Currently, the 10 year note is off 9/32’s (yield 3.68%) and mortgage backs are off 4/32’s. A mortgage price change for the worse is right around the corner. More in a few.
Best to take advantage of current mortgage pricing with such low odds of improvement in the cards. Currently, we’re trading 3.73% with the extremes at 4.62% and 2.0%. Lots of room to run (either way) as the economic picture changes.
What is catching trader’s eyes this morning is China and their latest release of GDP. The plus 10.7% has the Dragon breathing fire and Wall Street worried about overheating.
The market was looking for a better number, given high hopes of a better holiday season. We see the negative December reading as unsettling, reflecting a consumer that has started to spend but at a snail’s pace.
Mortgage pricing is trying to work its way back from the lows of the early morning trade. We are not out of the woods yet, although I wouldn’t expect this trade session today to be very volatile facing tomorrow morning’s Employment report. From what we are seeing, the estimates are anywhere’s from 100k to 130k job losses vs the 190k number from the previous report. I am leaning more towards the -110k mark at this point. Expectations are for the unemployment rate to stay at the 10.2% previous month number, as well as avg hourly earnings and avg work week numbers to stay the same as well.
The economic reports before Thanksgiving were packed with housing market data and, guess what, they were all extremely positive! Monday saw Existing Home Sales UP 10.1% to an annual rate of 6.10 million, the highest since February 2007. Sales are now UP 20% in the past two months and UP 36% from their January lows. Even better, the supply of existing homes was down to just 7 months, with inventories down to 3.57 million, the lowest level in almost three years. This puts existing homes very close to the 6-month supply level of a healthy housing market. The Case-Shiller 20-City Composite Home Price Index rose 0.3% in September. The index also showed its second consecutive quarterly increase, UP 3.1% for Q3, returning to August 2003 levels.
Our view that risk is back in vogue, noting gold at record highs and stocks up 60%. Systemic risk/asset bubble risk is creeping back into the market as investors are forced into stocks and fixed income spread product. The Fed is on hold for at least another year and they (Fed) will need to see GDP growth of 4% to 5% before they will tap on the brakes (raise interest rates). We’d look for Austin mortgage rates to stay low well into 2010.
Notice how the purchase applications hit a 9 year low and yet interest rates are available at historic lows. Tells you how strapped the consumer is
Prices continue to probe the neckline of a reverse head and shoulders pattern but we will need the market to close at or below 3.45% to keep rally hopes alive. The auction will be key to our short term direction. Notice how the purchase applications hit a 9 year low and yet interest rates are available in the 4.875% range. Tells you how strapped the consumer is.
Initial claims decreased by 20k to 512k, the lowest level since Jan. 3, and more than forecasts of a decrease of only 5k claims
Initial claims decreased by 20k to 512k, the lowest level since Jan. 3, and more than forecasts of a decrease of only 5k claims. Initial claims still remain at a fairly high level, suggesting the job market has a long recovery ahead. On the brighter side, some economists still see positive signs in the recent decreases in the four-week-moving average, and today’s 20k decrease in initial claims also may suggest an improvement in labor conditions.
Currently, the 10 year note is down 20/32’s (yield 3.49%), MBS down 6/32’s, and stocks up 75 points on the big board. Stocks will hold the key as to where Austin mortgage rates go next. The current pattern (stocks) has been for sellers to lean on the market when it rallies (5 out of the last 7 days). We will want to watch the late afternoon trade (from 2:00 to 3:00 cst) to see if they can hold today’s gains. Failure to do so will improve mortgage pricing while a positive close, especially 50 points or more, will put additional pressure on our stuff.