New home sales sink 11 percent
by Associated Press
Originally printed at http://www.katu.com/news/business/79992047.html
WASHINGTON (AP) - Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky and heavily dependent on the generosity of Uncle Sam.
The 11 percent slump from October's pace shows that consumers are taking their time following an extension of a deadline for first-time buyers to qualify for a tax credit. The incentive was set to expire at the end of November, but Congress pushed back the date to April 30 and expanded the program to include current homeowners who relocate.
"They don't have to act today," said David Crowe, chief economist at the National Association of Home Builders, who called the results "pretty awful."
New home sales data, released Wednesday, are a better indicator of future real estate activity than sales of previously occupied homes, but capture a smaller slice of the market. The new home figures tally sales agreements signed in November, while home resale numbers reflect contracts signed over the summer that were completed the same month.
While buyers of previously occupied homes were rushing to close deals by the end of November, buyers of new homes knew early in the month they could shop longer because of the extension. Though completed home resales rose 7 percent in November, most economists expect sales to decline during the winter months.
The results show the how reliant the housing market has been on government assistance. About 2 million homebuyers have taken advantage of the tax credit of up to $8,000 for first-time buyers, the National Association of Realtors estimated this week. Another 2.4 million are expected to either tap that subsidy or another one for up to $6,500 for current homeowners.
The Federal Reserve is also snapping up $1.25 trillion in mortgage-backed securities to help keep interest rates low, which makes payments more affordable.
Despite the poor showing from new home buyers, the housing market has been recovering from the worst downturn in decades, largely due to a massive infusion of federal assistance. New home sales are up 8 percent from the bottom in January but 74 percent below the peak in July 2005. Compared with November last year, sales were off 9 percent.
The Commerce Department said new home sales hit a seasonally adjusted annual rate of 355,000 last month, off from a downwardly revised 400,000 pace in October. Economists surveyed by Thomson Reuters had expected 440,000.
Builders clearly saw the drop coming: the National Association of Home Builders said last week its index of industry confidence fell to the lowest level since June. The trade group blamed high unemployment and a slow economic recovery that are stifling demand.
The industry has cut back on construction in the face of weak demand. Many builders also complain they can't get financing, so their bulldozers are idle. But that has slashed inventory to healthier levels.
Builders had 235,000 new homes for sale nationwide at the end of November, the lowest inventory level since April 1971. Though at the current weak sales pace, that still represents nearly eight months of supply.
Since the housing bubble burst, new home sales have represented a dwindling share of the overall market. New home sales accounted for just 5 percent of total sales last month, down from a peak of more than 16 percent in summer 2005.
Buyers have been able to find better prices searching for previously occupied homes, especially among foreclosed properties, which made up about a third of sales last completed month.
Builders have tried to compete. The median sales price of $217,400 was down nearly 2 percent from $221,600 a year earlier, but up about 4 percent from October's level of $209,400.
"There's only so much of a haircut (on price) they can give," said Ian Pollick, an economics strategist with TD Securities.
The only strong region was the Midwest, where sales rose 21 percent. Sales fell by 21 percent in the South, 9 percent in the West and 3 percent in the Northeast.
Robert Toll, CEO of luxury builder Toll Brothers Inc. said earlier this month demand has been "choppy" after several strong months in the spring and summer.
"You just have to bite the finger, be patient, and wait until you see what comes out in the latter part of January, all of February and in the early part of March," he said.
Wednesday, December 23, 2009
RateWatch 12-23-2009 Opening Graph
I switched to the 3 month graph today so you can see that mortgage backed bonds are trading at their lowest level in at least 3 months. They are also trading below the 200 day moving average (pink line). Things have sure changed since Thanksgiving. I expect a correction up into the 100.8 or higher level after things settle down after the holidays. Durable goods and jobless claims will be released tomorrow.
Tuesday, December 22, 2009
RateWatch 12-22-2009 Opening Graph
The price of mortgage backed bonds has dropped off of the table which means that mortgage rates are up. They are now trading way below the 200 day moving average (pink line). Hopefully we will see a correction after christmas that will get us back up over the 200 day moving average. Merry Christmas!
Daily Commentary by Larry Baer 12/22/2009
Commentary: It is highly likely thin trading conditions ahead of the Christmas Holiday is far more of factor with respect to the sell-off in the mortgage market today than is the economic news.
The Commerce Department reported earlier this morning that the economy grew at a much slower pace than previously thought in the third quarter. The final estimate of third-quarter Gross Domestic Product showed growth slowed to a 2.2% annualized pace instead of the 2.8% reported last month. Under normal market conditions such news would typically support steady to perhaps fractionally lower mortgage interest rates. Not today. I strongly suspect calmer, cooler heads were quick to note that almost all of the growth in the third-quarter was boosted by government stimulus programs, including the popular cash for clunkers and tax credits for first-time home buyers. Debate will continue to rage over the sustainability of the recovery once government support wanes. The probabilities are high those betting on a robust acceleration of economic growth in the fourth-quarter of 2009 and beyond will likely discover they have been far too optimistic once Uncle Sam begins to turn his financial tap off. The knee-bone to the shin-bone connection here goes like this - slowing economic growth tends to reduce the demand for capital which in-turn tends to push interest rates down - not up.
In other news of the day, the National Association of Realtors said sales of existing homes rose a stronger-than-expected 7.4% last month, to the highest level in more than two years. Lower interest rates, declining property values and homebuyer tax credits are all credited with contributing to the November sales growth. The big question regarding the sustainability of the recovery in the housing sector still swirls around labor market conditions. As long as income growth remains weak and credit remains tight a major sustained rebound for new and existing home sales will be unlikely.
Be patient . be disciplined . and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
The Commerce Department reported earlier this morning that the economy grew at a much slower pace than previously thought in the third quarter. The final estimate of third-quarter Gross Domestic Product showed growth slowed to a 2.2% annualized pace instead of the 2.8% reported last month. Under normal market conditions such news would typically support steady to perhaps fractionally lower mortgage interest rates. Not today. I strongly suspect calmer, cooler heads were quick to note that almost all of the growth in the third-quarter was boosted by government stimulus programs, including the popular cash for clunkers and tax credits for first-time home buyers. Debate will continue to rage over the sustainability of the recovery once government support wanes. The probabilities are high those betting on a robust acceleration of economic growth in the fourth-quarter of 2009 and beyond will likely discover they have been far too optimistic once Uncle Sam begins to turn his financial tap off. The knee-bone to the shin-bone connection here goes like this - slowing economic growth tends to reduce the demand for capital which in-turn tends to push interest rates down - not up.
In other news of the day, the National Association of Realtors said sales of existing homes rose a stronger-than-expected 7.4% last month, to the highest level in more than two years. Lower interest rates, declining property values and homebuyer tax credits are all credited with contributing to the November sales growth. The big question regarding the sustainability of the recovery in the housing sector still swirls around labor market conditions. As long as income growth remains weak and credit remains tight a major sustained rebound for new and existing home sales will be unlikely.
