MBA Mortgage Applications, Week of October 19th

TRADEX GLOBAL INTERNAL COMMENTARY

The MBA said that its seasonally adjusted index of mortgage applications fell 4.2% during the week ending October 12th.  The home purchase component increased 1% from the previous week (3% mortgages make a difference!).  The refinance component fell 5.3% from the previous week (see my comment on peak prepayment speeds from 2 weeks ago), while the share of refinancings to total applications decreased to 82% from 83%.  We think two things are clear:  1) New home purchases are clearly gaining traction, and 2) Refinancing is probably going to crest in the next quarter.  We believe that both of these will be a major positive to the housing industry, the employment situation and for Tradex liquid real estate portfolios.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Applications for U.S. home mortgages fell last week, but demand for purchase loans, a leading indicator of home sales, reached the highest level since June, data from an industry group showed on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.2 percent in the week ended October 12. The seasonally adjusted purchase index, which measures loan requests for home purchases, increased by 1 percent over the previous week, putting the index at its highest level since June. The data was adjusted to account for the Columbus Day holiday. The MBA's seasonally adjusted refinance index fell 5.3 percent from the previous week. The refinance share of total mortgage activity decreased to 82 percent of total applications from 83 percent the prior week. Fixed 30-year mortgage rates rose 1 basis point to average 3.57 percent. Still, they remain near all-time lows following the Federal Reserve's latest economic stimulus program. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA. 

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

Housing Starts, Week of October 19th

TRADEX GLOBAL INTERNAL COMMENTARY

Housing starts surged 15% in September to the highest level in four years.  Beginning home construction jumped last month to an annualized rate of 872k, the fastest pace since July 2008.  This makes it fairly clear that housing is off the bottom and is in the midst of a recovery.  Population growth and household formations have increased, while the excess inventory of quality homes has dwindled.  I think that these numbers and the lack of recent building activity will go a long way to revive employment in the housing sector that has lost 2 million jobs since the end of 2007.  Shares of homebuilders rallied (which is not great for our hedges).  The August number was revised up to 785k (annual rate) from 750k, and over the last 12 months work has begun on 34.8% more new homes, the biggest year-over-year increase since April.  Building permits (a proxy for future construction) also jumped to an 894k annual rate.  This exceeded forecasts, with the number of permits rising by 45% since September 2011, the biggest annual jump since 1983.  No matter how you spin these numbers, housing is rebounding and this should help employment.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Housing starts in the U.S. surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis. Beginning home construction jumped last month to an 872,000 annual rate, the fastest since July 2008 and exceeding all forecasts in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. An increase in building permits may mean the gains will be sustained. “It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian Enterprises Inc. (HOV), the best-performing homebuilding stock this year, said in a telephone interview today. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.” A pickup in sales stoked by record-low mortgage rates and population growth combined with dwindling supply indicates construction can continue strengthening, contributing more to economic growth. Improving demand may also help revive a part of the job market that’s seen construction employment fall by almost 2 million since the end of 2007. “This is good news for the labor market,” said Anika Khan, a Charlotte, North Carolina-based senior economist at Wells Fargo & Co., the biggest mortgage lender in the U.S. If single-family starts “continue to show this positive momentum, and we expect they will, we’ll likely start to see some construction jobs come back.”

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

Mortgage Applications, Week of October 5th

TRADEX GLOBAL INTERNAL COMMENTARY

Mortgage applications fell last week, but “new purchases” rose to the highest levels since June.  Mortgage refinancing applications fell 2%, while applications for home purchases rose 2.4%.  Despite the decline in refinancing, we believe that the level of prepayments will stay elevated for another quarter and will taper off near year end.  30-year mortgage rates were at 3.56%, slightly higher than 3.53% the week before.  The MBA survey covers 75% of US residential mortgage applications.  I think that this report has some noise to it, but it is a slight positive that “new home” purchase applications is rising.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Applications for home mortgages fell last week as demand for refinancing eased slightly but purchase applications rose to their highest levels since June, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 1.2 percent in the week ended on October 5, 2012. The MBA's seasonally adjusted index of refinancing applications fell 2 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, rose 2.4 percent. Despite the decline of refinance applications, their volume is still near three-year highs, Mike Fratantoni, MBA's vice president of research and economics, said in a statement. Fixed 30-year mortgage rates averaged 3.56 percent in the week, up 3 basis points from 3.53 percent the week before. Still, they remained near their lowest levels in the wake of the Federal Reserve's latest aggressive program to boost the economy. In a program known as quantitative easing, or QE3, the Fed said in September that it will buy $40 billion in mortgage-backed securities a month until the job market improves. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

