Morning Report - D.R. Horton is optimistic about 2015

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Current Coupon Fannie Mae TBA	103.3	0.2
BankRate 30 Year Fixed Rate Mortgage	4.1

Stocks are down on no real news; bonds and MBS are up a few ticks. 

Homebuilder D.R. Horton reported numbers yesterday, with a big increase in orders and deliveries. EPS missed Street estimates, however the stock was up on the news. Geographically, Texas, Florida, and the Carolinas are their strong areas. The company sounds optimistic about 2015, although pricing might be coming under pressure as they forecast lower gross margins in 2015. ASPs did increase, which were driven mainly by increasing house size - psf increased only by a small amount. D.R. Horton is rolling out a brand of true starter homes, with average selling prices around 170k, in anticipation of the return of the first time homebuyer. Overall, given Horton's numbers and Toll's pre-announcement, things may be looking up for the builders. The Spring Selling Season starts around Super Bowl Sunday.

Now for the bad news: A survey of 100 experts commissioned by Zillow says that the real estate market won't truly recover until 2018. Blame the precarious position of the first time homebuyer.

Mortage Applications fell .9% last week, with purchases up 1.1% and refis down 1.9%.

The consensus is forming that Obama AG nominee Loretta Lynch is a civil rights type, not a Wall Street prosecutor type. Does this signal the Administration is burying the hatchet against the financial sector? Maybe. The affordable housing lobby is getting sick and tired of tight credit. 

This article demonstrates the opportunity in VA loans, and how many servicemembers don't know about them or understand them. Education is key.

The Supreme Court agreed to hear King v Burwell - the case regarding Obamacare and subsidies. The cliff notes version of the issue concerns Medicaid subsidies to the states. The actual bill states that only states that set up exchanges are eligible for subsidies, meaning if a state didn't set up an exchange, they cannot get Medicaid subsidies. Many states elected not to set up exchanges. Democrats are claiming this was a drafting error and they intended for everyone to get the subsidies. Republicans claim this was an incentive for states to create exchanges. If the Supreme Court rules in favor of the Democrats, nothing probably changes. If they rule in favor of Republicans, it doesn't necessarily end Obamacare, but it would put pressure on these states to set up exchanges. Ultimately, it would probably have to go back to Congress, and Obama would have to accept some changes to Obamacare to get the language fixed. The first items likely to be discussed would be the medical devices tax, which many Democrats don't even like, as well as the employer mandate. Ultimately that might not be enough to entice Republicans and some reduction in subsidies might be necessary, Given the 2014 results and his lack of political mojo, Obama might cut a deal to save his signature program and maintain his legacy.