Be patient . be disciplined . and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Monday, December 14, 2009
New Seller Buydown Video
I created a new video designed to explain the Seller Buydown Strategy to Real Estate Professionals in more detail. If you are a Real Estate Professional this strategy will help you qualify more buyers for your listings, and it will help your buyers buy more house with the same income. Take a few minutes to watch this video by clicking on the link at the bottom of my blog page under New Seller Buydown Video. What do you have to loose? Watch this video today!
RateWatch 12-14-2009 Opening Graph
The Market Opened up this morning and is continuing on an upward trend. That means that mortgage rates should be lower than Friday afternoon. Wednesday is the big news day this week.
Friday, December 11, 2009
Daily Commentary by Larry Baer 12/11/2009
Commentary: It appears many mortgage investors are fretting far more strenuously over the disappointing auctions of 10-year and 30-year debt obligations than they are over a stronger-than-expected reading for November Retail Sales.
There are some analysts aggressively trying to fan worries that the last two Treasury auctions of the week drew less than stellar demand because -- U.S. government debt obligations - seen as the world's safest securities - are in danger of losing their coveted AAA rating. While such an event is certainly possible - it is not very probable and there is a major difference between those two conditions. It is possible I could become an over-forty underwear model for Calvin Klein - but the probably that such an event might occur exceeds my ability to imagine - much less describe. I think it is much more likely that weaker-than-expected demand for Wednesday's $21 billion of 10-year notes and Thursday's $13 billion of 30-year bonds is more a function of year-end investor preference for either cash or very short-term government debt obligations. It is far more likely we are dealing with a seasonal condition with respect to demand for these longer-dated securities - rather than the effects of a major shift in investor sentiment.
Selling pressure in the mortgage market surged this morning driven by a report from the Commerce Department indicating November Retail Sales increased 1.3%, its largest advance since August, after rising 1.1% in October. It was the second straight monthly gain for overall retail sales and handily beat market expectations for a 0.7% gain. Compared to last year, overall retail sales were up 1.9%, the first year-on-year gain since August 2008. Excluding autos, retails sales increased 1.2% last month, the largest increase since January.
As the day progresses I look for calmer, cooler heads to conclude that a significant amount of the surge in the pace of November sales was created through heavy discounting by retailers attempting to get a head-start on the holiday season. There is still a big question mark attached to the retail sales data regarding the sustainability of November's solid performance. Fundamentally, conditions remain poor for consumers. Wage income is more than 3.0% below its year-ago level and there is little chance of improvement in that figure until the labor sector once again begins to produce more jobs than it looses on a month-over-month basis. In a nutshell - in my judgment it is unlikely this report is as threatening to the prospects of steady to perhaps fractionally lower mortgage interest rates as many "talking-heads" are currently trying to make it out to be.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
There are some analysts aggressively trying to fan worries that the last two Treasury auctions of the week drew less than stellar demand because -- U.S. government debt obligations - seen as the world's safest securities - are in danger of losing their coveted AAA rating. While such an event is certainly possible - it is not very probable and there is a major difference between those two conditions. It is possible I could become an over-forty underwear model for Calvin Klein - but the probably that such an event might occur exceeds my ability to imagine - much less describe. I think it is much more likely that weaker-than-expected demand for Wednesday's $21 billion of 10-year notes and Thursday's $13 billion of 30-year bonds is more a function of year-end investor preference for either cash or very short-term government debt obligations. It is far more likely we are dealing with a seasonal condition with respect to demand for these longer-dated securities - rather than the effects of a major shift in investor sentiment.
Selling pressure in the mortgage market surged this morning driven by a report from the Commerce Department indicating November Retail Sales increased 1.3%, its largest advance since August, after rising 1.1% in October. It was the second straight monthly gain for overall retail sales and handily beat market expectations for a 0.7% gain. Compared to last year, overall retail sales were up 1.9%, the first year-on-year gain since August 2008. Excluding autos, retails sales increased 1.2% last month, the largest increase since January.
As the day progresses I look for calmer, cooler heads to conclude that a significant amount of the surge in the pace of November sales was created through heavy discounting by retailers attempting to get a head-start on the holiday season. There is still a big question mark attached to the retail sales data regarding the sustainability of November's solid performance. Fundamentally, conditions remain poor for consumers. Wage income is more than 3.0% below its year-ago level and there is little chance of improvement in that figure until the labor sector once again begins to produce more jobs than it looses on a month-over-month basis. In a nutshell - in my judgment it is unlikely this report is as threatening to the prospects of steady to perhaps fractionally lower mortgage interest rates as many "talking-heads" are currently trying to make it out to be.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
RateWatch 12-11-2009 Opening Graphs
The price of MBB (Mortgage Backed Bonds) opened way down for the 3rd day in a row. While I think this is a troubling trend, I think we are near the bottom of the correction because we are now trading below the 100 day moving average as depicted by the yellow line in the bottom graph (30 day price window) and the 200 day moving average depicted by the pink line in the top graph (1 year price window). Mortgage rates are currently up, but it is my hope that patience will prevail and we will see a market correction which will bring rates down some.
Thursday, December 10, 2009
Daily Commentary by Larry Baer 12/10/2009
SHORT-TERM TREND (10 days or less). Favors higher rates and lower investor prices.
LONG-TERM TREND (11 days or more) Favors higher rates and lower investor prices.
Commentary: Mortgage investors are allowing mortgage interest rates to drift fractionally higher in this morning's early going.
Uncle Sam will be in the credit market today looking to borrow $13 billion in the form of 30-year bonds. Yesterday's $21 billion 10-year note offering did not find as strong as demand as many had expected -- causing the Treasury Department to "sweeten-the-pot" by offering slightly higher yields in order to attract the required capital. Many now believe the yield on today's 30-year bond will likely finish the day higher than where it started. If so, look for mortgage interest rates to creep higher as well. I will post an update on the 30-year bond auction results at soon as possible following the conclusion of bidding at 1:00 p.m. ET.
This morning's weekly initial jobless claims report for the week ended December 5th drew little more than a passing glance from most mortgage investors. Initial claims for state unemployment insurance rose 17,000 to 474,000 last week. A Labor Department spokesman said claims had been bumped by seasonal industries laying people off and by applications that had been held back during the Thanksgiving holiday week. Even though claims rose last week, applications for unemployment benefits have dropped from lofty levels in March - but until claims fall above the 400,000 level -- it is unlikely this data series will exert much, if any upward pressure on mortgage interest rates.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Favors higher rates and lower investor prices.
Commentary: Mortgage investors are allowing mortgage interest rates to drift fractionally higher in this morning's early going.
