Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1295.7	10.6	0.82%
Eurostoxx Index	2128.5	41.2	1.97%
Oil (WTI)	85.15	0.9	1.02%
LIBOR	0.468	0.000	0.00%
US Dollar Index (DXY)	82.56	-0.265	-0.32%
10 Year Govt Bond Yield	1.59%	0.01%
RPX Composite Real Estate Index	178.1	0.6

S&P futures are higher this morning on hopes of further stimulus in Europe.  The ECB left interest rates unchanged. The world seems to be backing away from the ledge a little, selling government bonds and taking more risk. Mortgage rates moved lower only grudgingly last week, so we should expect them to stay more or less stable as the 10-year yield backs up. Nonfarm productivity came in lower than expected, as did unit labor costs. The Fed's Beige Book will be released mid-afternoon.

CoreLogic's April Home Price Index showed a year-over-year gain of about 1%.  Excluding distressed sales, they rose almost 2%. They also introduced a new metric - the Pending Home Price Index - which indicates the trend in prices. This month, the Pending HPI predicts another 2% from April to May. Month-on-month increases are normal seasonal behavior, but year on year increases are more a sign that prices are bottoming.

Clear Capital is reporting more or less the same thing in its June Home Data Index Market Report. It notes that national home prices grew on both a quarterly and yearly basis for the first time since August 2010. Dr Alex Villacorta, Director of Research said:  "While gains in national home prices over the quarter and year were minimal in May, there are encouraging trends continuing to play out and gaining momentum beneath the surface.  Strength in REO-only price trends as well as some early indications of price gains spreading from low tier sections to the mid, and higher priced homes is helping confirm that the country continues to make progress on its recovery, and we are expecting to see improvements extend of the next several months." RTWT.

Given that the mortgage market more or less IS Fannie, Fred, and Ginnie the question now is what to do with them. The Community Mortgage Lenders Association has sent a white paper to the government recommending that we reduce the GSE's involvement in the secondary market to around 33% and that there be an explicit backstop fee paid to the government.