Austin Mortgage Blog

Posts Tagged ‘New Home Sales’

Short term, Austin mortgage borrowers are encouragerd to stay defensive

It’s early on Monday morning and the market already looks like Ventura Highway.  Stocks were lower in pre-market trading (bonds higher) until Fed Ex came out and revised 3^rd quarter earnings (quarter ending 8/31) up 20 cents a share and pushed guidance higher for the remainder of the year.  Stocks turned around, going positive and as a consequence, bonds, notes, and mortgage backs took a dip.

Then along came New Home Sales, expected to be 320K annualized units.  The print was much better than that, up 24% to 330K units.  Stocks got another boost (now up 68 on the big board) as fixed income instruments (such as mortgage backs) dipped a little deeper.  Currently, the 10 year note is off 10/32’s (yield 3.03%) while MBS are off 4/32’s (tighter spreads which is good).  We also had the Chicago Fed National Activity Index out, which dropped .94 to its worst level since October.  Manufacturing output, or the lack thereof, did the trick.

Fast money is selling the long end of the curve, dragging the 10 year note along with it.  Not a lot of downside is expected from here.  The week ahead will feature Case Shiller Home Prices, Consumer Confidence, Durable Goods, Weekly Claims, and GDP on Friday.  Good week for data and market moving volatility.  For the week ahead, we see the market weaving and bobbing with a neutral/bearish type bias as investors will be looking to buy treasuries at yields slightly higher than current.  We still like the market long term as the detours are everywhere.

Short term, Austin mortgage borrowers are encouragerd to stay defensive.

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 June 7, 2010

For the week of June 7, 2010 – Vol. 8, Issue 23

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE The National Association of Realtors (NAR) reported the Pending  Homes Sales index rose in April for the third month in a row, registering a 6% increase over the upwardly revised March figure. This index measures the number of homebuyers signing purchase contracts. April Pending Home Sales hit their highest level since October 2009 and are UP 22.4% year-over-year. Like Existing and New Home Sales the week before, a good part of the gain was put to the tax credit expiration that required a signed contract by April 30. The NAR also forecast new home sales will be UP 18.5% for the year. April construction increased 2.7%, its fastest gain in a decade. This includes commercial, government, and home construction. Home improvements led the residential gain, but new single-family homes were up as well, showing increased confidence among homebuilders. >> Review of Last Week SUMMER SLUMP… The Memorial Day-shortened trading week ended with a slump in stocks on Friday. This was driven by concerns that Hungary may default on its debt, followed by the May Employment Report, whose payroll numbers were lower than expected and had investors selling off big time. The Dow lost over 300 points on the day and all three major indexes were down for the week. The facts did not actually justify such extreme investor reaction. No U.S. bank has major exposure to European debt and Europe accounts for only a minor percentage of our export business. Yes, the employment report showed a headline payroll number below expectations, with the private sector adding just 41,000 jobs. But the average workweek went from 34.1 to 34.2 hours. If hours per worker had remained the same, that extra labor demand would have created 315,000 more private sector jobs. For the moment, employers are clearly preferring to meet rising labor needs with more hours for existing workers, rather than new hires. Ignored in all the negative hoopla was the DROP in the unemployment rate to 9.7%, which beat expectations. Before Friday’s market slide, other economic data had sent stock prices up. We had the great Pending Home Sales gain covered above. The ISM Manufacturing index continued to show strength in that sector, hitting levels not seen since 2004, while the ISM Services index showed non-manufacturing business at its highest level in almost four years. And final Q1 productivity came in at a 2.8% annual growth rate, UP 6.1% from a year ago. For the week, the Dow ended down 2.0%, to 9931.97; the S&P 500 was down 2.3%, to 1064.88; and the Nasdaq was down 1.7%, to 2219.17. Bonds blasted skyward on Friday fueled by the goulash coming out of Hungary, then boosted further by the lower than expected payroll numbers. The flight to safety benefited the FNMA 30-year 4.5% bond we watch, which closed UP 66 basis points for the week, ending at $102.69. National average mortgage rates held at their historic levels for another week, according to Freddie Mac’s weekly survey. >> This Week’s Forecast CONSUMERS WEIGH IN… This is a fairly quiet week for economic data, but we’ll have a good look at the consumer’s participation in the recovery with Friday’s May Retail Sales. The June Michigan Consumer Sentiment index will follow. Expectations are for continued improvements in these numbers. Initial and Continuing Unemployment claims will also be watched closely given last week’s jobs report. Thursday’s April Trade Balance will show us the strength of U.S. business in the global economy. >> 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 June 7 – June 11 Date Time (ET) Release For Consensus Prior Impact W Jun 9 10:30 Crude Inventories 6/5 NA –1.90M Moderate Th Jun 10 08:30 Initial Unemployment Claims 6/5 450K 453K Moderate Th Jun 10 08:30 Continuing Unemployment Claims 5/29 4.600M 4.666M Moderate Th Jun 10 08:30 Trade Balance Apr –$41.2B –$40.4B Moderate F Jun 11 08:30 Retail Sales May 0.3% 0.4% HIGH F Jun 11 08:30 Retail Sales ex-auto May 0.1% 0.4% HIGH F Jun 11 09:55 Univ. of Michigan Consumer Sentiment Index Jun 74.8 73.6 Moderate F Jun 11 10:00 Business Inventories Apr 0.5% 0.4% Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months With jobs still not enthusiastically joining the rest of the recovery, most economists now feel we’ll be in a low-rate environment for a considerable period of time. 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 5% Sep 21 12%

