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Posts Tagged ‘Existing Home Sales’

Austin Mortgage rates moved even lower during the week

Austin Mortgage rates moved even lower during the week, as uncertainty about the pace of the economic recovery has increased investor demand for relatively safer assets such as government guaranteed mortgage-backed securities (MBS). The Fed Chairman acknowledged during the week that the economic outlook is even more difficult than usual to predict right now. Uncertain economic growth with low inflation is a favorable environment for Austin mortgage rates.

In his semi-annual testimony to Congress, Fed Chief Bernanke described the economic outlook as “unusually uncertain”. According to Bernanke, this is the worst labor market since the Great Depression, and it is recovering more slowly than expected. Still, the Fed forecasts modest economic growth in 2010 with low inflation. Important for mortgage rates, Bernanke expressed reluctance to provide further monetary stimulus, unless the economy falters badly. He suggested that the upside of additional Fed actions may be limited, while the downside is that it would raise future inflation expectations.

In the housing sector, June Existing Home Sales declined 5% from strong May levels to an annual rate of 5.37M units, which was well above the consensus forecast of 5.10M. Existing sales were 10% higher than one year ago. First-time buyers accounted for 43% of existing home sales in June. Existing home sales have been helped in recent months by the homebuyer tax credit. Even with the end of the tax credit, though, the National Association of Realtors (NAR) expects annual existing home sales to increase in 2010 and to rise further in 2011.

Worries about European banks, UK austerity measures, US Housing, and the beginning of a two day FOMC meeting are all on today’s marquee

Worries about European banks, UK austerity measures, US Housing, and the beginning of a two day FOMC meeting are all on today’s marquee.  Stress tests and downgrades on banks across the pond got the early morning trade going.  Housing, as in Existing Home Sales, piled on to the gloom as the index fell to 5.66 million units, well below analysis’s expectations.  They were actually looking for an increase to 6.12 million.  Sales held steady in the Midwest, rose a touch in the South, jumped to 1.29 million in the West, and fell like a rock in the Northeast.  Pending Home Sales surprised on the upside, rising 6.0%.  New Home Sales (recorded at contract signing) jumped 14.8%, leaving many to scratch their heads wondering what happened to the Existing Sales numbers.  The divergence is most likely buried in the last dash for 8K buyers credit program which will shake out in the next 60 days.

FHFA (home price index) was plus .8% in April, reversing a two month slide.  On balance, housing looks to be stable but guarded.  Pimco strategist, Richard Clarida is on the wire talking about the Fed changing their language in tomorrow’s policy statement.  The change is regarding the economy as “sluggish” from stable, noting that since April, world and US economies have softened.  We have treasury paper coming to auction as well.  2’s today, 5’s tomorrow, and the 7 year note on Thursday.  Shouldn’t be a problem here.

We also got a peek at early predictions of month end extension needs.  Those are for money funds, etc. that much adjust to meet the Barclay’s index.  Extension needs for June look to be a bit larger than normal with the treasury complex needing to add .6 years and MBS .10 years.  In a nut shell, this will create buying in fixed income, adding support to Austin mortgage pricing.  Technically, the bias is neutral looking to buy weakness and sell strength.  Nothing new here as this has been the trend for the past several sessions.

Analyst Meredith Whitney expects U.S. economy to have rough 2nd half – if true, expect Austin mortgage rates to stay low into 2011

Last week, we anticipated today being a “no news” day, expecting the bond market would pick up right where it left off.  Not quite the case and a great reason to fear “headlines” at any time.  Over the weekend, China preempted the G-20 meeting, announcing that they will allow more flexibility with their currency (Yuan).  The move is very stock and global growth friendly as it would remove imbalances in manufacturing and exports.  Consequences of their actions have pushed the dollar lower and bonds, notes, etc. to higher yields.

Nothing huge here as the Dow is plus 107, 10 year note down 20/32’s (yield 3.29%), and mortgage backs off 7/32’s.  Potentially, this is big news but then again it is China.  Let’s just say traders have “trust” issues.  The week ahead will fire up tomorrow with Existing Home Sales, FHFA House Price Index, and day one of the FOMC meeting.  Wednesday, the FOMC concludes with any change in Fed Funds rate/monetary policy due at 1:15 pm cst.