Uncle Sam will be in the credit market today looking to borrow $13 billion in the form of 30-year bonds. Yesterday's $21 billion 10-year note offering did not find as strong as demand as many had expected -- causing the Treasury Department to "sweeten-the-pot" by offering slightly higher yields in order to attract the required capital. Many now believe the yield on today's 30-year bond will likely finish the day higher than where it started. If so, look for mortgage interest rates to creep higher as well. I will post an update on the 30-year bond auction results at soon as possible following the conclusion of bidding at 1:00 p.m. ET.
This morning's weekly initial jobless claims report for the week ended December 5th drew little more than a passing glance from most mortgage investors. Initial claims for state unemployment insurance rose 17,000 to 474,000 last week. A Labor Department spokesman said claims had been bumped by seasonal industries laying people off and by applications that had been held back during the Thanksgiving holiday week. Even though claims rose last week, applications for unemployment benefits have dropped from lofty levels in March - but until claims fall above the 400,000 level -- it is unlikely this data series will exert much, if any upward pressure on mortgage interest rates.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
RateWatch 12-10-2009 Opening Graph
The Fannie Mae 4.0% Coupon opened down for the third day in a row. If today's 30 year bond auction goes well, look for the price to move back up between the 10 day average (blue line) and the 30 day average(orange line). If the bond auction does not go well the price will drop and mortgage interest rates will go up.
Wednesday, December 9, 2009
RateWatch 12-9-2009 Opening Graph
The Fannie Mae 30 year 4.0% coupon opened slightly down this morning. I think we are into a new trading range between the yellow line (99.00 30 day moving average) and the blue line (99.6 10 day moving average). I think that if we are down near the blue line you are probably safe to float and if we are up near the blue line you should take the money and run (lock).
Tuesday, December 8, 2009
RateWatch 12-8-2009 Closing Graph
The 4% coupon bond opened at 99.65 and closed at 99.28 down 35 basis points for the day. Tomorrow morning's mortgage rates may be up a little bit.
RateWatch 12-8-2009 Opening Graph
The Mortgage bond market opened up which is a good thing, but bonds are now selling off and the price is dropping. If you have a transaction that is closing soon, I would lock.
Daily Commentary by Larry Baer 12/8/2009
SHORT-TERM TREND (10 days or less). Tilted slightly in favor of lower rates and higher investor prices.
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: Global stock markets fell hard earlier today as pessimistic news reports trumpeting details of a resurgent credit crisis in Dubai and a major downgrade in the sovereign debt of Greece sent foreign stock investors scrambling to park capital in the relative safe haven of U.S. debt obligations and mortgage-backed securities. This "flight-to-quality" buying spree in the government debt and mortgage market is a welcome but likely temporary development.
Uncle Sam will be in the credit markets today looking to sell a stack of 3-year notes worth $40 billion. The auction will conclude at 1:00 p.m. ET and is expected to be well bid - hopefully setting the stage for an equally well bid $21 billion 10-year note sale tomorrow and a $13 billion 30-year bond offering on Thursday. Look for today's auction to exert little, if any meaningful influence on the trend trajectory of mortgage interest rates.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: Global stock markets fell hard earlier today as pessimistic news reports trumpeting details of a resurgent credit crisis in Dubai and a major downgrade in the sovereign debt of Greece sent foreign stock investors scrambling to park capital in the relative safe haven of U.S. debt obligations and mortgage-backed securities. This "flight-to-quality" buying spree in the government debt and mortgage market is a welcome but likely temporary development.
Uncle Sam will be in the credit markets today looking to sell a stack of 3-year notes worth $40 billion. The auction will conclude at 1:00 p.m. ET and is expected to be well bid - hopefully setting the stage for an equally well bid $21 billion 10-year note sale tomorrow and a $13 billion 30-year bond offering on Thursday. Look for today's auction to exert little, if any meaningful influence on the trend trajectory of mortgage interest rates.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Monday, December 7, 2009
RateWatch 12-7-2009 Closing Graph
The Mortgage bond market closed up 35 basis points today. Hopefully we will continue to see an upward adjustment which means better mortgage rates tomorrow morning than we had today.
RateWatch 12-7-2009 Opening Graph
The Mortgage Bond market opened up from Friday's close. That means that rates should be down slightly from Friday evening. Look for rates to fluctuate in this area for a short while.
Daily Commentary by Larry Baer 12/7/2009
SHORT-TERM TREND (10 days or less). Favors higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: With nothing on the economic calendar to stir trading activity - mortgage investors are generally marking time ahead of the three-part, $71 billion Treasury debt auction scheduled for Tuesday through Thursday. Believe-it-or-not last week's heavy sell-off in the government debt market has probably limited the upward pressure this event might have otherwise exerted on mortgage interest rates over the course of the next five business days.
Mortgage investors will be intently watching the Treasury auction results for any sign that a change in market psychology occurred in conjunction with last Friday's dramatically improved labor market story - or for an indication skepticism about the sustainability of the budding economic recovery remains high among credit market participants.
Given strong seasonal demand and the sharp price markdowns of last week, I think there is a reasonable chance overall demand for this week's government debt offerings will be decent. Should my assessment prove accurate, the Treasury auctions will tend to be supportive of at least steady mortgage interest rates - with an outside chance rates will find the traction necessary to move to fractionally lower levels.
The economic release of most interest to mortgage investors - the November Retail Sales report - does not arrive until Friday.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: With nothing on the economic calendar to stir trading activity - mortgage investors are generally marking time ahead of the three-part, $71 billion Treasury debt auction scheduled for Tuesday through Thursday. Believe-it-or-not last week's heavy sell-off in the government debt market has probably limited the upward pressure this event might have otherwise exerted on mortgage interest rates over the course of the next five business days.
Mortgage investors will be intently watching the Treasury auction results for any sign that a change in market psychology occurred in conjunction with last Friday's dramatically improved labor market story - or for an indication skepticism about the sustainability of the budding economic recovery remains high among credit market participants.
Given strong seasonal demand and the sharp price markdowns of last week, I think there is a reasonable chance overall demand for this week's government debt offerings will be decent. Should my assessment prove accurate, the Treasury auctions will tend to be supportive of at least steady mortgage interest rates - with an outside chance rates will find the traction necessary to move to fractionally lower levels.
The economic release of most interest to mortgage investors - the November Retail Sales report - does not arrive until Friday.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Market Analysis
Oceans of Uncertainty
With Dubai World’s problems fading from the headlines like the latest scandal in the tabloids, the markets began this past week by regaining the strength they gave away briefly in the face of Dubai’s announcement the prior week that it would skip its massive debt payment. By Tuesday evening, the Dow Jones Industrial Average had already put back on all the weight it had briefly lost, making its way to 10,471.58.
