The week has been a reprieve from the crazy roller coaster ride we have been experiencing over the last month or so. The reality is that movement in the stock market of 100 to 200 points in a day, or a few hours for that matter, is now being seen as somewhat common place. (It is amazing what used to be crazy, is now the new normal)
Overall the economic news this past week has been quite positive in nature. Construction spending rose 2.7% in April from the previous month. What is especially optimistic about this increase is that the rise was driven primarily by investment in building single family residential properties.
Additionally, pending home sales in April rose another 6% from the 7.1% increase in March. The mad run for people to purchase prior to the tax credit expiration on April 30th seems to be the driving force behind the large increases. As always, not to be negative, we need to see what the numbers will be like for May. Many experts are predicting that we will see a reversal of the upward trend however that is to be expected.
Despite mortgage rates remaining below 5%, the Mortgage Bankers Association reported that purchase loan applications have declined for the 4th straight month. (Can anyone say "tax credit expiration"?)
Unemployment continues to remain an issue despite the fact that the national unemployment rate dropped from 9.9% to 9.7%. Although the drop is positive, the reality is that the bulk of the job additions for the month were related to the temporary hiring of 411,000 Census workers.
Outside of employment, there is economic news to be optimistic about that continues to point to slow and gradual growth of the economy. The increase in the ISM Manufacturing Index shows that employment and production in the manufacturing sector continues to grow at a healthy pace. In addition, factory orders continue to grow as well for both durable and non-durable goods orders at a strong rate showing that consumers and businesses are slowly starting to spend.
Economic news and activity next week has the potential to impact mortgage rates significantly. The 10YR Treasury Note Auction on Wednesday will shed light if investors are still seeking the quality and security of government treasuries, or if the appetite for stocks is returning - stay tuned!
News on tap for next week:
• Wednesday June 9th - Mortgage Bankers Association Purchase Applications
• Wednesday June 9th - 10 Year Note Auction
• Thursday June 10th - Jobless Claims
• Friday June 11th - Retail Sales
• Friday June 11th - Consumer Sentiment
Your Mortgage Consultant,
JJ Mack
916-517-1800
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