Escape From Chicago! Case-Shiller 20 Home Price Index Slows To 3.69% YoY As Households Flee Big Cities

The Case-Shiller repeat home sales numbers are out for May (yes, it is almost August). It shows home price growth slowing to 3.69% YoY in May.

The smallest gain in home prices is in Chicago (1.3% YoY) while the largest gain is in Phoenix AZ (9.0% YoY).

You can see the enormous home price bubble in both Chicago and Phoenix in 2005-2007 but the Phoenix bubble is far greater. Phoenix has recovered almost to bubble highs while Chicago is suffering from an exodus due to a broken pension system and plague-like taxes.

Chicago is going to need Snake Plisken to escape Mayor Lori Lightfoot, the Duke of Chicago.

US Q1 GDP Sags To -5% QoQ Annualized As Virus Lockdown Helps Crush Economy (Corporate Profits Shrink 14% In Q1)

Oof.

US GDP growth QoQ annualized plunged to -5% in the first quarter. Still not to the depths of The Great Recession (aka, housing bubble burst and ensuing financial crisis).

But you ain’t seen nothing yet.

The Atlanta Fed GDPNow estimate for Q2 GDP is -41.907%.

Why will Q2 look like a disaster? Take a peek at April’s preliminary durable goods orders: down -17.2%. Take out transportation and the decline is “only” -7.4%. In other words, the print (actual) are lower than the surveys. And while jobless claims clocked in at 2.12 million, it is the first decline in jobless claims so far.

Corporate profits shrank by 14% in Q1.

First Time Homebuyer Blues! GSEs Will Charge 5% To Purchase Loans From Lenders For First Time Homebuyers

According to the GSEs, they will charge a loan-level price adjustment of 500 basis points (5%) for loans where the borrower is a first-time homebuyer. For all other loans, the GSEs will charge 700 basis points (7%).

That means it will cost lenders either 5% or 7% of the loan’s value to sell the loan in forbearance to the GSEs.

That’s a steep cost. On a $200,000 loan to a first-time homebuyer, for example, it would cost the lender $10,000 to sell the loan, meaning the lender is losing money on that loan. And for a loan that touches the GSEs’ loan limit of $510,400, a lender could have to pay nearly $36,000 for a GSE to buy the loan.

On the other hand, the alternative would be for the lender to keep a delinquent loan on their books. This solution at least allows the lender to sell the loan and preserve some liquidity, as the FHFA noted.

Like Abner Jay, first-time homebuyers are so depressed.

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JPMorgan Chase To Raise Mortgage Borrowing Standards As Economic Outlook Darkens

So much for The Fed’s attempts to lower rates and stimulate borrowing.

JP Morgan Chase is running away from the storm .. sort of.

NEW YORK (Reuters) – JPMorgan Chase & Co (JPM.N), the country’s largest lender by assets, is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value.

In other words, JP Morgan Chase is returning to good, old-fashioned lending standards … at least for the moment while jobless claims skyrocket.

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JP Morgan Chase’s mortgage origination

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Of course, JPMC can always originate a conforming mortgage that can be sold to Fannie Mae and Freddie Mac. I assume that their new underwriting standards apply to loans held in portfolio..

Speaking of darkening economic outlook …

This is beginning to look like Fannie Mae and Freddie Mac are the last men standing.

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Is Redwood Deadwood? Jumbo Mortgage REIT Redwood Got Clear-cut

Times are tough for non-GSE firms like Redwood, one of the leading jumbo mortgage companies. Redwood Trust, a REIT, has fallen from around $18 per share in March to just $3.08 today.

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Of course, plunging EPS is the primary culprit (loan payment delays, forbearance) are on the rise with growth in US job loss.

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A YoY earnings growth rate of -33.3% is devastating.

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Redwood is joined by other niche financial companies in hovering around less than $10 per share.

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Lumberjacks ready for some more clear-cutting?

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Mortgage Apps Crash Most Since 2009 (Covid-19 Lockdown Edition)

(Bloomberg) — U.S. loan applications for buying and refinancing homes plunged last week by the most since the global financial crisis, amid coronavirus shutdowns and related financial turmoil that pushed borrowing costs higher.

The Mortgage Bankers Association’s index of applications fell 29.4% in the week ended March 20, the biggest decline since early 2009. Home-purchase applications dropped by 14.6% while refinancing applications plummeted 33.8%.

The average contract rate on a 30-year fixed mortgage increased 8 basis points to a two-month high of 3.82%, despite the Federal Reserve cutting the benchmark interest rate to near zero.

The decline in applications is an early sign suggesting home sales will slow and that refinancings are coming off a spike. That follows other data indicating a precipitous dropoff in business activity this month as stores and schools shutter to prevent the spread of the virus.

Yes, MBA mortgage applications fell the most since 2009 and the financial crisis.

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Mortgage rates actually rose last week (yellow line) but will likely decline this week.

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The biggest decline came in mortgage refinancing applications, down 33% WoW.

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Mortgage purchase applications dropped 14.64% WoW.

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Gold Trading Hits Record High As Treasury 10 Yield Near All-time Low (Swaption Vol Escalates, Fannie’s 30Y Current Coupon Falls Below 2%)

Its a wonderful day in the financial neighborhood! … NOT!

Gold trading hits record high.

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As gold keeps on rising.

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S&P 500 futures are down 3.201%.

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USD Swaption vol is escalating.

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The US Treasury 10-year yield is down another 20 bps.

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Fannie Mae’s 30-year current coupon just fell below 2%.

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What up with that?

Limbo Rock! US Treasury 10Y Yield Falls 12.6 Basis Points To 0.926% As Dow Drops 800 Points

The Washington Post had a howler of a story yesterday: “U.S. markets post big gains as Joe Biden’s Super Tuesday surge offers coronavirus respite”

It that was true, it was a very short-term effect given that the Dow dropped 800 points this morning.

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Or was it something else … like the IMF throwing $50 billion at the Coronavirus. And more stimulus from Central Banks like The Federal Reserve? But those effects were short-lived too.

The US 10Y Treasury yield fell another 12.6 basis points this AM to 0.926%. The lowest in history.

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And Freddie Mac’s 30Y mortgage survey rate (green line) continues to follow the 10Y Treasury rate down the rabbit hole.

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How long will rates go?

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I want to thank Rick Sharga for remembering that I was one of the few that predicted what is happening today with interest and mortgage rates while most others predicted mortgage rates would rise above 8%.