Though we had good economic data smiling on the real estate market—a strong Pending Home Sales Index and a report of stability in construction spending—Treasury securities began to rise slightly more in anticipation of Friday’s employment report for November than because of numbers already reported in other areas. Still, the Fed issued its beige book on Wednesday and it told a tale of continuing recovery, which gratified the markets but—since good news is bad news for interest rates—took interest rates a bit higher.
The DJIA fell 0.8% on Thursday and interest rates edged very slightly higher as investors awaited the employment news. What is important here, perhaps, is that more analysts expected the data either to look very much as it did last month, or to look worse. Many analysts wrote that a higher unemployment rate wouldn’t surprise them at all.
Thus, when the unemployment rate dropped from 10.2% to 10%, most analysts and investors were surprised—and surprise is what moves markets. The slimming down of job losses, from 190,000 in October to 11,000 in November, also took the markets by surprise.
Nonetheless, Friday’s gain on the DJIA after the announcement only amounted to 22 points, and the 10-year Treasury was only up about 11 basis points. This is extraordinary, given the relative strength of the employment news. What will it take to produce solid moves—up or down—in these indices?
So we moved from analysts’ declarations that this might be the turning point for employment and therefore the moment when the recovery becomes a solid reality…to yet another fading event on Wall Street.
Still, there were two major moves that did not fizzle at all. The dollar gained greatly on the employment data, as the world seemed to sense a stronger American recovery in the air, and the price of an ounce of gold plunged. As for the latter, many economists (whom I tend to respect) have been increasingly skeptical about the recent reverence for gold. The argument has been that gold has much further to climb because, adjusted for inflation, its price is well below the last peak in the 1980s. This reasoning does not convince them—or me. Gold may well continue to demonstrate weakness now, especially if our recovery continues to gain strength. It is well worth watching.
And strength in our recovery is what both of these indicators seem to suggest. They only tell a small part of the overall story, though. The spread between the 10-year note’s yield and the average 30-year mortgage rate has narrowed enough to make one suspect that the next move for mortgage rates is up. But the markets are telling us nothing very clearly. Best to wait a few days before hazarding a guess about where the markets will go next.
I would not, in any case, expect interest rates to decline at all significantly any time soon.
by: Bill Fisher
With Dubai World’s problems fading from the headlines like the latest scandal in the tabloids, the markets began this past week by regaining the strength they gave away briefly in the face of Dubai’s announcement the prior week that it would skip its massive debt payment. By Tuesday evening, the Dow Jones Industrial Average had already put back on all the weight it had briefly lost, making its way to 10,471.58.
Though we had good economic data smiling on the real estate market—a strong Pending Home Sales Index and a report of stability in construction spending—Treasury securities began to rise slightly more in anticipation of Friday’s employment report for November than because of numbers already reported in other areas. Still, the Fed issued its beige book on Wednesday and it told a tale of continuing recovery, which gratified the markets but—since good news is bad news for interest rates—took interest rates a bit higher.
The DJIA fell 0.8% on Thursday and interest rates edged very slightly higher as investors awaited the employment news. What is important here, perhaps, is that more analysts expected the data either to look very much as it did last month, or to look worse. Many analysts wrote that a higher unemployment rate wouldn’t surprise them at all.
Thus, when the unemployment rate dropped from 10.2% to 10%, most analysts and investors were surprised—and surprise is what moves markets. The slimming down of job losses, from 190,000 in October to 11,000 in November, also took the markets by surprise.
Nonetheless, Friday’s gain on the DJIA after the announcement only amounted to 22 points, and the 10-year Treasury was only up about 11 basis points. This is extraordinary, given the relative strength of the employment news. What will it take to produce solid moves—up or down—in these indices?
So we moved from analysts’ declarations that this might be the turning point for employment and therefore the moment when the recovery becomes a solid reality…to yet another fading event on Wall Street.
Still, there were two major moves that did not fizzle at all. The dollar gained greatly on the employment data, as the world seemed to sense a stronger American recovery in the air, and the price of an ounce of gold plunged. As for the latter, many economists (whom I tend to respect) have been increasingly skeptical about the recent reverence for gold. The argument has been that gold has much further to climb because, adjusted for inflation, its price is well below the last peak in the 1980s. This reasoning does not convince them—or me. Gold may well continue to demonstrate weakness now, especially if our recovery continues to gain strength. It is well worth watching.
And strength in our recovery is what both of these indicators seem to suggest. They only tell a small part of the overall story, though. The spread between the 10-year note’s yield and the average 30-year mortgage rate has narrowed enough to make one suspect that the next move for mortgage rates is up. But the markets are telling us nothing very clearly. Best to wait a few days before hazarding a guess about where the markets will go next.
I would not, in any case, expect interest rates to decline at all significantly any time soon.
by: Bill Fisher
Friday, December 4, 2009
Daily Commentary by Larry Baer 12/4/2009
SHORT-TERM TREND (10 days or less). Favors higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: It is almost too good to be true.
Employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began in December 2007. According to government figures, the economy shed only 11,000 jobs last month - far fewer than the 130,000 drop in the November headline nonfarm payroll figure most economists had anticipated. The national jobless rate dropped to 10% from October's 10.2%. The data wonks that compile these figures also announced that they had overstated the job losses in September and October by 159,000. Not only did payroll losses drop sharply, but leading indicators of employment also improved significantly. In particular, temporary help agencies added 52,000 jobs last month following a gain of 40,000 in October. Businesses tend to ramp up their temp numbers before adding permanent headcount to their payrolls.
On its face the story from the labor sector is that the worst of the recession appears to be behind us. The recent flow of macro-economic data continues to paint a developing picture of the economy in transition from a deep recession to a modest recovery. That's terrific news for the millions of American's who yearn to return to the labor force -- and overall I think it is good news for single-family mortgage originations. Even though improving statistics from the labor sector will likely encourage the Fed to be more vocal about an exit strategy from their sharply mortgage market friendly monetary policy strategies - the inevitable rise in mortgage interest rates will probably be largely muted by a return of consumer confidence which subsequently will likely lead to improved demand for homeownership. Which is worst - an economy in which a loaf of bread costs $1.00 and a man/woman happens to have a $1.00 to spend on bread - or an economy is which a loaf of bread cost 25 cents and a man/woman has no money at all to spend on bread or anything else?
Looking ahead to next week Uncle Sam returns to the credit market looking to borrow $70 billion or so in the form of 3-year notes on Tuesday, 10-year notes on Wednesday and concluding with a 30-year bond offering on Thursday. The only major economic report on tap is Friday's 8:30 a.m. ET release of the November Retail Sales figures.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of higher rates and lower investor prices.
Commentary: It is almost too good to be true.
Employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began in December 2007. According to government figures, the economy shed only 11,000 jobs last month - far fewer than the 130,000 drop in the November headline nonfarm payroll figure most economists had anticipated. The national jobless rate dropped to 10% from October's 10.2%. The data wonks that compile these figures also announced that they had overstated the job losses in September and October by 159,000. Not only did payroll losses drop sharply, but leading indicators of employment also improved significantly. In particular, temporary help agencies added 52,000 jobs last month following a gain of 40,000 in October. Businesses tend to ramp up their temp numbers before adding permanent headcount to their payrolls.
