Morning Report: TRID starts showing up in the housing numbers

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Current Coupon Fannie Mae TBA	103.2
BankRate 30 Year Fixed Rate Mortgage	3.84

Stocks are higher this morning on hopes of more stimulus for the Chinese economy. Bonds and MBS are down small.

Existing Home Sales fell to an annualized rate of 4.76 million from 5.32 million last month. This was the lowest level in 19 months. Guess what the reason was. The median home price rose to $220,300. which is up 6.3%. Housing inventory is 2.03 million homes, which represents a 5.1 month inventory at the current sales pace.

The third revision to Q3 GDP came in at 2%, a slight downward revision from the 2.1% second estimate. A lower inventory estimate drove the revision. Personal consumption was 3%, while the core PCE index (the Fed's preferred measure of inflation) rose at an annualized rate of 1.3%. Consumption has been depressed for so long that eventually consumers are forced to replace worn out clothes and cars. The average age of a car in the US recently hit a record at 11.5 years, and this is behind the stronger auto sales (along with cheap and easy financing). 

Housing contributed 15.3% of GDP in the third quarter, about where it was in the fourth quarter. This is well below the historical levels and is explained by the drop in homebuilding. Given that the excesses of the bubble were worked off years ago, inventories are tight, and the Millennial generation is even bigger than the Boomers we will see a pick-up at some point, which should last years. Remember, housing starts averaged 1.5 million a year from the 1960s to 2002 (pre-bubble years). Since 2002, we have averaged under 1.2 million. When you take into account population growth, the deficit grows even larger.

House prices rose 0.5% in October, according to the FHFA. On a year over year basis, they rose 6.1%. Looking at the chart, it seems like we are back at the heights of the index set in 2007 or so.The Mountain states led the charge, while the Northeast fell a little.

Cash sales as a percentage of home sales fell to 32.5% of all sales from 35.9% a year ago, according to CoreLogic. REO sales tend to be most likely to be cash sales. You can see on the map below the range of percentages based on the state. It looks to correlate most closely with the foreclosure pipelines. 

More TRID horror stories. Borrowers are having to pay for longer lock periods, and lenders are scrambling to meet closing deadlines. Hopefully this will be a memory in a few months. Non-agency remains an even bigger problem as investors are taking a zero defects stance on TRID and not buying loans.