National Federation of Independent Business Survey

TRADEX GLOBAL INTERNAL COMMENTARY

The National Federation of Independent Business’s optimism index fell slightly in September to 92.8 from 92.9.  This is the fourth decline in five months.  It shows that business leaders are delaying any expansion until there is more clarity in tax and regulatory policy.  It is becoming extremely difficult to do business in the United States! Hiring is not improving and this measure fell 6 percentage points to a net 4%.  The number of respondents who expected higher sales held at 1%.  Respondents said the biggest problem facing small businesses was the rising cost of health care and insurance, energy costs and government policy.  The NFIB report was based on 691 small business owners, and small business owners represent 99% percent of all US employers.  A small business is defined as an independent enterprise with no more than 500 employees.  We believe that this segment of the economy gives the most accurate picture of what is happening on Main Street.  The report was not very strong…In the 39th month of a real recovery, we should be seeing much stronger reports.  Keep nimble; we are increasing hedges for October – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Confidence among U.S. small businesses cooled in September as fewer companies said they planned to hire or invest in new equipment, a survey found. The National Federation of Independent Business’s optimism index fell to 92.8 from an August reading of 92.9. Four of the 10 components that make up the gauge decreased, the Washington- based group said. The fourth decline in the past five months for the measure showed business leaders may be putting off some of their hiring and investment decisions because of a lack of clarity on tax and regulatory policy. At the same time, more companies expected better economic conditions in six months, signaling a pickup in sales and employment may take time to develop.

Small-business “owners are in maintenance mode; spending only where necessary and not hiring,” William Dunkelberg, the group’s chief economist, said in a statement. “Owners are unwilling to put their own capital on the line until the future path of the economy and economic policy becomes clear.”

A measure of whether business owners plan to add more workers fell by six percentage points to a net 4 percent. The number of respondents who said they planned to invest in equipment dropped three points to a net 21 percent in September. The world’s largest economy added 114,000 workers last month, the fewest since June, according to a Labor Department report on Oct. 5. The jobless rate dropped to 7.8 percent after exceeding 8 percent for 43 straight months.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

MBA Mortgage Application Numbers, Week of September 28th

TRADEX GLOBAL INTERNAL COMMENTARY

Mortgage applications jump!  Applications for home mortgages rose to the highest level in 3 years, driven by a drop in interest rates to yet another record low.  MBA reported a 16.6% rise in applications in the week ending September 28th.  The index of refinancing applications surged 19.6% from the previous week (HARP is working), while fixed (conforming) 30-year mortgage rates dropped to 3.53% from 3.63% one week earlier.  The refinance share of total mortgage activity moved up to 83% from 81% a week earlier.  We do a lot of work on mortgages for our Liquid Real Estate Portfolio and watch prepayments very carefully.  We believe prepay activity (refinancing) will stay elevated through the end of the year, but as banks are not writing mortgages at the lowest rates possible we think that we are seeing the peak of mortgage prepayments.  This should be a favorable environment for our IO exposure in the first quarter of 2013.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Applications for home mortgages surged last week as demand for refinancing rose to the highest level in more than three years, driven by a drop in interest rates to yet another record low, data from an industry group showed on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, jumped 16.6 percent in the week ended Sept 28. The index of refinancing applications surged 19.6 percent, hitting the highest level since April 2009. The gauge of loan requests for home purchases - a leading indicator of home sales - also rose, though not as strongly, gaining 3.9 percent. The stronger demand came as mortgage rates hit fresh lows in the wake of the Federal Reserve's latest aggressive program to boost the economy. In a program known as quantitative easing, or QE3, the Fed said in September that it will buy $40 billion in mortgage-backed securities a month until the job market improves. "Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates," Mike Fratantoni, MBA's vice president of research and economics, said in a statement. Fixed 30-year mortgage rates dropped 10 basis points to average 3.53 percent, down from 3.63 percent the week before. The refinance share of total mortgage activity gained to 83 percent of applications from 81 percent the week before. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global