Austin Mortgage Rates Rise on Improving Economic Data

While inflation remained low, stronger than expected economic data released this week was negative for mortgage markets. As a result, Austin mortgage rates ended the week a little higher.

The big news in this week’s economic data came from the housing sector. March Existing Home Sales rose 7% from February, and existing home sales were 16% higher than one year ago. Inventories of unsold existing homes fell to an 8-month supply, from 8.5-months in February. March New Home Sales were even better, jumping 27% from February to the highest monthly rate since last July. This marked the largest single-month increase in new home sales since 1963. The chief economist of the National Association of Realtors (NAR) credited the homebuyer tax credit for the strong March housing data. Buyers must sign a contract by April 30 to take advantage of the tax credit, so the April data should benefit as well.

Friday morning, CNBC reported that support is growing among Fed officials to begin sales of mortgage-backed securities (MBS) from the Fed’s portfolio. In a program which ended March 31, the Fed purchased $1.25 trillion of MBS to help lower mortgage rates and boost the economy. According to CNBC, “at least” six members of the Fed’s policymaking committee support near-term MBS sales if the economy continues to improve. The selling could begin as soon as the third or fourth quarter of this year. Fed Chief Bernanke still views the likely time frame to begin MBS sales as next year, but his recent comments have indicated a willingness to keep more options open. With the next Fed meeting taking place on Wednesday, the 2:15 et release of its statement will take on added significance. If the Fed actually conveys an intention to begin to sell MBS soon, Austin mortgage rates would be likely to rise on the news.

New Home Sales gains also smell of the last mad rush for 8K in buyers credit money before we put that program to bed the end of next week

TGIF.  Bonds, notes, and mortgage back traders have all turned sellers today on a mixture of fundamental and technical data.  Word on the street has it that at least one half of the Fed Governors (FOMC) feel that the time is getting near to sell assets.  With 1.75 trillion dollars worth of mortgage backs, agency paper, and god knows what, unloading this on the market is not bond friendly.  Keep in mind that they are in unchartered policy territory, caught in their own wicked web of quantitative easing/zero interest rates and super hero inflation fighter/bloated balance sheet reducer.  Interesting as well that they are having the debate in a much more public forum right before next week’s FOMC meeting.

In other news, Durable Goods, items which are supposed to last 3 years or more, fell 1.3% yet ex-transportation, the index was plus 2.8%.  Orders for transportation equipment fell 12.9%, dragging the overall index into the red.  New Home Sales were also released, up 26.9% to 411K annual units.  The print blew away economists estimates of plus 330K.  Every region of the country rebounded with the “South rising again”, up 43% month on month.  Although the numbers were great, they are coming off the worst month (February) in 22 years.  The gains also smell of the last mad rush for 8K in buyers credit money before we put that program to bed the end of next week.

