US 30Y Fixed Mortgage Rates Tick Up To 2.79% As 10Y Treasury Yields Rise (Treasury Vol Remains Low As Yield Curve Steepens)

Freddie Mac’s 30-year mortgage survey rate ticked-up to 2.79% in the latest reading.

The US Treasury 10-year yield has been rising since August.

Treasury volatility remains low.

The US Treasury yield curve is steepening to around 100.

Here we go loop de loop. As interest rates rise.

Biden’s team explores ways to oust Fannie-Freddie regulator, Mark Calabria (replace with Wharton’s Susan Wachter?)

President-elect Joe Biden’s team has held preliminary talks on how it could oust Fannie Mae and Freddie Mac’s regulator (Mark Calabria), a move that would let the new administration fill a post that’s crucial to the mortgage market and its goal of boosting affordable housing.

One candidate the transition team is considering as a potential Calabria replacement is Susan Wachter, a professor at the University of Pennsylvania’s Wharton School of Business, said the people who asked not to be named in discussing private conversations.

Well, there are only so many options to increase affordable housing that are in the realm of reason: 1) increase loan-to-value ratios on purchase (insured mortgages) and 2) lower the credit score required. Fannie and Freddie already have a sizeable affordable housing mission. so short of shutting down Fannie and Freddie, and expanding the FHA (aka, SUPER HUD), Fannie and Freddie may be cajoled into expanding their affordable housing mission.

After the housing market crash (and ensuring financial crisis), lenders and government insurance companies reduced the mortgage originations by low credit score borrowers. Yet home prices started to grow again despite the lack of originations by low credit score borrowers. In fact, the FHFA purchase only home price index YoY is almost back to the housing bubble peak of 2005.

Something is missing from the above chart. Jay Brinkmann (former Chief Economist for the Mortgage Bankers Association) and Alex Pollock (R Street) disagree about what is missing from the chart. I think that the omitted variable is The Federal Reserve’s balance sheet (purchase of Treasuries and Agency Mortgage-backed Securities).

Home price growth corresponds to changes in The Fed’s balance sheet, particularly in surges in the balance sheet (QE3, Covid).

It’s also an historic imbalance of housing supply and demand, exacerbated by low interest rates helped by The Federal Reserve’s policies.

Granted, the demand is driven by historically low interest rates, but it’s also driven by demographics, as a large number of Millennials are reaching prime home buying age. (Thanks to Rick Sharga!)

Wharton’s Susan Wachter is likely the replacement for Cato’s Mark Calabria to be the US housing finance Mandarin.

Deep In The Heart of … COVID! Case-Shiller Home Price Index Rises 8.41% YoY In October (Phoenix AZ Fastest Growing, NYC Slowest Growing)

We are “Deep in the heart of Covid.”

US home prices, according the S&P CoreLogic Case-Shiller US National Home Price Index, rose 8.41% YoY in October.

My old home town of Phoenix AZ is growing at 12.7% YoY. The slowest growing city? New York City at 6% YoY.

I am still trying to recover from pneumonia due to Covid-19 in one of the economic shutdown states, Virginia.

Speaking of Covid, The Federal Reserve responded to Covid with expanding their balance sheet … again … helping to drive the 30 year mortgage rate to near all-time lows.

US New Home Sales Down 11% In November, But UP 20.8% YoY

US new home sales plunged 11% in November (hello, it’s NOVEMBER!!).

But new home sales rose 20.8% YoY (even though the YoY rate is falling).

The median price for new home sales fell slightly in November,but with historically low existing home sales I expect new home sales to increase in 2021.

Give Me A V! US Existing Home Sales Rise 25.8% YoY As US GDP Q3 Revision Rises To 33.40% QoQ (Inventories Hit All-time Low!)

According to the National Association of Realtors, existing-home sales decreased in November to a seasonally-adjusted annual rate of 6.69 million – down 2.5% from the prior month, but up 25.8% from one year ago. As US GDP for Q3 was revised to 33.40%. This looks like a V-shaped recovery.

This comes as the US Congress passes $900-billion COVID-19 stimulus package as part of $2.3-trillion government spending bill. Of course, members of Congress have not read this 5,593-page bill. It’s over 5,000 pages, arrived at 2pm today, and they are told to expect a vote on it in 2 hours (5,593 pages in 2 hours???). This reminds of House Speaker Nancy Pelosi’s infamous press conference where she said that Congress has to pass the Obamacare bill in order to find out what is in it.

Here is the 5,593 page bill that had to be read in two hours. That is only 2,800 pages per hour. Piece of cake! Or piece of pork.

Inventory of existing home sales fell to the lowest level in modern history as median price of EHS fell slightly in November.

Historic low inventories of homes for sale is why Biden’s $15,000 tax credit for first time home buyers is not wise. It is like throwing gasoline on a fire.