Real Estate Facing First Test of 2013

I noticed a lot of women wearing sparkling red shoes this holiday season, now I know why. They all want to follow the yellow brick road to Kansas, the land of no cliffs. The market seems to be cheering over:


1. Everyone has to pay more taxes.

2. There's not a dent in the deficit.

3. The debt ceiling is looming, if it's not already here.


Pertaining to real estate, the 10 year treasury yield has risen solidly above 1.8%. I suspect this is going to fluctuate wildly as the markets digest the impact of the fiscal cliff-related decisions. In the next few days, we shall also see how mortgage rates react. More importantly, we should be able to see if the invisible hands of the Feds can hold the agency MBS market steady. So far, since the announcement of QE3, the Feds have already been going full throttle, purchasing $236.9 billion of MBS in 14 weeks. I am not sure what the wizard can do anymore without buying more than the QE3 guidelines he has set for himself.


We know that refinancing has accounted for at least 70% of the mortgage originations in 2012. Freddie Mac reported that the average 30 year mortgage rate was 3.35% for December 2012, a full half percentage point below the 3.96% a year ago and over 1% below the 4.71% average during December two years ago. If rates go up, the refinance business will not just decline, it will vanish. Frankly, I have no clue how rates may affect the HAMP and HARP interventions, but their aggregate volume is not expected to be much.

The bigger test, however are purchases. If you watch CNBC, it is unanimous that the housing bottom is behind us and recovery is well on the way. If you listen to the home builders, they will tell you that their average buyers are over-qualified and a little increase in mortgage rates would have no impact on sales. In the next few weeks, we should be able to see if rates actually matter. It becomes a true test to see how qualified buyers really are, as they try to purchase at a higher cost.

Most of the time, the weekly mortgage application reports from the Mortgage Bankers Association are pretty useless.  They are however  one of the earliest indicators of changes and may prove to be very telling in the next few weeks. If mortgage rates go up, there should be a rush to lock in rates, resulting in a spike of applications when all the procrastinators come off the sidelines. Then the volume will settle down and we shall see how deep and strong the demand pool really is.

Also coming up is the traditional spring selling season for the home builders, starting after the super bowl weekend. This year, the season may be overshadowed by the debt ceiling battle.  I make it a practice not to discuss specific trades, but I have to admit I am salivating over the opportunities in these home builders right now.



 
 

Emigrate While You Can... Learn More

 

results 

Year-End Fund Raising Drive

Dear readers, our year-end funding drive has become a “beginning of the year funding drive” as we have yet to reach our target. By now you will be familiar with the many advantages a donation can secure for you, which range from sounder sleep, to children including you in their songs, to potentially obtaining privileges in the afterlife (no guarantees, but it seems highly likely). Lastly, a special thanks to all readers who have already made a contribution, we are greatly honored by your support.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Real Estate Facing First Test of 2013”

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • goldmine-700x360Gold and Gold Stocks – A Meaningful Reversal?
      A Negated Breakdown There have been remarkable gyrations in the gold sector lately. The typical rebound out of a November/December low (typical in recent years after the end of the tax loss selling period) was initially cut short in January in the course of the global stock market decline. This was a bit surprising, because it was widely held that the recovery in the gold price was a result of said stock market decline.   Photo via genius.com We suspect that in it was...
  • 1790_AssignatInflation-Spewing Dragon
      Dovish Cooing from the Desolation of Draghi As Reuters informs us, on the heels of Mr. Draghi's somewhat “disappointing” attempt to assassinate the euro on occasion of the previous ECB meeting, the chief European printing press supervisor and certified monetary crank has decided to assure everyone of his ultra-dovish stance again on Thursday, by announcing that even more monetary insanity must be expected soon:   “Fading growth and inflation prospects will force the European...
  • sauvequipeutThe Bank of Japan – Ringing in the Endgame?
      Let's Do More of What Doesn't Work It is the Keynesian mantra: the fact that the policies recommended by Keynesians and monetarists, i.e., deficit spending and money printing, routinely fail to bring about the desired results is not seen as proof that they simply don't work. It is regarded as evidence that there hasn't been enough spending and printing yet.   BoJ governor Haruhiko “Fly” Kuroda: is that a windshield I'm seeing? Photo credit: Yuya Shino / Reuters   At the...
  • The Lost Ice CubeAn Ice Cube for Gulliver
      Panic! 9,000 Billion Tons of Ice Lost in Greenland! Have you ever wondered why they called that place up north “Greenland” instead of, say, “Whiteland”? The reason is that at the time humans first moved there, much of the place was in fact green....as it was a lot warmer than it is today, when allegedly, we are shortly all going to be roasted due to global warming (those living in coastal ares are supposed to drown before they have a chance to burn for their carbon footprint...
  • eyes-1The FOMC Decision: The Boxed in Fed
      An Imaginary Bogeyman What's a Keynesian monetary quack to do when the economy and markets fail to remain “on message” within a few weeks of grandiose declarations that this time, printing truckloads of money has somehow “worked”, in defiance of centuries of experience, and in blatant violation of sound theory? In the weeks since the largely meaningless December rate hike, numerous armchair central planners, many of whom seem to be pining for even more monetary insanity than the...
  • To Hell in a HandbasketTo Hell in a Handcart
      $5 Trillion up in Smoke POITOU, France – Pessimism is a sin against God, said money manager Charles Gave. It suggests ingratitude. And a lack of faith. After all, this is God’s world. What, not good enough for you? That’s why we are always optimistic at the Diary. Things don’t always go the way we would like, but they always go the way they should. Yes, the world may be headed to Hell in a handcart… but it’s for its own damned good!   Mild surprise down in hell...
  • hollandeHollande's Socialist Wonderland
      Everything's an Emergency If memory serves, France remains in a state of emergency on account of the terror attack in Paris in last November. As terrible as terror attacks are, they are a statistically insignificant cause of death and injury in developed nations. It is also worth noting that the countries that seem most prone to suffering terror attacks are the ones that are most active in intervening militarily in foreign countries. This is probably no coincidence. Just...
  • iceberg_ClevengerUnsound Credit and Risk Assets – How Serious is the Situation?
      Loan Losses and Rumors We want to briefly comment on recent news about a rise in loan loss provisions at US banks and rumors that have lately made waves in this context.   The iceberg – an excellent simile for what we know and what we don't know... or rather, what we don't know just yet. Image credit: Ralph A. Clevenger   First though, here is a look at the Philadelphia Bank Index (BKX) as well as its ratio to the S&P 500:   Investors seem increasingly...
  • Super-Tall ScrapersSkyscraper Mania Goes Global
      New Skyscrapers Wherever one Looks Readers may recall our recent discussion of the construction of the Jeddah Tower (see “Soaring to Bankruptcy” for details). This skyscraper is a typical symptom of an artificial boom that has moved past its due date, so to speak. The idea behind the skyscraper index is that in light of the immensity of projects that involve the construction of the tallest building in the world (or one of the tallest), they are only realized once the notion that boom...
  • MW-BX052_FOMC_m_MG_20140319160153The End Is Nigh for the Fed’s “Bubble Epoch”
      Market Mythology LONDON – Twice in the last 15 years, markets have tried to correct the mistakes and excesses of the Bubble Epoch. Each time, the Fed came back with even more mistakes and excesses. Trillions in new credit… lower lending rates… easier terms… ZIRP… QE… and the Twist!   The gaggle of price-fixers the job of which is to regularly falsify one of the most important price signals in the economy. The idea that the economy can be “improved” by the...

Support Acting Man

350x200

Archive

j9TJzzN

Own physical gold and silver outside a bank

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com