William and Kate were married this morning. They kissed on the balcony for all to see, so now I, along with the estimated 2 billion people that watched can now resume normal life once again. Oops, no we can't...I forgot that the media is going to video their every move of their Honeymoon, and what they can't film, they will make up.
There are increasing indications that the economy is on the path to sustained recovery. It may not be at an earth shattering pace, but evidence certainly points toward an improving economy. Of course there will continue to be set backs every so often, but the recovery trend seems to have really taken hold.
New Home Sales are starting to show signs of life. The increase of 30,000 units over last month was more than expected. Although the pace of new home sales is still at historic lows, the trend of improvement seems to be starting. As promising as this report is, it is important not to put much weight on the new home sale report for the simple fact that until existing home inventory declines significantly, home buyers will continue to gravitate towards existing home purchases. Existing homes tend to be more affordable due the fact that short sales and foreclosures make up almost 40% of all sales.
Existing Home Sales, which is the key to reducing existing housing inventory, showed a nice 5.1% jump for the month of March. The National Association of Realtors attributes the jump to improved job creation and rising rents. More and more renters are starting to realize that for a few dollars more per month, they can own a home instead of paying someone else's mortgage by renting.
The Mortgage Bankers Association reported a 13.6% decline in purchase applications for the prior week. Although this decline may seem significant, it is important to remember that the recent increases in mortgage purchase applications was mainly driven by home buyers trying to apply for their loan prior to the increase in FHA Insurance Premiums which took effect on April 18th. Now that the premiums have taken effect, we should see mortgage applications numbers moderate.
Mortgage rates have been declining again as concerns about significant inflation have subsided. The FOMC reiterated that the concern about inflation has decreased somewhat in their recent meeting as the FOMC continues to use "extended period" in their language in regard to keeping rates low. In fact for the first time in many months, the entire committee was in agreement about their assessment that the economy will continue to grow at a moderate pace.
Once again the American public is showing its resolve in that consumer spending habits have not been changing as radically as expected due to rising gas prices. Like anything else, if you experience it enough, you get used to it and accept it. (By the way Exxon reported an 11 billion dollar first quarter profit but yet they said that they don't make much money on gasoline. Please wish me a happy birthday because obviously Exxon thinks I was born yesterday.)
Reports due out next week are:
• Monday May 2nd - ISM Manufacturing Index & Construction Spending
• Tuesday May 3rd - Factory Orders
• Wednesday May 4th - MBA Mortgage Applications & ADP Employment Report
• Thursday May 5thth - First Time Jobless Claims
• Friday May 6th - National Unemployment

Your Mortgage Consultant,

JJ Mack
916-517-1800