Morning Report - NAR forecasting home prices to moderate in 2014.

	Last	Change	Percent
S&P Futures	1805.0	3.0	0.17%
Eurostoxx Index	3084.1	21.5	0.70%
Oil (WTI)	92.22	-1.5	-1.56%
LIBOR	0.2376	0.001	0.42%
US Dollar Index (DXY)	80.67	0.059	0.07%
10 Year Govt Bond Yield	2.73%	0.02%
Current Coupon Ginnie Mae TBA	105.234	-0.2
Current Coupon Fannie Mae TBA	104.344	-0.2
RPX Composite Real Estate Index	200.67	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.33

Markets are higher this morning after a mixed bag of economic reports. Due to the Thanksgiving Day holiday, this morning included reports scheduled for tomorrow. Bonds and MBS are down small.

Initial Jobless Claims came in at 316k, the lowest level in 2 months. Durable Goods orders fell 2%, which was more or less in line with Street expectations. Consumer Confidence came in higher than expected. Chicago Purchasing Managers dropped, but not as much as expected. Finally leading economic indicators rose .2%. Bottom line: so much for the theory that the government shutdown affected the economy outside of the luxury car dealerships around Tyson's Corner.

Mortgage Applications fell slightly as rates ticked up a couple of basis points. Surprisingly, refis rose while purchases fell. 

FHFA decided not to change the conforming loan limits, which really isn't much of a surprise. Incoming FHFA Chairman Mel Watt does not have an appetite for reducing the government's footprint in the mortgage market. Whether that means anything for FNMA shareholders (and pref holders) is an open question. Ralph Nader (yes) is agitating in defense of shareholders. 

Again, I think the under-appreciated story is that Mel Watt will in fact be the new FHFA Chairman. This means principal reductions on loans held by F&F, a probable extension (and loosening) of the HARP plan, and definitely more focus on low-income lending. Watt is a CRA guy to the bone. The reason why the MBA has supported his candidacy was because he would presumably usher in a wave of refis. 

Pending Home Sales dropped .6%, according to the National Association of Realtors. This is unsurprising given the government shutdown and the inability of mortgage bankers to get tax returns out of the IRS. The NAR is warning that the new QM rules may depress sales in early 2014. They also forecast home price growth to slow from 11% in 2013 to 5% in 2014. It is an interesting dynamic with tight inventory on one hand, and decreasing affordability on the other. If the job market improves, especially for the Millenials, there will be a wave of pent-up demand that is going to enter the market. Household formation has been severely depressed over the past 6 years, not due to demographics, but due to a lousy economy. Homebuilders have underbuilt for ten years, and foreclosures remain tied up in the courts in the judicial states. And while affordability may have decreased, anyone with gray hair remembers the days when a 4.5% mortgage was considered unheard-of, something that your dad might have been able to get in the 1960s, but a relic of a bygone era.