Pending Purchases of U.S. Existing Homes Unexpectedly Decline

Bloomberg – Princess Laya – Contracts to buy previously owned U.S. homes unexpectedly declined in January as higher mortgage rates, elevated prices and a limited number of listings pushed the index to a one-year low, according to figures released Monday from the National Association of Realtors in Washington.

Pending home sales gauge dropped 2.8 percent (forecast was for 0.6 percent advance), the most since May, to a one-year low of 106.4.

Contract signings rose 0.8 percent in December, revised down from a previously reported 1.6 percent gain
Index increased 2.7 percent from January 2016 on an unadjusted basis

Pending sales decreased in the Midwest and West

Pending home sales, which reflect contract signings, declined in January as affordability became an issue for potential buyers. A pickup in mortgage rates since the November election, higher home prices and fewer properties to choose from are limiting progress in residential real estate. At the same time, steadily increasing wages and a growing economy remain sources of support.

Here is a chart for Pending Home Sales (MoM) courtesy of Zero Hedge (the battery in my Bloomberg Anywhere card died).

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And Pending Home Sales have declined with declining mortgage purchase applications (again, courtesy of Zero Hedge).

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This is not a good sign. Very frustrating, much like trying to eat “Raw Oyster Stew.”

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18 European Nations Have Negative 2 Year Sovereign Yields (Germany’s Continue To Decline)

While the USA has seen their Treasury yields generally rising since the election of President Trump, Europe and particularly Germany have not been experiencing the same “love.”

In fact, Germany has the second lowest Bund yields in Europe after Switzerland (who maintain their own currency).

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German 2 year Bund yields have been dropping like a stone since 2014.

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And have been dropping even more quickly since January 2017 after a brief respite.

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At the 10 year tenor, Germany has the lowest government bond yield after Switzerland. And the lowest of any nation with a positive bond yield.

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The German Bund yield curve is greater than 200 basis points lower than the US Treasury curve after the 2 year tenor.

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This comes as Germany’s deputy finance ministers claims that there will be debt relief for Greece.

The continuing Greek debt crisis and Germany’s insistance on not lowering Greece’s staggering debt load are not helping Greece’s financial institutions like the National Bank of Greece.

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Here is an unfortunate photo of German Chancellor Angela Merkel.

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Bubble? New Home Sales Disappoint (555k vs 571k Expected) — Back To 1990 Levels

New home sales for January 2017 were released and they were not up to expectations. 571k was the expectation, but only 555k were delivered. But there was a 3.74% MoM gain since December 2016.

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New home sales continue to disappoint after the massive mortgage credit bubble of the last decade and are only at 1990 levels.

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But the median price for new home sales continues to escalate and is well above the peak of the housing bubble.

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Are we in a house price bubble?

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Let me answer that this way. “Does your dog bite?” I am sure that Fed Chair Janet Yellen would answer “That is not my dog.”

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Duty To Serve [Man] (It’s A Cookbook!): FHFA’s New Duty To Serve Manufactured Housing, Rural Housing and Affordable Housing “Preservation”

The regulator for Fannie Mae and Freddie Mac issued last year a cookbook for the always expanding role of Federal government support for housing. Here is FHFA’s site for Duty to Serve (Man).

Here is FHFA’s Jim Grays discussing the Duty to Serve which requires Fannie Mae and Freddie Mac to support 1) Manufactured housing, 2) Affordable housing preservation, and 3) Rural housing.

Bear in mind that FHFA is ordering Fannie Mae and Freddie Mac to subsidize (at taxpayer’s expense) and drive out competition from the non-taxpayer subsidized competition.

So yes, FHFA’s Duty to Serve is really a Duty to Serve Man. And it is a cookbook … for greater Federal government expansion into the housing finance.

More risk with no capital. Brilliant combination. Yes, a cookbook for financial distress.

Here is a photo of FHFA’s Jim Gray speaking to US Congress on the benefits driving out private market competition and expanding Federal government intervention.

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Existing Home Sales Hot-Hot-Hot (Jump 3.3% MoM In January, While Median Price Rises 7.1% YoY)

Existing home sales for January remain hot-hot-hot.

According to the National Association of Realtors, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, expanded 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December 2016. January’s sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).

On a more negative note, existing home sales are finally back to 2001 levels near the beginning of the horid housing bubble of the 2000s.