On its face the story from the labor sector is that the worst of the recession appears to be behind us. The recent flow of macro-economic data continues to paint a developing picture of the economy in transition from a deep recession to a modest recovery. That's terrific news for the millions of American's who yearn to return to the labor force -- and overall I think it is good news for single-family mortgage originations. Even though improving statistics from the labor sector will likely encourage the Fed to be more vocal about an exit strategy from their sharply mortgage market friendly monetary policy strategies - the inevitable rise in mortgage interest rates will probably be largely muted by a return of consumer confidence which subsequently will likely lead to improved demand for homeownership. Which is worst - an economy in which a loaf of bread costs $1.00 and a man/woman happens to have a $1.00 to spend on bread - or an economy is which a loaf of bread cost 25 cents and a man/woman has no money at all to spend on bread or anything else?
Looking ahead to next week Uncle Sam returns to the credit market looking to borrow $70 billion or so in the form of 3-year notes on Tuesday, 10-year notes on Wednesday and concluding with a 30-year bond offering on Thursday. The only major economic report on tap is Friday's 8:30 a.m. ET release of the November Retail Sales figures.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
RateWatch 12-4-2009
Unemployment figures (non-farm payroll) and the jobless rate were both better than expected, so the Fannie Mae 30 year 4.0 coupon dropped like a rock this morning opening down almost 70 basis points. That means mortgage rates are on the rise. We are seeing a correction right now with the market up 13 basis points. We are now at the bottom of the recent trading range. Hopefully we will see this freefall stop and flatten or correct upwards.
Thursday, December 3, 2009
RateWatch 12-3-2009
It was a bit of a crazy trading day. But at the end of the day the price of the 4.0% coupon closed up just a little from where it opened. The problem is that it as you can see, it opened quite a bit down from yesterday's close. We are now trading below the 10 day moving average. I hope it will stay flat and not move down any further as that will cause mortgage rates to rise.
Daily Commentary by Larry Baer 12/3/2009
SHORT-TERM TREND (10 days or less). Tilted slightly in favor of higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Hovering at an important support level necessary to sustain a trend assessment favoring lower rates and higher investor prices.
Commentary: Following a stronger-than-expected weekly jobless claims number - mortgage investors were quick to push mortgage interest rates fractionally higher in the day's early going.
According to the Labor Department, new applications for jobless benefits unexpectedly fell by 5,000 last week to the lowest level in more than 14 months. While this jobless claims report falls outside of the survey period for tomorrow's 8:30 a.m. ET release of the far more important November nonfarm payroll figures -- some investors wasted no time placing their "bets" for a surprisingly mortgage market unfriendly employment story.
I personally think these mortgage investors may have jumped the gun a bit. Even though the first-time claims number was better than the majority of economist had anticipated - the number of people continuing to collect benefits after the initial week rose by 28,000. Going one step further, with hiring so slow, the unemployed are exhausting their regular benefits (26 weeks in most states) and instead are claiming extended benefits or Emergency Unemployment Compensation. Growing totals for these programs have more than offset the decline in the regular weekly jobless claims number. For the week ending November 14th, the enrollment in the extended benefits programs offered by the government grew by 323,000. From this perspective, the weekly jobless claims numbers are almost certainly glossing over the underlying anemic conditions in the labor market.
The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000. If so, the Labor Department's data will likely exert little, if any influence on the mortgage market. On the other hand, if the headline number shows the economy lost 150,000 jobs or more and/or the national jobless rate exceeds 10.3% -- the odds are high that a large number of investors will be caught leaning the wrong way - resulting in higher prices and lower mortgage interest rates before the day is over.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Hovering at an important support level necessary to sustain a trend assessment favoring lower rates and higher investor prices.
Commentary: Following a stronger-than-expected weekly jobless claims number - mortgage investors were quick to push mortgage interest rates fractionally higher in the day's early going.
According to the Labor Department, new applications for jobless benefits unexpectedly fell by 5,000 last week to the lowest level in more than 14 months. While this jobless claims report falls outside of the survey period for tomorrow's 8:30 a.m. ET release of the far more important November nonfarm payroll figures -- some investors wasted no time placing their "bets" for a surprisingly mortgage market unfriendly employment story.
I personally think these mortgage investors may have jumped the gun a bit. Even though the first-time claims number was better than the majority of economist had anticipated - the number of people continuing to collect benefits after the initial week rose by 28,000. Going one step further, with hiring so slow, the unemployed are exhausting their regular benefits (26 weeks in most states) and instead are claiming extended benefits or Emergency Unemployment Compensation. Growing totals for these programs have more than offset the decline in the regular weekly jobless claims number. For the week ending November 14th, the enrollment in the extended benefits programs offered by the government grew by 323,000. From this perspective, the weekly jobless claims numbers are almost certainly glossing over the underlying anemic conditions in the labor market.
The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000. If so, the Labor Department's data will likely exert little, if any influence on the mortgage market. On the other hand, if the headline number shows the economy lost 150,000 jobs or more and/or the national jobless rate exceeds 10.3% -- the odds are high that a large number of investors will be caught leaning the wrong way - resulting in higher prices and lower mortgage interest rates before the day is over.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Wednesday, December 2, 2009
Daily Commentary by Larry Baer 12/2/2009
SHORT-TERM TREND (10 days or less). Tilted slightly in favor of higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Hovering at an important support level necessary to sustain a trend assessment favoring lower rates and higher investor prices.
Commentary: The swoon in the mortgage market yesterday afternoon was primarily the result of capital flowing out of the relative safety of U.S. government debt obligations and mortgage-backed securities back into higher risk asset classes as market participants became increasingly convinced the Dubai story would not morph into a another major global financial crisis. Easy come - easy go.
Trading action so far today is being driven by a relatively few players moving light volume. As I write, there is nothing much going on to inspire more dynamic action between buyers and sellers.
According to a report released earlier this morning by ADP Employer Services, U.S. private employers cut 169,000 jobs from their payrolls in November which was fewer than the 195,000 jobs lost in October but more than the 155,000 jobs loss that most analysts had been anticipating the data would indicate. It was the eighth straight month of fewer job losses reported by ADP. It may not be exactly what market participants were looking for, but at least the trend is right. The ADP report has been weaker than the government's much more important Nonfarm Payroll figurers in nine of the past 11 months, with an average miss of -55,000. The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000. If so, the Labor Department's data will likely exert little if any influence on the mortgage market.
