It is such a great day for writing my newsletter. We are heading into the July 4th holiday weekend and, believe it or not, I did not have to search hard to find good economic news to write about this week.
Now that the Greece Debt Crisis seems to be resolved, Wall Street is loving it. This week alone, the Dow rose over 550 points as of Friday morning. In fact this week is responsible for almost all of the gains in the market for the entire first half of the year.
Housing continues to send mixed signals as to which direction it is heading, however there seems to be a light shining on it for the moment. Although growth in mortgage applications has been virtually stagnant for both purchase and refinances, that does not mean there is no good news in housing.
The Case-Shiller House Value Index reported the first increase in home prices in 8 months. Although the gain is minimal, breaking the trend of house price declines is a very important milestone. Sometimes it is something as little as this that can move fence sitting buyers to take action so as not to miss out on the bottom of the market.
None of us know if we have hit bottom, however the recent increase in mortgage rates combined with the improvement in home values can have a strong psychological impact on the housing market. Even the media is finally beginning to discuss housing in a positive way. (It is a miracle)
As I mentioned in last week's newsletter, the National Association of Realtors alluded to the fact that this week there would be good news about housing. Well NAR did not let us down as they reported that Pending Homes Sales for the month of May jumped 8.2%, which is more than any so called experts had expected.
The other major change to housing is that with all of the positive momentum in the stock market, many investors are taking their money out of government bonds and dumping them into the stock market. When investors sell bonds, that causes mortgage rates to rise. In the last week we have seen mortgage rates jump almost ¼% which can be a positive or negative for the housing market.
The positive is that fence sitting homebuyer may jump into the market if they perceive that mortgage rates are on the way up. The potential negative to housing is that qualifying for a mortgage is challenging enough. Higher rates reduce home affordability which can once again have a negative impact on values in the future.
I personally am not concerned about rates at this time in that one week does not set a pattern for any direction on housing or mortgage rates.
Next week the markets will turn their focus to employment. Between the ADP Employment Report and the National Unemployment numbers to be released on Friday, these reports will warrant the attention of most investors.
Outside of the major employment reports, there is not much activity on tap for next week. Additionally, this is a big vacation week so although the markets can move radically, it can easily be driven by just a few investors because of the expected low trading volume.
Economic Reports on tap for next week:
o Wednesday June 6th -MBA Mortgage Applications and ADP Employment Report
o Thursday July 7th - First Time Jobless Claims
o Friday July 8th - National Unemployment
Your Mortgage Consultant,
JJ Mack
916-517-1800
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