Wednesday, September 21, 2011

Misc: Possible Refinance Boom, Update to Reinhart and Rogoff paper

by Calculated Risk on 9/21/2011 08:46:00 PM

• From reader Soylent Green is People (mortgage broker):

"Refinance boom will be much larger than 2009 when the Feds remove the 125% LTV cap on HARP loans. There are so many whispers about it I can hardly hear myself think."
• From Tom Petruno at the LA Times: Mortgage rates expected to slide on new Fed move
The shift back to mortgage bonds could bring $20 billion or more a month of Fed buying power into that market, said Walter Schmidt, a bond market analyst at FTN Financial in Chicago.
“It’s absolutely clear they’re targeting mortgages,” Keith Gumbinger, a principal at mortgage data firm HSH Associates in Pompton Plains, N.Y., said of the Fed.
The 4% level is a psychological barrier for the market, but “I think we can breach that” soon, Schmidt said.
• An update to the widely quoted Carmen Reinhart and Kenneth Rogoff paper from the Oregon Office of Economic Analysis: This Time is Different, An Update
I have recreated and updated some of Ms Reinhart and Mr Rogoff’s work. Specifically, what follows (PDF – full version) is based on their draft paper for an American Economic Association presentation in January 2009 “The Aftermath of Financial Crises.“

In order to not bury the lede, first up is a quick summary of the U.S.’ current experience relative to historical financial crises, followed later by graphs for each individual measure.

All told, the recent U.S. financial crisis looks very similar to the historical crises as detailed by Reinhart and Rogoff – just your “garden variety, severe financial crisis” if you will. Across each of the five measures discussed in the Aftermath paper, the current U.S. experience is of the same magnitude
See the post for several tables and graphs.

Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
Existing Home Sales: Comments and NSA Graph
Will there be another Refinance Boom?
AIA: Architecture Billings Index Turns Positive
Existing Home Sales graphs