Counterparties: Your very tentative housing recovery
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Which isnâ€™t to say todayâ€™s numbers are going to make your house suddenly jump in value. The Capital Spectator says the housing recovery is “perhaps downshifting a bit” and notes that newly issued building permits fell by 1% over the previous month. Bill McBride at Calculated Risk calls the existing home sales number “decent”, not because of housing starts but because of the market’s inventory dynamic.
Why should you care about the various measures of housing inventory? For one, they’re good ways of measuring how we’re recovering from the foreclosure crisis. Barclays recently estimated that the market’s “shadow inventory” — homes that are at or near foreclosure — includes some 3.25 million mortgages which are either in foreclosure or at least three months in default. McBride expects reluctant sellers to soon start returning to the market: “this new inventory will probably limit price increases.”
Peter Eavis, following up on a piece he had last month, points to another puzzling dynamic that could hold the housing recovery back. “Pricing in the mortgage market” Eavis writes, “appears to be have gotten stuck.” The spread between mortgage rates and mortgage bond yields, a rough shorthand for mortgage revenue, has jumped in the last year. Even as interest rates are at or near historic lows, Eavis writes, “banks arenâ€™t fully passing on the low rates in the bond market to borrowers. Instead, they are taking bigger gains, and increasing the size of their cut.” — Ryan McCarthy
On to today’s links: