Thursday, December 31, 2009

Looking Ahead at Mortgage Rates

The NY Federal Reserve is, and has been, the biggest buyer of Mortgage-Backed Securities for all of 2009. This helps push mortgage rates lower, and that's why they allotted for a 1.25TN budget over a 15 month period. It is set to expire at the end of Q1 2010.

This week, their purchasing volume is down significantly. ~9BN this week. For the past few months, they had been closer to 16BN per week, and a few months earlier they were consistent at 25BN per week.

It makes sense that as they near the end of their budget, they will slow the volume. Otherwise, their departure from the market would create a demand vacuum.

Many speculate that mortgage rates will quickly return to the levels that predated the Fed buying campaign. But I don't think it will be that severe - that environment had a number of different dimensions that do not apply today. That said, it's helpful to note what has happened to rates this week (up) as the Fed's buying changed (down).

Wednesday, December 30, 2009

Strategic Default and the Fading Stigma of Foreclosure


It's important to pay attention to the sociological dimensions of the financial crisis (aka Great Recession) as it continues to evolve.

I think this article on SocketSite touches on a very interesting point. Social dynamics are at play as well as financial ones on the path to a mortgage loan default and foreclosure. But as the 'bug' spreads, and more and more of us know people who have faced foreclosure, it becomes less of a Scarlet Letter. And that implies that the social reasons to avoid foreclosure get weaker as it becomes more prevalent around us. It's a snowballing effect.

So before we are able to truly bottom, we need to combat this force as well as the purely economic ones.

Note - the study referenced here suggests that 1 in 3 California mortgage defaults in 2008 were strategic, which represents a 16x increase from the rate only 4 years earlier.

Friday, December 18, 2009

Price Discrimination and Landlording

You've got to wonder about the owner who rented out this home. There are a lot of 'accidental landlords' out there, and maybe this is an upside-down, about to be foreclosed upon investment. But no matter what, I hope this homeowner charged a premium for rent based on tenant selection.

Tuesday, December 08, 2009

Unemployment Over Time - Nice Visual

Here's a great visual representation of the unemployment trend over the past few years, laid out by county for the entire US. Takes about 15 seconds to get the point across.