In their standard Wednesday report, for the week ended November 27th the Mortgage Bankers of America said their mortgage application index (a value that includes request for both purchase and refinance loans) was up 2.1% over the previous week. The purchase index was up 4.1% while the refinance index gained 1.7% from the week before. Refinance applications accounted for 72.1% of all applications. It was the first time in eight weeks that both the purchase and refinance indices increase from the previous week.
To sustain the current level of mortgage interest rates will likely require softer-than-expected November employment numbers on Friday and/or a major sell-off in the stock markets. While both outcomes are certainly possible - they are each in their own right not very probable.
In my judgment, Friday's headline nonfarm payroll report will need to show the economy lost more than 150,000 jobs and/or the national jobless rate exceeded 10.3% last month in order to induce mortgage investors to push mortgage interest rates notably lower. In terms of stock market trading activity it will likely take a convincing move below the 10,200 mark for the Dow Jones Industrial Average before a sustained flow of capital out of the stock market could be counted on to support the prospects for notably lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Hovering at an important support level necessary to sustain a trend assessment favoring lower rates and higher investor prices.
Commentary: The swoon in the mortgage market yesterday afternoon was primarily the result of capital flowing out of the relative safety of U.S. government debt obligations and mortgage-backed securities back into higher risk asset classes as market participants became increasingly convinced the Dubai story would not morph into a another major global financial crisis. Easy come - easy go.
Trading action so far today is being driven by a relatively few players moving light volume. As I write, there is nothing much going on to inspire more dynamic action between buyers and sellers.
According to a report released earlier this morning by ADP Employer Services, U.S. private employers cut 169,000 jobs from their payrolls in November which was fewer than the 195,000 jobs lost in October but more than the 155,000 jobs loss that most analysts had been anticipating the data would indicate. It was the eighth straight month of fewer job losses reported by ADP. It may not be exactly what market participants were looking for, but at least the trend is right. The ADP report has been weaker than the government's much more important Nonfarm Payroll figurers in nine of the past 11 months, with an average miss of -55,000. The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000. If so, the Labor Department's data will likely exert little if any influence on the mortgage market.
In their standard Wednesday report, for the week ended November 27th the Mortgage Bankers of America said their mortgage application index (a value that includes request for both purchase and refinance loans) was up 2.1% over the previous week. The purchase index was up 4.1% while the refinance index gained 1.7% from the week before. Refinance applications accounted for 72.1% of all applications. It was the first time in eight weeks that both the purchase and refinance indices increase from the previous week.
To sustain the current level of mortgage interest rates will likely require softer-than-expected November employment numbers on Friday and/or a major sell-off in the stock markets. While both outcomes are certainly possible - they are each in their own right not very probable.
In my judgment, Friday's headline nonfarm payroll report will need to show the economy lost more than 150,000 jobs and/or the national jobless rate exceeded 10.3% last month in order to induce mortgage investors to push mortgage interest rates notably lower. In terms of stock market trading activity it will likely take a convincing move below the 10,200 mark for the Dow Jones Industrial Average before a sustained flow of capital out of the stock market could be counted on to support the prospects for notably lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
RateWatch 12-2-2009
The Market is correcting and the price of the Fannie Mae 4.5 coupon is down and falling. That means that mortgage rates are on the rise. I believe they will keep going up for a little while. If you missed locking, lock now before rates go up more.
Wednesday, November 25, 2009
RateWatch 11-25-2009
The Fannie Mae 30 year 4.5% coupon is trading at the highest level it has been in over 3 months. A market correction is coming. I would lock now.
Daily Commentary by Larry Baer 11/25/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: This morning's deluge of macro-economic data initially created a flurry of trading activity in the mortgage market - but the few investors still at their desks quickly lost interest. As I write, trading volume in the mortgage market is exceptionally thin - floating back and forth in a very, very narrow range.
The Labor Department started the parade of economic news this morning - announcing the number of workers filing first-time applications for jobless benefits fell by a very surprising 35,000 during the week ended November 21st. It was the fourth consecutive week of improvement for this measure of the health of the labor sector. The number of unemployed continuing to draw benefits fell by 190,000. Most market participants shrugged off the Labor Department data as largely distorted by outsized seasonal adjustments.
The Commerce Department chimed in with their report on Personal Income and Spending for October. According to the government, spending by consumers rebounded by 0.7% last month - solidly outdistancing the consensus estimate for a gain of 0.5%. Incomes rose by 0.2% slightly ahead of economists' guesstimates for a gain of 0.1%. Most importantly of all, the Personal Consumption Expenditure Index component of the report, the Fed's preferred measure of inflation pressure at the consumer level, posted a very modest gain of 0.2%. After a quick once over - mortgage investors didn't give this data another thought.
The march of macro-economic data continued when the Census Bureau reported October new home sales rose a stronger than expected 6.2% over the prior month level. As of October, new-home sales are running at their best pace since last fall. Once again mortgage investors were quick to discount this report - noting the sales strength is only evident in the South, with sales dropping decisively in the other three regions.
Rounding out this morning's string of economic reports was news from the Mortgage Bankers of America that their seasonally adjusted mortgage application index slipped 4.5% lower last week. The purchase index gained 9.6% while the refinance component of the index declined by 9.5%. The reason for the downward skew in the overall index is that refinance applications accounted for 71.7% of all application last week.
Uncle Sam is wrapping up this three-part borrowing spree this week with today's auction of $32 billion worth of 7-year notes. If the strong bias of the earlier two offerings prevails again today this event will not likely exert any notable influence on the trend trajectory of mortgage interest rates. In the unlikely event this offering is poorly bid - look for government debt yields and mortgage interest rates to edge higher. I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: This morning's deluge of macro-economic data initially created a flurry of trading activity in the mortgage market - but the few investors still at their desks quickly lost interest. As I write, trading volume in the mortgage market is exceptionally thin - floating back and forth in a very, very narrow range.
The Labor Department started the parade of economic news this morning - announcing the number of workers filing first-time applications for jobless benefits fell by a very surprising 35,000 during the week ended November 21st. It was the fourth consecutive week of improvement for this measure of the health of the labor sector. The number of unemployed continuing to draw benefits fell by 190,000. Most market participants shrugged off the Labor Department data as largely distorted by outsized seasonal adjustments.
The Commerce Department chimed in with their report on Personal Income and Spending for October. According to the government, spending by consumers rebounded by 0.7% last month - solidly outdistancing the consensus estimate for a gain of 0.5%. Incomes rose by 0.2% slightly ahead of economists' guesstimates for a gain of 0.1%. Most importantly of all, the Personal Consumption Expenditure Index component of the report, the Fed's preferred measure of inflation pressure at the consumer level, posted a very modest gain of 0.2%. After a quick once over - mortgage investors didn't give this data another thought.
The march of macro-economic data continued when the Census Bureau reported October new home sales rose a stronger than expected 6.2% over the prior month level. As of October, new-home sales are running at their best pace since last fall. Once again mortgage investors were quick to discount this report - noting the sales strength is only evident in the South, with sales dropping decisively in the other three regions.
