We all knew the bond market rally had to come to an end. The rapid decline in the 10 Year Treasury heading toward the 3.00% mark came to a screeching halt this week. Given the amount of economic data that was released this week, we should not be surprised.
After hitting a low of 3.18% on May 25th, the 10 Year Treasury closed out the month of May at 3.31%. The rapid drop in the treasury yield was due mainly to concerns over the European debt crisis which fueled a flight to quality for investors.
Despite many concerns that remain over international debt, positive news in housing fueled some of the rebound of the 10 YR Treasury this week.
The one question that remains is that although mortgage rates are not tied directly to the movement of the 10YR treasury, many experts were surprised that the drop in mortgage rates did not mirror the drop in the 10YR more closely.
Existing home sales jumped 7.6% which exceeded analyst's expectations. As we all know, the tax credit stimulus plan is assumed to have played a major role in the larger than expected increase. Housing inventories also jumped dramatically by 11.5% to a supply of 8.4 months. The existence of the heavy supply of homes combined with the absence of any housing stimulus, point to the risk of price erosion in the months ahead.
In other housing news, the Case-Shiller House Value Index showed that overall home prices have remained flat for the month of March. It is expected that in April the prices should rise given the consumer's rush to lock in their home purchase prior to the expiration of the 2nd round of economic housing stimulus. Predictions for home prices beyond April are uncertain.
New Home Sales surged 14.5% beating analyst's expectations. In addition, new housing inventory also dropped to a 42 year low which shows that the area of new construction housing is showing signs of rapid recovery. Granted that we have seen major declines in the amount of new construction spending since the start of the recession, the current trend indicates the lure of purchasing new construction is rebounding faster than the existing home market.
In other news, the stock market roller coaster ride continues. After the free fall earlier this week, the stock market regained some of the losses and closed out the week above the 10K mark.
GDP and Jobless claims showed gradual and steady improvement. Although neither number is earth shattering, none the less, they are both showing that the economy is improving at a very gradual pace.
Consumer confidence as well as consumer sentiment both are showing that the American public is feeling better about the economy as well. In addition, many Americans seem to feel that the job market will improve dramatically in about 6 months.
Economic news on tap for next week:
• Tuesday June 1st - Manufacturers Index
• Wednesday June 2nd - Pending Home Sales
• Thursday June 3rd - Jobless Claims
• Friday June 4th - Employment Situation
Have a good weekend,
JJ Mack
916-517-1800 x300
jj@granitefundinggrp.com
Saturday, May 29, 2010
Friday, May 21, 2010
Weekend Mortgage Markey Update - 05/21/2010
The stock market blood bath has been the mortgage industry reprieve. Mortgage rates have been declining rapidly due to the tremendous inflow of investors leaving the market and moving their money into the safe haven of government treasuries.
The concern over the European debt crisis has investors very skittish about remaining in the stock market. Since we are in a world that is so intertwined in business, there is not a single country that can stand on their own if another country or region faces economic challenges.
Only time will tell if the decline in rates will stimulate purchasers to take action. Additionally, in a normal market with a rate decline like this, refinances would increase substantially. However, millions of eligible borrowers have already taken advantage of the previous low rates so nobody is sure how big the pool of remaining homeowners is who can still qualify to refinance.
Housing starts came in higher than expected. Builders are cautiously moving ahead with construction and are showing a willingness to begin building more homes. Many builders still remain concerned about how the termination of the tax credit will impact housing purchases. Unfortunately, we will not really know the answer to this question for at least another 30 days.
One of the driving factors in the mortgage rate decline is that the Producer Price Index and the Consumer Price Index both indicate that inflation is well under control. Both indexes unexpectedly declined in the last month. The bulk of the decline was driven by the decrease in energy costs. (I don't know about you, but I have not seen the decline in energy prices reflected at the gas pump. However, don't worry, in the next quarter the oil companies will show record profits once again and then Congress will call them up to Capitol Hill and slap them on the wrist for not passing any savings on to the consumers. We have seen this before and we will see it again)
Jobless claims came in unexpectedly higher this past week. In addition, last week's numbers were revised up by 2000 which indicates that new claims of unemployment are still a concern. On the bright side of the unemployment front, continuing jobless claims have been declining slowly and gradually. The big question is: "Is the decline due to people getting jobs, or because people are falling off of the unemployment rolls because they are no longer eligible to receive benefits?