Given the fundamentals of the economy, bond pricing is very expensive, meaning that if that market was not being influenced by outside forces (global debt crisis, etc.) Austin mortgage rates would simply move higher.  That’s why borrowers need to be careful as every day is a new day and expecting the unexpected is more common place than you think.  We tipped you off to the technical trade that was developing yesterday and our bearish expectations.  It was a text book classic double top, fuel injected 6 speed and Hemi powered, convertible top with navigation and a kicker sound system.  Sorry, I got carried away.  The pattern did play out and added to the bond bearish news of the day, having pinched mortgage pricing for another .25 point.  Currently, the 10 year note is off 11/32’s (yield 3.82%), MBS off 8/32’s, and stocks up 9 points on the Dow.

We still feel that the trade is range bound between 3.75% and 3.83% so given our digits, additional selling is starting to lose favor.  Short term momentum is over sold in both notes and bonds which should give us a little support as well.  Call the market neutral with a little recovery due as we move into the last week of the month.  We’ll try to wrap this up later today.

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.

Austin Mortgage Market Update – For the week of March 29, 2010

For the week of March 29, 2010 – Vol. 8, Issue 13

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE February existing home sales were down for the third month in a row, but the 0.6% drop was less than expected. We had severe winter weather putting a damper on things and we’re still seeing the hangover from sales pushed into October and November when everyone thought the homebuyer tax credit was going away. February new single-family home sales were down 2.2%. But the median price of $220,500 was UP 5.2% over last year and the average price of $282,600 was a strong 9.3% UP from a year ago. The Mortgage Bankers Association (MBA) expects existing home sales to be UP almost 4% this year to 5.34 million, going to 5.72 million in 2011. They see new home sales hitting 398,000 in 2010 and 528,000 the following year. The Federal Housing Administration (FHA) announced new measures that will go into effect for borrowers next Monday, April 5. Here’s what they mean: 1) The upfront Mortgage Insurance Premium (MIP) will go from 1.75% to 2.25%. 2) Even though FHA’s official FICO score minimum is less, borrowers need a score of 620 or higher to have a realistic chance of getting an FHA loan with a minimum 3.5% down payment. 3) The maximum seller contribution has been reduced from 6% to 3%. So FHA borrowers will now have to look better on paper and pay a little more upfront MIP. We’re happy to answer any questions on these new FHA requirements. To take advantage of the homebuyer tax credit (along with today’s low mortgage rates) buyers have just one month left to sign a contract — that’s April 30. And they have to close by June 30. >> Review of Last Week UP AGAIN… It was another week that ended UP for all stock indexes. The market hit an 18-month high during the week, although Friday saw just a 9-point gain. Investors are still worried about Greece’s debt, but their European neighbors announced a bail-out plan that sounded encouraging. Wall Street took the above housing news in stride. Then February Durable Goods came in UP 0.5% and up at an 18% annual rate in the past six months, a healthy level of business investment. Initial unemployment claims dropped by 14,000, to 442,000, and the four-week moving average fell to 454,000, the lowest since September 2008. Continuing claims dropped to 4.65 million, the lowest in fifteen months, spurring further talk that this Friday’s Employment Report will show substantial job gains. Friday, real Q4 GDP was revised from a previous 5.9% estimate to a 5.6% annual rate, still a booming number. Many economists expect this rate to decline in Q1 because of the harsh winter weather, but some still see GDP growth for the first six months of 2010 at a healthy 4.5% rate. The report showed Q4 corporate profits increased at a 36% annual rate and are up 31% over a year ago. Observers say this spurred the increased equipment investments we’ve seen and will soon give us a big improvement in the job market. For the week, the Dow headed UP 1.0%, to 10850.36; the S&P 500 was UP 0.6%, to 1166.59; while the Nasdaq went UP 0.9%, to 2395.13. It was a tough week in the bond market, though prices recovered a tad on Friday. There is understandable uncertainty around the Fed’s ending their purchases of Mortgage Backed Securities this Wednesday. The FNMA 30-year 4.5% bond we watch ended down 43 basis points from the week before, closing at $100.41. Average mortgage rates, as reported in the Freddie Mac Survey, were up a smidge, but still at historically low levels for now. >> This Week’s Forecast INFLATION, MANUFACTURING, JOBS… Everyone will be waiting with bated breath for Friday’s Employment Report, when even pessimistic observers are predicting the recovery’s first serious increase in payrolls. Markets will be closed for Good Friday, although the Federal government will be open. But let’s not forget about Monday’s PCE reading, which is the Fed’s favorite look at inflation. Any rise here could bring the Fed closer to a rate hike. Finally, we get two looks at the strengthening manufacturing sector with the Chicago PMI and the ISM Index. >> 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 March 29 – April 2 Date Time (ET) Release For Consensus Prior Impact M Mar 29 08:30 Personal Income Feb 0.1% 0.1% Moderate M Mar 29 08:30 Personal Consumption Expenditures (PCE) Feb 0.3% 0.5% HIGH M Mar 29 08:30 Core PCE Feb 0.1% 0.0% HIGH Tu Mar 30 10:00 Consumer Confidence Mar 50.0 46.0 Moderate W Mar 31 09:45 Chicago PMI Mar 61.0 62.6 HIGH W Mar 31 10:30 Crude Inventories 3/27 NA 7.25M Moderate Th Apr 1 08:30 Initial Unemployment Claims 3/27 440K 442K Moderate Th Apr 1 08:30 Continuing Unemployment Claims 3/20 4.600M 4.648M Moderate Th Apr 1 10:00 ISM Index Mar 57.0 56.5 HIGH F Apr 2 08:30 Average Workweek Mar 33.9 33.8 HIGH F Apr 2 08:30 Hourly Earnings Mar 0.2% 0.1% HIGH F Apr 2 08:30 Nonfarm Payrolls Mar 190K –36K HIGH F Mar 26 09:55 Unemployment Rate Mar 9.7% 9.7% HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months The Fed still says it will “keep rates low for an extended period”. But with the economy picking up, more economists think we will see a hike in the Fed funds rate in the second half of the year. 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 Apr 28 0%–0.25% Jun 23 0%–0.25% Aug 10 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Apr 28 <1% Jun 23 10% Aug 10 28%

