Need To Know News

NAR Economist Lawrence Yun called for a 75bps rate cut at the January FOMC meeting, reasoning that there are indications the FED will cut and January and February by 25bps and he feels they should cut a larger amount at one time. When asked by what amount the FED should cut, Mr. Yun said 75bps. When asked about the effect on the dollar or inflationary pressures from such a move, Yun stated that most models are looking for benign inflation readings through next year and that 75pbs would stem buyer reluctance. Indeed the NAR thinks there is a good bit of pent up demand in the housing market with those refusing to buy are doing so because they are waiting for lower rates or for lower prices. Yun also mentioned the 90 to 100bps spread between conforming and Jumbo mortgages and said Freddie and Fannie should lift their Jumbo caps to help out markets where Jumbo loans proliferate, mentioning California (sales up 10.3% m-o-m) as an example of a market that would be helped. He said raising Freddie and Fannie caps would immediately drop Jumbo mortgage rates down to 6.2%, the conforming loan rate.

The Mortgage Insurance Companies of America is reporting a 35% increase in defaults of privately insured U.S. mortgages since November 2006.  Defaults rose in November to 61,033 from 45,325 last November.  This marks the first time defaults numbered over 60,000 since 2001.  Missed payments increased 2.9% from October.

November existing home sales rose 0.4% to a 5 million unit annual rate compared with a revised 4.98 million unit rate in October. This is slightly above the 4.97 unit rate that analysts had expected. However, home sales were still 20% below the November 2006 levels. Single-family home sales rose 0.7% to 4.4 million units; the first increase in single-family existing home sales since February of this year. Condo sales fell 1.6% in November to a 600,000 unit rate. Overall the median price of homes sold in November was $210,200, 3.3% below year earlier levels. The median price of single-family homes was $208,700, down 3.7% from year earlier levels. While inventory levels were down in November to 4.27 million units that was a 10.3 months supply at the current sales rate, slightly below October’s 10.7 months supply. There were 3.64 million single-family homes for sale at the end of November, down 3.7% from October but still a 9.9 months supply at the current sales pace compared with a 7.1 months supply last November. Geographically, home sales were down in the Northeast and South, unchanged in the Midwest and up 10% in the West despite the West’s heavy dependence on jumbo mortgage loans which are still running 90 basis points above conventional loans on average. This minor upside surprise and slight revision higher may resonate in the equity markets on the upside which will result in some bond futures selling.