Rounding out this morning's string of economic reports was news from the Mortgage Bankers of America that their seasonally adjusted mortgage application index slipped 4.5% lower last week. The purchase index gained 9.6% while the refinance component of the index declined by 9.5%. The reason for the downward skew in the overall index is that refinance applications accounted for 71.7% of all application last week.
Uncle Sam is wrapping up this three-part borrowing spree this week with today's auction of $32 billion worth of 7-year notes. If the strong bias of the earlier two offerings prevails again today this event will not likely exert any notable influence on the trend trajectory of mortgage interest rates. In the unlikely event this offering is poorly bid - look for government debt yields and mortgage interest rates to edge higher. I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Tuesday, November 24, 2009
RateWatch
The price of the Fannie Mae 4.5 coupon continues to rise which means the rate continues to fall. As you can see, it is trading way above the moving averages. There should be a correction some time soon. I would take the money and run!
Daily Commentary by Larry Baer 11/24/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Mortgage investors nudged rates fractionally lower this morning after a revision to the government's data for third-quarter economic growth came in just below expectations and fanned some doubt about the sustainability of the budding economic recovery.
The Commerce Department's second estimate of third-quarter economic output showed growth running at a 2.8% pace rather than the 3.5% annualized clip originally reported. It was the strongest level of economic growth since the third-quarter of 2007 and was driven in large part by government fiscal stimulus programs. If all of Uncle Sam's various "booster" shots designed to support third-quarter growth are removed, our domestic economy would have barely registered a pulse. As long as the economy remains on government sponsored life support -- any upward pressure on mortgage interest rates will likely be muted.
Another day - another government debt auction. Uncle Sam will be in the credit markets today looking to auction off a $42 billion stack of 5-year notes. Yesterday's 2-year note auction results were decent but unremarkable, marking a retreat from the string of spectacular sales results in recent months. Hopes are high that today's offering will be well bid. If so, this auction will likely be a non-event as far as its impact on the trend trajectory of mortgage interest rates is concerned. Keep your fingers crossed that this assessment proves accurate. A poorly bid note auction could very well create a "snowball-effect" that pushes both government debt yields and mortgage interest rates higher. While such an outcome is certainly possible - it is not currently considered probable. I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Mortgage investors nudged rates fractionally lower this morning after a revision to the government's data for third-quarter economic growth came in just below expectations and fanned some doubt about the sustainability of the budding economic recovery.
The Commerce Department's second estimate of third-quarter economic output showed growth running at a 2.8% pace rather than the 3.5% annualized clip originally reported. It was the strongest level of economic growth since the third-quarter of 2007 and was driven in large part by government fiscal stimulus programs. If all of Uncle Sam's various "booster" shots designed to support third-quarter growth are removed, our domestic economy would have barely registered a pulse. As long as the economy remains on government sponsored life support -- any upward pressure on mortgage interest rates will likely be muted.
Another day - another government debt auction. Uncle Sam will be in the credit markets today looking to auction off a $42 billion stack of 5-year notes. Yesterday's 2-year note auction results were decent but unremarkable, marking a retreat from the string of spectacular sales results in recent months. Hopes are high that today's offering will be well bid. If so, this auction will likely be a non-event as far as its impact on the trend trajectory of mortgage interest rates is concerned. Keep your fingers crossed that this assessment proves accurate. A poorly bid note auction could very well create a "snowball-effect" that pushes both government debt yields and mortgage interest rates higher. While such an outcome is certainly possible - it is not currently considered probable. I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Monday, November 23, 2009
Daily Commentary by Larry Baer 11/23/2009
Housekeeping Note: The mortgage market will operate on a normal schedule on Wednesday, November 25th and will be closed all day on Thursday, November 26th for the Thanksgiving Holiday. The mortgage market is scheduled to close early at 2:00 p.m. ET on Friday, November 27th.
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: The credit markets are setting up for another huge dose of supply from Uncle Sam this week. The Treasury Department will be peddling $118 billion worth of 2-, 5- and 7-year notes over the course of the next three business days. The action starts this afternoon with the sale of $44 billion of 2-year notes.
Despite the supply pressure, recent government debt sales have drawn generally solid demand. At a minimum this week's offering will likely be welcomed by those players looking for a safe place to park cash until 2010. This week's auction schedule may create a little temporary choppiness in the mortgage market but the debt sales should pass without dramatically influencing the trend trajectory of mortgage interest rates much one way or the other. I'll provide auction results as soon as possible following the auction conclusion at 1:00 p.m. ET.
The National Association of Realtors announced this morning that the pace of Existing Home Sales posted a surprisingly sharp 10.1% gain in October, following a similarly strong 8.8% gain in September. At 6.1 million annualized units, existing home sales are up nearly 24% compared with year ago levels and are currently running at their strongest pace since early '07. Even though the sales price of existing homes slid 7.1% lower as compared to last year -- it was the second consecutive month that the sales price slumped at a single-digit clip - making the October price dip a victory of sorts. The median price of an existing home in October was $173,100. Sales of previously owned homes, which make up more than 90% of the market, are complied from contract closings and may reflect purchases agreed upon weeks or months earlier.
The current condition of the housing market will be more accurately reflected when the October new home sales data is released on Wednesday (8:30 a.m. ET). The new home sales data is recorded when the contract is signed, not when the transaction closes, and is therefore considered by investors to be a far more timely indication of demand in the housing sector. Mortgage investors have an October New Home Sales gain of 4.5% already priced into their rate sheets. If the actual number closely approximates the forecast -- look for mortgage interest rates to remain little changed. A stronger than expected new home sales number will likely put some upward pressure on mortgage interest rates while a sharply lower than anticipated value will tend to support steady to perhaps fractionally lower rates.
FYI: Saint Louis Fed president James Bullard told reporters this weekend that he believes the central bank should keep alive its mortgage-related assets purchase program beyond its planned expiration at the end of March 2010. Bullard feels the program should be sustained at a "very low level" to give policymakers more flexibility as they work to extract the economy from a very painful recession. Mr. Bullard won't actually have a vote of policy matters until 2010. I suggest you don't make too much out of this event just yet - but I'll keep you posted if Bullard's idea seems to be catching on with other current voting members of the Federal Open Market Committee.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: The credit markets are setting up for another huge dose of supply from Uncle Sam this week. The Treasury Department will be peddling $118 billion worth of 2-, 5- and 7-year notes over the course of the next three business days. The action starts this afternoon with the sale of $44 billion of 2-year notes.
Despite the supply pressure, recent government debt sales have drawn generally solid demand. At a minimum this week's offering will likely be welcomed by those players looking for a safe place to park cash until 2010. This week's auction schedule may create a little temporary choppiness in the mortgage market but the debt sales should pass without dramatically influencing the trend trajectory of mortgage interest rates much one way or the other. I'll provide auction results as soon as possible following the auction conclusion at 1:00 p.m. ET.