New Home Sales will also be out in the morning.  Thursday’s data will release Durable Goods, Weekly Unemployment Claims, and the Kansas City Fed Survey.  We’ll end the week with final GDP Q1 and the Michigan Sentiment Survey.  This week’s data will be important as the focus will be on Housing, Unemployment, and the Fed.  All three seem to be the biggest drag on the economy.

In the “for what it’s worth” department, top analyst Meredith Whitney has a bearish call on equities (stocks) and expects the U.S. economy to have a rough second half.  If true, expect Austin mortgage rates to stay low into 2011. Technically, I completed my chart work on the cocktail napkin Friday night.  Bears have the advantage but only slightly, leading us to believe we’re trapped in a triangle pattern range trade.  Let’s call the market neutral and have great week.

Austin Mortgage Market Update – For the week of May 31, 2010

For the week of May 31, 2010 – Vol. 8, Issue 22

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE For the third month in a row, Existing Home Sales beat expectations, UP 7.6% for April and UP 22.8% over a year ago. A lot of the gain was put to the tax credit expiration that required a signed contract by April 30. But buyers have till June 30 to close, so observers feel sales will probably increase for the next couple of months, then take a short break before rising again. Inventories were up from 8.1 to 8.4 months, but this is similar to April gains in prior years, rather than evidence of some huge “shadow inventory” hitting the market. Meanwhile, the median price for an existing home went to $173,000, up 4.0% from a year ago. April New Home Sales shot UP 14.8%, reaching a 504,000 annual rate, their highest level since May 2008. The supply fell to 5.0 months in March and inventories dropped to 211,000 — their lowest level since 1968, down 63.1% from their mid-2006 peak. The tax credit expiration also contributed to these great numbers. But the fact remains, new homes are now significantly more affordable, thanks to prices that are the lowest since 2003 and extremely low Austin mortgage interest rates. Two home price indicators gave mixed signals. The Case-Shiller index for the 20 top metro areas was down 0.5% for March but UP 2.3% for the year. The FHFA price index for homes bought with conforming mortgages was UP 0.3% for the month but down 2.2% for the year. >> Review of Last Week THANK YOU, CHINA… Call it a somewhat volatile week in the stock markets, as investors continued to fret over Europe’s financial health, the Gulf oil spill and North Korea. Then Thursday China stepped in as a solid buyer of Eurozone bonds, giving Wall Street ample reason to calm down, leaving two major indexes up for the week, with the Dow off just 0.6%. We continue to get good factory data, with the Richmond Fed manufacturing index at +26 for May indicating continued expansion in the Mid-Atlantic region. The Chicago PMI manufacturing index also showed growth, though slightly slower than the month before. Durable Goods were UP 2.9% for April and UP 18.9% over a year ago. Especially encouraging, orders for capital goods used in production were UP 7.4% for April and UP 30% over a year ago, one of the steepest annual boosts in the last 20 years. Real Q1 GDP was revised down slightly to 3.0% annual growth. But Q1 corporate profits grew at a 24% annual rate and are UP 31% over a year ago. Economists expect these profits to boost hiring and business investments. Q1 prices were up only 1% annually, so inflation is still under control. April Personal Income came in UP 0.4% and Personal Consumption was flat, but economists feel it’s normal for consumers to take a break every few months. University of Michigan Consumer Sentiment was UP to 73.6. For the week, the Dow ended down 0.6%, to 10136.63; but the S&P 500 was UP 0.2%, to 1089.41 and the Nasdaq was UP 1.3%, to 2257.04. Bonds also had an up-and-down week, finally recovering on Friday to end in pretty good shape. The FNMA 30-year 4.5% bond we watch closed down 13 basis points for the week, ending at $102.03. National average mortgage rates continued near record lows, according to Freddie Mac’s weekly survey. Their Chief Economist feels this should soften the effect of the expiration of the homebuyer tax credit. >> This Week’s Forecast LOOKING FOR JOBS… The economic news of the week is dominated by the May employment report on Friday. Expectations are that a substantial number of jobs will be added, but increases in the workforce population will cut the unemployment rate by just 0.1%. On our way to this big news, we’ll be interested to check out April Pending Home Sales, which should continue to show gains. Tuesday’s ISM manufacturing read and Thursday’s ISM Services and revised Q1 Productivity should also provide more support for our continuing recovery.  >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of May 31 – June 4 Date Time (ET) Release For Consensus Prior Impact Tu Jun 1 10:00 ISM Index May 58.9 60.4 HIGH W Jun 2 10:00 Pending Home Sales Apr 3.5% 5.3% Moderate W Jun 2 10:30 Crude Inventories 5/29 NA 2.46M Moderate Th Jun 3 08:30 Initial Unemployment Claims 5/29 455K 460K Moderate Th Jun 3 08:30 Continuing Unemployment Claims 5/22 4.600M 4.607M Moderate Th Jun 3 08:30 Productivity–Rev. Q1 3.4% 3.6% Moderate Th Jun 3 10:00 ISM Services May 55.5 55.4 Moderate F Jun 4 08:30 Average Workweek May 34.1 34.1 HIGH F Jun 4 08:30 Hourly Earnings May 0.1% 0.0% HIGH F Jun 4 08:30 Nonfarm Payrolls May 500K 290K HIGH F Jun 4 08:30 Unemployment Rate May 9.8% 9.9% HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months The sense among economists is becoming stronger that the Fed will hold interest rates at current levels through the end of the year, as inflation stays tame. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Jun 23 0%–0.25% Aug 10 0%–0.25% Sep 21 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jun 23 2% Aug 10 7% Sep 21 11%