After a fairly quiet week of economic reports, next week stands to be the exact opposite. A number of important housing reports are coming out as well as the consumers view on how the economy is doing. Normally I would say that these reports could have a major impact on rates and the stock market however given how everything in the U.S. markets has been primarily been driven by the concerns over Europe, it is hard to guess as to what impact the U.S. reports will have on the markets.
Economic reports on tap for next week are:
• Monday May 24th - Existing Home Sales
• Tuesday May 25th - Case-Shiller Home Value Index & Consumer Confidence
• Wednesday May 26th - New Home Sales
• Thursday May 27th - GDP & Jobless Claims
• Friday May 28th - Consumer Sentiment
Your Mortgage Professional,
JJ Mack
916-517-1800 x300
The concern over the European debt crisis has investors very skittish about remaining in the stock market. Since we are in a world that is so intertwined in business, there is not a single country that can stand on their own if another country or region faces economic challenges.
Only time will tell if the decline in rates will stimulate purchasers to take action. Additionally, in a normal market with a rate decline like this, refinances would increase substantially. However, millions of eligible borrowers have already taken advantage of the previous low rates so nobody is sure how big the pool of remaining homeowners is who can still qualify to refinance.
Housing starts came in higher than expected. Builders are cautiously moving ahead with construction and are showing a willingness to begin building more homes. Many builders still remain concerned about how the termination of the tax credit will impact housing purchases. Unfortunately, we will not really know the answer to this question for at least another 30 days.
One of the driving factors in the mortgage rate decline is that the Producer Price Index and the Consumer Price Index both indicate that inflation is well under control. Both indexes unexpectedly declined in the last month. The bulk of the decline was driven by the decrease in energy costs. (I don't know about you, but I have not seen the decline in energy prices reflected at the gas pump. However, don't worry, in the next quarter the oil companies will show record profits once again and then Congress will call them up to Capitol Hill and slap them on the wrist for not passing any savings on to the consumers. We have seen this before and we will see it again)
Jobless claims came in unexpectedly higher this past week. In addition, last week's numbers were revised up by 2000 which indicates that new claims of unemployment are still a concern. On the bright side of the unemployment front, continuing jobless claims have been declining slowly and gradually. The big question is: "Is the decline due to people getting jobs, or because people are falling off of the unemployment rolls because they are no longer eligible to receive benefits?
After a fairly quiet week of economic reports, next week stands to be the exact opposite. A number of important housing reports are coming out as well as the consumers view on how the economy is doing. Normally I would say that these reports could have a major impact on rates and the stock market however given how everything in the U.S. markets has been primarily been driven by the concerns over Europe, it is hard to guess as to what impact the U.S. reports will have on the markets.
Economic reports on tap for next week are:
• Monday May 24th - Existing Home Sales
• Tuesday May 25th - Case-Shiller Home Value Index & Consumer Confidence
• Wednesday May 26th - New Home Sales
• Thursday May 27th - GDP & Jobless Claims
• Friday May 28th - Consumer Sentiment
Your Mortgage Professional,
JJ Mack
916-517-1800 x300
Friday, May 14, 2010
My Mortgage Weekend Update - 05/14/2010
Rates are Falling - YIPPEE!!! - For months experts speculated that when the government exited the mortgage backed securities re-purchase program in March, mortgage rates would rise from ½ to 1%. Well the experts were clueless. (To be honest with you, I thought rates were going to rise as well, shows what I know right?)