With current levels at 3.77%, the market needs to boot strap itself back together or further downside (worsening mortgage pricing) will occur

While yesterday was a ho hum, mainly flat day, Wednesday’s trade has been anything but.  It all started across the pond as Germany’s Business Climate Index jumped a few points and Euro zone PMI Indexes (services, manufacturing, and composite) all came in on the plus side.  On the flip side, Fitch downgraded Portugal as another one of the PIG countries struggles with its debt.

Durable Goods greeted stateside traders at plus .5% while the ex-transportation component was plus .9%.  Both were a touch below consensus.  Weakness in Durables can be traced to New Home Sales which fell 2.2%, setting a new record low (308K units annually).  All of the above has pushed the 10 year note towards the bottom of the range, down 22/32’s to yield 3.77%.  Mortgage backs have fared better with spreads tightening (Fed taking 1.25 billion out of the market) but are still off a smooth 11/32’s.  Stocks complete the sea of red hat trick, off 20 points on the big board.

While the economic data is seen a net neutral, the technical set up on the chart looks more like a pit bull.  Reason being is that the selling today has sliced through the trend line that has restricted the downside (acted as support) since December 2009.  Couple that with bearish oscillators kicking in and a breach of the 40 day moving average and you have the makings of the “perfect storm”.

Today’s day-end close will be very important.  We need to hold 116 22/64^th on the futures chart (yield equivalent is 3.75%) to feel better about the range trade continuing.  With current levels at 3.77%, the market needs to boot strap itself back together or further downside (worsening mortgage pricing) will occur.  42 billion in 5 year notes (today’s auction) could be the key.  Yesterday’s 2 year auction was a dog, giving traders suspicious minds about the outcome of today’s 5’s and tomorrow’s 7’s.  Good participation will go a long way to helping our cause.  Given the way we ticked off the Chinese lately, that is not a given.  Keep both hands on the wheel.  We’ll update you on the auction results (12:00 cst).

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.