Watch stocks, they are in the driver’s seat

Bonds, notes, mortgage backs, and stocks are all trading in the red.  Stocks off only 3 points as they have come back from much worse levels.  The Naz has gone positive.  Stock market gyrations have put pressure on notes and mortgage backs.  Currently, the 10 year note is off 6/32’s (yield 3.22) and mortgage backs are a mirror image, down 6/32’s as well.

Big week for news with Existing Home Sales out this morning.  The print of plus 7.6% looks good headline but when you dig into the details, you’ll see inventories jumped to 8.4 months and 49% of the sales were first time home buyers.  Something to watch in the future.

Spain took over one of their banks today.  The 146 year old institution had too much bad real estate debt.  Hummmmm.  Technically, the market is consolidating to relieve over-bought conditions and put the chart back into harmony.  We do not see a Katie bar the door reversal, just a trade to let everything catch up.  Watch stocks, they are in the driver’s seat.

Austin Mortgage Market Update – For the week of May 17, 2010

For the week of May 17, 2010 – Vol. 8, Issue 20

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE Last Tuesday the National Association of Realtors (NAR) reported the Q1 median price for existing homes was up in 91 out of 152 metro areas compared to a year ago, showing the housing market is starting to stabilize. This was a nice gain over Q4 of last year when prices were up in only about 40% of the cities tracked. Even more encouraging, the percentage price increases in 29 cities were in double-digits. The NAR also reported that existing home sales of single-family homes and condos were UP 11.4% in Q1 compared to a year ago. Sales increased in 44 states and Washington, D.C., with over 70% reporting double-digit percentage gains. Long-term forecasts were also revised slightly downward by the NAR, but the numbers are still good. They see existing home sales UP 4.3% this year and UP 5.1% for 2011, with the median resale home price UP 2.5% for 2010 and UP 3.7% in 2011. New single-family home sales are forecast to rise 6.9% in 2010 and a whopping 42.0% next year. Median new home prices will be up 3.3% this year and 4.7% the next. >> Review of Last Week ANOTHER EUROPEAN TRIP… Europe’s fiscal shenanigans were in the news again and they took the markets on a trip north, then turned them sharply south to end the week. The gains came after Sunday’s announcement of a major Euro-zone rescue package. But as the week wore on, concerns over whether individual countries would put the necessary austerity measures in place sent stocks down, though the market indexes ended the week with strong gains. If you could take your mind off Europe, there were plenty of reasons to feel positive about the U.S. economic situation. Wednesday, the March trade deficit came in as expected, up $1.0 billion to $40.4 billion, thanks to the strength of our recovery pushing imports up faster than exports. Best of all, the report showed our total volume of international trade was up 3.1% for the month and up 24% since it hit bottom a year ago April. On the jobs front, the four-week moving average inched down for both initial and continuing unemployment claims. Then Friday came the news retail sales were UP 0.4% for April and UP 0.9% including upward revisions to February/March. For the last six months, retail sales are up at a 10.7% annual rate, 10.3% excluding autos, showing the consumer is certainly alive and well. Finally, industrial production was UP 0.8% for April, as manufacturing continues to boom, up at a 9.5% annual rate since its low last June. For the week, the Dow ended UP 2.3%, to 10620.16; the S&P 500 was UP 2.2%, to 1135.68; and the Nasdaq was UP.6%, to 2346.85. Worried about Europe, investors flocked to the safety and bargains they found in bonds. Friday’s drop in stocks pushed bond prices up nicely. So even though we had good economic data on Friday, the week ended on an up note. The FNMA 30-year 4.5% bond we watch closed UP 9 basis points for the week, ending at $101.59. According to Freddie Mac’s weekly survey, national average fixed-rate mortgages dipped to their lowest levels of the year. >> This Week’s Forecast HOMES, INFLATION–WHAT’S GOING UP?