On your last point about treasuries yields going down because of a housing slowdown, I don't want to go there because I have a completely different model/playbook (economic weakness=weak USD=inflation= higher rates via revolt, especially if there is an easy money printing press response), that doesn't not necessarily draw the same conclusion, but you already know that.
On the housing starts and transaction data, I'm having some questions about what to use. I don't see the Nov. numbers as to be trusted as accurate, and suspect they may be revised upward. The reason is that the MBAA purchase index was just too robust averaging 476, as were the homebuilders 4Q reports. Dec was even stronger averaging 484. The suddenly in January activity fell sharply, the sharpest since I've been tracking this, first two weeks was 405. Northern Trust noted this and said it might be "weather", so I guess I'm watching like a hawk to see if we get a continuation of this.
The data on refis however is getting more obvious, it's dropping steadily on every small uptick in rates. Nov was 2184, Dec. 1883, Jan so far is 1711 (it got down here in August, but miraculously the bond market rallied, and borrowing picked right back up again). Looks like a combination of saturation and the slightly higher rates. Plus the stress on borrowers especially on the ultra low rate short term LIBOR based loans is really building. So I agree the "kill rate" on consumer borrowing from every rate uptick may be a building pandemic, or at least an epidemic. And since the spreads and profits for the lenders of trying to compete for every last loan to every marginal buyer is getting so low,
idorfman.com
then the potential exists for lending standards to be tightening up, and soon. Either that or they will raise their rates to expand margins, which in turn will really slow things down. And that will be the tipping point, if we aren't there already.
On the question of folks having problems with these loans, the problem again is lagged data. This shows 3Q and it came out on 11/29,
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and things have never been better, obviously because consumers were flush with fresh easy money loans, HELOCs and LIBOR ARMs, etc.
money.cnn.com
At the end of Feb we will get it for 4Q, but as we can see the falloff really began around the Dec. 8th date I keep coming back to. We will have to figure out something more real time to track this?. |
