Japan that
inflation is declining in Japan even with the recent stimuli from
the BofJ and government initiatives. Europe mostly closed today also likely to
keep markets relatively quiet. The markets opened all day today. The outlook
for oil prices are increasingly gaining even more attention in markets;
declining oil prices seen as the current main driver for consumer spending and
economic growth. With US interest rates higher than other sovereign in the G-7
the demand will continue; last week’s 5 and 7 yr auctions saw very strong
demand from foreign investors and foreign banks.
PRICES @ 10:00 AM
- 10 yr note: +2/32 (6 bp) 2.26% unch
- 5 yr note: +1/32 (3 bp) 1.75% -1 bp
- 2 Yr note: unch 0.75% unch
- 30 yr bond: +10/32 (31 bp) 2.82% -2 bp
- Libor Rates: N/A
- 30 yr FNMA 3.5 Jan: @9:30 103.84 +6 bp (+18 bp from 9:30 Wednesday)
- 15 yr FNMA 3.0 Jan: @9:30 103.65 +3 bp (+3 bp from 9:30 Wednesday)
- 30 yr GNMA 3.5 Jan: @9:30 104.52 +10 bp (+12 bp from 9:30 Wednesday)
- Dollar/Yen: 120.45 +0.35 yen
- Dollar/Euro: $1.2174 -$0.0051
- Gold: $1196.60 +$23.10
- Crude Oil: $55.94 +$0.10
- DJIA: 18,099.44 +69.23
- NASDAQ: 4797.86 +24.39
- S&P 500: 2091.77 +9.89
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