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Also back to 2001 levels is median price of exisiting homes sales at 7.1% YoY.

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Mortgage purchases applications are only back to 1997 levels.

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Let us hope we never repeat the house price and mortgage credit bubble that started in 1995.

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Here is the original version of Hot-Hot-Hot by Buster Poindexter.

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Highway To Hell! Hedge Fund Liquidity Falls to Danger Zone in U.S. Stock Market

Highway to the danger zone!

(Bloomberg) — There’s safety in numbers. Until a stampede starts.

That’s the theory underlying a study of hedge fund holdings by Novus Partners Inc., which sought to calculate how easily the market could absorb concerted selling by large money managers. Using an analysis that turns mainly on how much volume is occurring in stocks favored by professional speculators, Novus says liquidity is at an all-time low.

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Herding hurts liquidity.

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Or is THIS the highway to the danger zone? Or Highway To Hell?

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Here is a video of hedge funds herding.

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Fannie, Freddie Drop; Court Rejects Most Holder Claims (Unlawful Taking By Government Withheld)

For the moment, the seizing of private property by the Federal government has been upheld by Judge Stein.

Under the original terms of the agreement, Treasury received warrants to acquire nearly 80 percent of the companies’ common stock along with a new class of “senior” preferred shares that originally paid a 10 percent dividend.

At issue in the lawsuits is the 2012 decision by Treasury and FHFA to change the bailout terms so that instead of a set 10 percent dividend, the government would take all profits and not require a dividend when they had a loss.

Today (as in 8/14/2014)  common shareholders of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) filed suit in the U.S. Court of Federal Claims seeking to remedy the federal government’s unlawful taking of shareholders’ rights and property in Fannie and Freddie and other violations of law. The shareholder plaintiffs are three individuals and Pershing Square Capital Management, L.P. (“Pershing Square”). The defendant is the United States government, including the U.S. Department of the Treasury and the Federal Housing Finance Agency (“FHFA”).

The complaint challenges the government’s ongoing confiscation of all profits of Fannie Mae and Freddie Mac (the “Companies”). According to the filing, the government is expropriating the Companies’ profits through a 2012 arrangement (the “Net Worth Sweep Agreements”) by which FHFA, purportedly acting as the conservator of the Companies, and Treasury agreed to strip all earnings from both Companies and sweep them to Treasury in cash, every quarter, in perpetuity. These Net Worth Sweeps implement what internal Treasury documents had earlier described as the Administration’s “commitment” to “ensure existing common equity holders will not have access to any positive earnings from the [Companies] in the future.”

Now, the ruling by Judge Stein.

(Bloomberg) -By Felice Maranz- D.C. Circuit appears to have rejected most Fannie, Freddie shareholders’ claims, except contract-based claims regarding liquidation preferences and dividend rights,  which are remanded to district court for further proceedings:
* Stein cites ruling:
** “We also reject most of the stockholders’ common-law claims.
Insofar as we have subject matter jurisdiction over the stockholders’ common-law claims against Treasury, and Congress has waived the agency’s immunity from suit, those claims, too, are barred by the Recovery Act’s limitation on judicial review”
** “As for the claims against FHFA and the Companies, some are barred because FHFA succeeded to all rights, powers, and privileges of the stockholders under the Recovery Act”
** “Others fail to state a claim upon which relief can be granted”
** “The remaining claims, which are contract-based claims regarding liquidation preferences and dividend rights, are remanded to the district court for further proceedings”
* NOTE: Earlier, federal appeals court in Washington affirmed “in part” a ruling dismissing a challenge to U.S. govt’s 2012 decision to capture billions of dollars in profits generated by FNMA, FMCC after their bailout; court also remanded “in part” portions of the case
* FNMA slumps 8.4% after earlier rising 3.6%; FMCC falls as much as 6.5% after earlier rising 3.3% intraday 

Wow. So, unlawful taking is allowed by the Federal government.

Here is a chart of Fannie Mae Operating income before the crisis and after. After operating income losses in 2007-2011, Fannie Mae has been an income making dynamo (for the US Treasury). You can see why The Feds want Fannie and Freddie under their wing, so to speak.

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The reaction?

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A closer look.

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Was it Judge Stein or Judge Valkenheiser from the film Valkenvia that made that ruling?

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