… Housing Starts and Building Permits reports will tell us where new home construction is headed and the expectation is those numbers will continue to trend upward.  We’ll see if inflation is going up too, with the wholesale PPI on Tuesday, followed by consumer CPI inflation on Wednesday. Most experts feel inflation remains under control. The week will be bookended with reads on New York and Philadelphia manufacturing, which should continue to show a strong recovery for the sector. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of May 17 – May 21 Date Time (ET) Release For Consensus Prior Impact M May 17 08:30 NY Empire State Manufacturing Index May NA 31.9 Moderate Tu May 18 08:30 Housing Starts Apr 656K 626K Moderate Tu May 18 08:30 Building Permits Apr 680K 680K Moderate Tu May 18 08:30 Producer Price Index (PPI) Apr 0.1% 0.7% Moderate Tu May 18 08:30 Core PPI Apr 0.1% 0.1% Moderate W May 19 08:30 Consumer Price Index (CPI) Apr 0.1% 0.1% HIGH W May 19 08:30 Core CPI Apr 0.0% 0.0% HIGH W May 19 10:30 Crude Inventories 5/15 NA 1.95M Moderate Th May 20 08:30 Initial Unemployment Claims 5/15 440K 444K Moderate Th May 20 08:30 Continuing Unemployment Claims 5/15 4.600M 4.627M Moderate Th May 20 10:00 Leading Economic Indicators (LEI) Index Apr 0.2% 1.4% Moderate Th May 20 10:00 Philadelphia Fed Index May 21.3 20.2 HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months Economists are now moving back to the idea the Fed will indeed keep rates where they are for an “extended period” as long as inflation remains in check. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Jun 23 0%–0.25% Aug 10 0%–0.25% Sep 21 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jun 23 3% Aug 10 10% Sep 21 15%

A couple of missed earnings reports and a sack of rotten Gyros did the trick

Finally, a little economic news to chew on.  First up, PPI, inflation at the wholesale level grew .7% in march while the core index was plus .1%.  Gas and food were the drivers of the headline number, up 2.1% and 2.4% respectfully.  The “core” index strips out food and energy which is why that component is nearly flat.  Given the numbers, we see very little inflation at hand or in the pipeline.

Weekly Unemployment Claims were also released, posting a drop of 24K.  The level however remains stubbornly high at 456K, an indication that it will take some time to turn this Titanic around.  Existing Home Sales, a piece of data near and dear to our hearts rose 6.8% to 5.35 million annualized.  Inventory rose as well, up 1.5% which represents 8 months of supply.  With the 8K buyers credit saying adios later this month, long term projections for a housing recovery are murky.  We shall see.

Last but not least was the FHFA Purchase only House Price Index.  Overall, the index was off .2% in February and down 3.4% year on year.  Prices declined in the South Atlantic, New England, and West North Central areas while modest increases were seen in the Middle Atlantic, Pacific, and West South Central regions.  High inventory levels due to foreclosures will continue to put this index under pressure.

Earlier today, treasury yields fell to their lowest levels in a month as Greece continues to slip into the ocean.  Yields on Greek 2 year notes are now over 11% as their yield curve inverts.  That’s the technical term for going on life support before someone pulls the plug.  Stocks are also in the soup, down 74 points on the Dow.  A couple of missed earnings reports and a sack of rotten Gyros did the trick.

Stocks are up a baker’s dozen on the big board as very overbought conditions are in a dog fight with stellar 1st quarter earnings

Stocks and bonds look to be the tale of two fables.  Stocks on one hand continue to tell the story of positive earnings data as day after day, the majority “beat the street”.  Apple reported after the bell yesterday, blowing the doors off expectations.  Morgan Stanley and Wells Fargo posted earnings beats as well with comments from the Stage Coach company that credit deterioration is improving and has “turned the corner”.