It appears that global uncertainty, especially in Europe, is keeping demand for U.S. Treasuries high. Until there is a clear picture on exactly how the European debt crisis will play out, it seems that the U.S. Treasuries is the place that investors want to keep their money. The stock market this week has been taking it on the chin badly in that many investors are fleeing the stock market for the safe haven of government treasuries.
Mortgage rates have dropped for four straight weeks and the average for a 30 year fixed rate loan is now 4.95%. The big question is now that the tax credit has ended, are the lower mortgage rates enough to keep demand for housing strong.
New actions on foreclosures seem to be hitting a plateau. Finally there may be some light at the end of the tunnel in which the number of foreclosure actions seems to no longer be increasing. However, the number of bank repossessions has hit a new high and the odds of that continuing for the coming months remains likely.
The amount of inventory of bank owned properties continues to grow rapidly. For better or worse, the banks are very slow to release these properties for sale in the market as to not create an oversupply of housing inventory which would result in driving down house values rapidly. It is expected that the banks will continue this slow drip of properties for sale to keep housing prices somewhat stable.
Despite problems in Europe, many other areas of the U.S. economy are showing steady signs of improvement. Retail Sales continue to increase month over month as well as the demand for high ticket luxury items is rebounding as well. (I guess somebody is spending money)
Industrial Production is increasing rapidly. Although most of the increase is for the purchase of manufacturing equipment, the increase in spending points to the fact that many manufacturers are gearing up for an expected increase in consumer spending later this year.
Jobless claims continue to show small signs of improvement. Once again this week there was a slight drop in new unemployment claims. Although it is good news to see claims falling, concern remains that the number of existing unemployed is increasing. This rising trend shows that companies are still very slow to hire new staff.
Economic reports on tap for next week are:
• Tuesday May 18th - Housing Starts
• Tuesday May 18th - Producer Price Index
• Wednesday May 19th - Consumer Price Index
• Thursday May 20th - Jobless Claims
Your Mortgage Professional for life,
JJ Mack
Granite Funding Group
916-517-1800 x300
It appears that global uncertainty, especially in Europe, is keeping demand for U.S. Treasuries high. Until there is a clear picture on exactly how the European debt crisis will play out, it seems that the U.S. Treasuries is the place that investors want to keep their money. The stock market this week has been taking it on the chin badly in that many investors are fleeing the stock market for the safe haven of government treasuries.
Mortgage rates have dropped for four straight weeks and the average for a 30 year fixed rate loan is now 4.95%. The big question is now that the tax credit has ended, are the lower mortgage rates enough to keep demand for housing strong.
New actions on foreclosures seem to be hitting a plateau. Finally there may be some light at the end of the tunnel in which the number of foreclosure actions seems to no longer be increasing. However, the number of bank repossessions has hit a new high and the odds of that continuing for the coming months remains likely.
The amount of inventory of bank owned properties continues to grow rapidly. For better or worse, the banks are very slow to release these properties for sale in the market as to not create an oversupply of housing inventory which would result in driving down house values rapidly. It is expected that the banks will continue this slow drip of properties for sale to keep housing prices somewhat stable.
Despite problems in Europe, many other areas of the U.S. economy are showing steady signs of improvement. Retail Sales continue to increase month over month as well as the demand for high ticket luxury items is rebounding as well. (I guess somebody is spending money)
Industrial Production is increasing rapidly. Although most of the increase is for the purchase of manufacturing equipment, the increase in spending points to the fact that many manufacturers are gearing up for an expected increase in consumer spending later this year.
Jobless claims continue to show small signs of improvement. Once again this week there was a slight drop in new unemployment claims. Although it is good news to see claims falling, concern remains that the number of existing unemployed is increasing. This rising trend shows that companies are still very slow to hire new staff.
Economic reports on tap for next week are:
• Tuesday May 18th - Housing Starts
• Tuesday May 18th - Producer Price Index
• Wednesday May 19th - Consumer Price Index
• Thursday May 20th - Jobless Claims
Your Mortgage Professional for life,
JJ Mack
Granite Funding Group
916-517-1800 x300
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