But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Surprise! Personal incomes jump in August—good for the mall REITs
Personal income is the income a person receives from all sources. This includes wages and salaries, government transfer payments, other labor income, proprietor’s income, and rental income.
As is typical after an asset bubble, debt levels remain high. The classic hallmark of these sorts of economies is a debt-fueled buying binge on assets.
Consumer spending and consumer debt are a driver of agency REITs such as Annaly Capital (NLY) and American Capital Agency (AGNC) as well as mall REITs such as Simon Property Group (SPG) and General Growth Properties (GGP)
The front-month Ginnie Mae TBAs were higher as bonds rallied five basis points. Ginnie Mae TBAs began the week at 105 27/32 and rose to 106 2/32.
Fannie Mae MBS sold off a bit on a weak bond market. The Fannie Mae 4% TBA started the week at 105 5/32 and picked up about 7 ticks to close at 105 12/32.
The roundup is a weekly series where we discuss the week’s trading in government bonds and to-be-announced (or TBA) mortgage-backed securities.
Last week had a number of reports of interest to the builders. On Monday, we had existing home sales, which came in a bit lower than anticipated.
The upcoming week has some critical economic reports, starting with personal income and personal spending, the ISM manufacturing and ISM non-manufacturing indices, construction spending, and then finally the jobs report on Friday.
Initial jobless claims are one of the few labor market indicators released every week. Unemployment is a profound driver of economic growth.
The theme of the real estate market for the past year has been tight inventory. This theme was also in the National Association of Realtors (or NAR) “Existing Home Sales Report.” Professional investors—think hedge funds and private equity firms—have raised capital to purchase single-family homes and rent them. Lately, professional investors have reduced their buying.
With new debt-to-income ratio rules now in effect and interest rates on the rise, non-qualified mortages and stated-income loans offer borrowers alternatives.
Judicial reviews of delinquencies stall foreclosures across half of the states in America. Most non-current mortgages are in judicial states such as New York, and New Jersey.
Fewer foreclosures are making life easier for credit risk-taking non-agency real estate investment trusts (or REITS). Declining delinquencies benefit agency REITS, too.
Inflation at the wholesale level has been typically taken to predict inflation at the consumer level. In a normal business environment, producers pass these increased costs to consumers, which would decrease disposable income if wages didn’t rise accordingly. So a little inflation is considered a good thing.
The front-month Ginnie Mae TBAs were roughly flat as bonds rallied four basis points. Ginnie Mae TBAs began the week at 105 28/32 and fell to 105 27/32.
Fannie Mae MBS sold off a bit on a weak bond market. The Fannie Mae 4% TBA started the week at 104 29/32 and lost about 5 ticks to close at 105 3/32.
The dominant event for bonds was the FOMC meeting last week. The Fed decided to continue to reduce asset purchases and held the Fed Funds rate constant.
The FOMC met last week. There were no major surprises on the interest rate front. But the dot graph, shown below, did change from the June meeting. FOMC members raised their forecast for the federal funds rate at the ends of 2015 and 2016.
The upcoming week has a lot of real-estate related data, with existing home sales, the FHFA Home Price Index, mortgage applications, and new home sales. We’ll also hear from homebuilder KB Home (KBH).
The Fed prefers to use the Personal Consumption Expenditure (or PCE) Index as its measure of inflation over the Consumer Price Index, which is more familiar to most people. There are a few differences between the two.