Morning Report - Negative Equity falls

Vital Statistics:

	Last	Change	Percent
S&P Futures	1612.3	2.4	0.15%
Eurostoxx Index	2654.8	-11.8	-0.44%
Oil (WTI)	95.66	-0.2	-0.23%
LIBOR	0.273	0.000	0.00%
US Dollar Index (DXY)	80.92	-0.031	-0.04%
10 Year Govt Bond Yield	2.21%	-0.02%
Current Coupon Ginnie Mae TBA	101.5	-0.2
Current Coupon Fannie Mae TBA	99.8	0.0
RPX Composite Real Estate Index	203.4	0.5
BankRate 30 Year Fixed Rate Mortgage	4.05

Markets are up on the back of a good retail sales number, in spite of an absolute shellacking (down 6.4%) in the Nikkei 225 index overnight. Initial Jobless Claims came in at 334k, a little better than expectations. The Import Price Index fell, which is bond bullish. Bonds and MBS are up small.

Advance Retail Sales were up .6% in the month of May, which was better than expected. Less autos and gasoline, they were up .3%, in line with expectations. April was revised downward from .5% to .2%.  Building materials are increasing at a 10% clip, which bodes well for new construction. 

It is probably too early for the back up in rates that started in May to start showing up in economic data, but is presence (or absence) will almost influence the Fed's decision making on ending QE. Don't forget The Bernank is done at the end of the year. The odds-on favorite is Janet Yellen to replace him and she is to the dovish side of Bernake. While I think it is a long shot, beware of a snap-back rally in bonds. That is when the margin clerk finishes his business.

CoreLogic reported that home equity increased 9% in the first quarter to reach $4.2 trillion. Negative equity fell 8% to $580 billion and the number of negative equity properties fell to 9.7 million from 10.5 million. CoreLogic estimates that if home prices increase another 5%, 1.6 million homes would regain positive equity.   This should really help drive purchase business as homeowners who have been stuck finally are able to move. Combined with a recovering job market to lure in the first time homebuyer and still generally good affordability, maybe the purchase business will make up for some of the lost refi business. Caveat: If the increase in home price appreciation continues to be driven by all-cash bidding wars in Las Vegas, then the effect will be more muted. We need to see home price appreciation in places like the Northeast and Midwest for this to really start turning things around. 

JP Morgan Chase is cutting 1,800 jobs in its mortgage unit, with the hits primarily coming from servicing (as delinquencies fall) and its Albion NY call center (as the refi market dries up).