Fixed income products (notes, bonds, and mortgage backs) are on a different page with yields falling/mortgage pricing improving on a continued and heightening sovereign debt crisis.  Yields on the Greek 10 year note are over 8.0% as the German Finance Minister expects the country to ask for aid.  He also hints that “creditors may need to assume some of the risk”.  As you can see, we have stocks and their earnings along with bonds and their flight to quality bid both driving the rally bus.

No economic news today.  That will change tomorrow with Weekly Claims, PPI (inflation at the wholesale level), Existing Home Sales, and the House Price Index all on the leader board.  Out right money flows or price action has been light and two way.  We are not seeing the volume in notes and mortgage backs to give us confidence in a continued rally.  That said, we do not expect much of a pullback either.

Currently, the 10 year note is up 10/32’s to yield 3.76%, very close to our range high (low yield) expectations of 3.75%.  Mortgage backs are plus 4/32’s on the day.  Stocks are up a baker’s dozen on the big board as very overbought conditions are in a dog fight with stellar 1^st quarter earnings.  Looks like one of those rare days when everyone is happy.

The tactical bias for Austin mortgage rates and pricing is to remain neutral

For the most part, both fixed income and equity markets are quiet following the wild Goldman Sachs induced ride we had on Friday.  Bonds, notes, and mortgage backed securities seem to be at a crossroads, trying to handicap the ramifications of Goldman’s alleged fraud.  That alone will keep a flight to quality bid in the market.

Greece is a helper on that front as well with more uncertainty, adding 35 bps to their yield (10 year debt) and then there’s China, tapping the brakes on real estate lending.  That sent the Shanghai index down 5% in early trading.  Stateside focus is clearly Goldman but also on 1^st quarter earnings.  Citi reported before the bell, actually making a profit of .14 cents a share.  At any rate, it’s a good thing for the tax payers since we own a big chunk of the company.

Leading Economic Indicators were also released, up 1.4%.  The print was .4% better than market expectations but in reality, the index is such a rear view mirror piece of data that most traders blink as it goes by.  Speaking of data, it’s a light week with the next release due for Thursday and Friday.  Existing Home Sales, New Home Sales, and Durable Goods Orders will be the headliners.

The tactical bias for Austin mortgage rates and pricing is to remain neutral, trading a range on the 10 year note between 3.75% and 3.82%.  Stocks want clarity on the Goldman/SEC issue which will lead bonds to react accordingly.  Our work on the 10 year note chart is providing neutral to bullish trend signals and overbought conditions at the same time.  Classic example of a mixed bag.

Currently, the 10 year note is off 3/32’s (yield 3.78%), mortgage backs off 3/32’s, and stocks off 8 points on the big board.

No Surprises From Fed Meeting

There were no major surprises in the economic data or the Fed announcement this week. As a result, while volatility remained day to day, Austin mortgage rates ended nearly unchanged for the third straight week.

As expected at its meeting on Tuesday, the Fed held the fed funds rate steady, and the accompanying statement contained few changes. The statement retained the language about the fed funds rate remaining at extremely low levels for at least several months. The Fed’s assessment of the economy was a little more upbeat at this meeting, but pointed out that economic improvement will occur slowly. The Fed continued to signal that the $1.25 trillion MBS purchase program will conclude at the end of March. With less than two weeks of Fed MBS purchases remaining, investors will be watching closely to see if the Fed’s exit has an impact on Austin mortgage rates.

This week’s inflation data showed that inflation is not a concern right now. The February Core Consumer Price Index (CPI) increased at a low 1.3% annual rate. The Fed’s target range is commonly believed to be a 1.5% to 2.0% annual rate. The current low inflation environment makes it easier for the Fed to continue to hold the fed funds rate low to stimulate the economy.

Week Ahead Next week, Existing Home Sales will be released on Tuesday, and New Home Sales will come out on Wednesday. Durable Orders, an important indicator of economic activity, is also scheduled for Wednesday. A revised report on first quarter Gross Domestic Product (GDP), the broadest measure of economic activity, will come out on Friday, along with Consumer Sentiment. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Several Fed officials will be speaking during the week as well.