The National Association of Realtors announced this morning that the pace of Existing Home Sales posted a surprisingly sharp 10.1% gain in October, following a similarly strong 8.8% gain in September. At 6.1 million annualized units, existing home sales are up nearly 24% compared with year ago levels and are currently running at their strongest pace since early '07. Even though the sales price of existing homes slid 7.1% lower as compared to last year -- it was the second consecutive month that the sales price slumped at a single-digit clip - making the October price dip a victory of sorts. The median price of an existing home in October was $173,100. Sales of previously owned homes, which make up more than 90% of the market, are complied from contract closings and may reflect purchases agreed upon weeks or months earlier.
The current condition of the housing market will be more accurately reflected when the October new home sales data is released on Wednesday (8:30 a.m. ET). The new home sales data is recorded when the contract is signed, not when the transaction closes, and is therefore considered by investors to be a far more timely indication of demand in the housing sector. Mortgage investors have an October New Home Sales gain of 4.5% already priced into their rate sheets. If the actual number closely approximates the forecast -- look for mortgage interest rates to remain little changed. A stronger than expected new home sales number will likely put some upward pressure on mortgage interest rates while a sharply lower than anticipated value will tend to support steady to perhaps fractionally lower rates.
FYI: Saint Louis Fed president James Bullard told reporters this weekend that he believes the central bank should keep alive its mortgage-related assets purchase program beyond its planned expiration at the end of March 2010. Bullard feels the program should be sustained at a "very low level" to give policymakers more flexibility as they work to extract the economy from a very painful recession. Mr. Bullard won't actually have a vote of policy matters until 2010. I suggest you don't make too much out of this event just yet - but I'll keep you posted if Bullard's idea seems to be catching on with other current voting members of the Federal Open Market Committee.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Thursday, November 19, 2009
Daily Commentary by Larry Baer 11/18/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: The mortgage market is struggling to maintain its traction favoring fractionally lower mortgage interest rates and higher prices this morning.
Investors have little to chew-on in terms of macro-economic data. The Labor Department reported the number of Americans filing claims for unemployment benefits remained at a 10-month low last week, but the four-week moving average of claims dropped to its lowest level in almost a year. Applications for jobless assistance from the government have dropped significantly from their peak of 674,000 in March to the 505,000 level for the reporting period ended November 14th. Even so, the jobless claims number will need to drop to below 400,000 on a weekly basis to be consistent with labor market stability.
Many analysts remain skeptical of the validity of the weekly jobless claims numbers, arguing correctly that they don't accurately reflect the number of workers forced by necessity to participate in the government's extended benefit programs. For the week ended October 31st (the latest week for which data is available) enrollment in programs designed for those who have exhausted their normal 26 weeks of unemployment benefits grew by a total of 119,000. Boiling all this jobless claims data down to its bare essence it shows that while the pace of layoffs has slowed significantly - employers remain extremely hesitant to hang-out the "Now Hiring" signs.
The good news is that the slow pace of hiring will definitely continue to muzzle inflation threats and by extension will diffuse a considerable amount of any developing upward pressure on mortgage interest rates. The bad news part of this story is that until the national employment picture brightens considerably - the demand for mortgage financing will likely remain muted.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: The mortgage market is struggling to maintain its traction favoring fractionally lower mortgage interest rates and higher prices this morning.
Investors have little to chew-on in terms of macro-economic data. The Labor Department reported the number of Americans filing claims for unemployment benefits remained at a 10-month low last week, but the four-week moving average of claims dropped to its lowest level in almost a year. Applications for jobless assistance from the government have dropped significantly from their peak of 674,000 in March to the 505,000 level for the reporting period ended November 14th. Even so, the jobless claims number will need to drop to below 400,000 on a weekly basis to be consistent with labor market stability.
Many analysts remain skeptical of the validity of the weekly jobless claims numbers, arguing correctly that they don't accurately reflect the number of workers forced by necessity to participate in the government's extended benefit programs. For the week ended October 31st (the latest week for which data is available) enrollment in programs designed for those who have exhausted their normal 26 weeks of unemployment benefits grew by a total of 119,000. Boiling all this jobless claims data down to its bare essence it shows that while the pace of layoffs has slowed significantly - employers remain extremely hesitant to hang-out the "Now Hiring" signs.
The good news is that the slow pace of hiring will definitely continue to muzzle inflation threats and by extension will diffuse a considerable amount of any developing upward pressure on mortgage interest rates. The bad news part of this story is that until the national employment picture brightens considerably - the demand for mortgage financing will likely remain muted.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Tuesday, November 17, 2009
Daily Commentary by Larry Baer 11/17/2009
SHORT-TERM TREND (10 days or less). Different day . same story. Favors lower rates and higher investor prices but very vulnerable to a near-term reversal.
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: As I write trading activity in the mortgage market is quiet -- with a slight bias favoring higher prices and lower rates. Earlier in the day selling action in the mortgage-backed security market tried to force interest rates a touch higher -- but that little "dust-up" ended pretty quickly and the balance between buy and sell orders has drifted back in favor of the buyers.
The early morning swoon in the mortgage market was created by a knee-jerk reaction on the part of a relatively few traders to the detail contained the Labor Department's release of the October Producer Price Index. These market participants were evidently hyper-sensitive to the component of the report that indicated core prices for intermediate goods have not deviated from the steady climb to higher levels that began in early spring. That's really working hard to find a reason to sell since all of the other aspects of this report remained well below the consensus expectations.
The headline producer price index rose by a very modest 0.3% in October while the core producer price index (a value that excludes the more volatile food and energy prices) unexpectedly dropped 0.6% - its largest monthly decline since July 2006.
Calmer, cooler heads have now moved in to completely counter the earlier selling pressure in the mortgage market. These more experienced traders clearly know that with output and employment expected to remain modest well into the coming year, producer price inflation will likely be a "no show" for some time to come.
As expected, the separate October Industrial Production and Capacity Utilization report released later in this morning trading session drew little more than a passing glance from mortgage investors.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: As I write trading activity in the mortgage market is quiet -- with a slight bias favoring higher prices and lower rates. Earlier in the day selling action in the mortgage-backed security market tried to force interest rates a touch higher -- but that little "dust-up" ended pretty quickly and the balance between buy and sell orders has drifted back in favor of the buyers.
The early morning swoon in the mortgage market was created by a knee-jerk reaction on the part of a relatively few traders to the detail contained the Labor Department's release of the October Producer Price Index. These market participants were evidently hyper-sensitive to the component of the report that indicated core prices for intermediate goods have not deviated from the steady climb to higher levels that began in early spring. That's really working hard to find a reason to sell since all of the other aspects of this report remained well below the consensus expectations.
The headline producer price index rose by a very modest 0.3% in October while the core producer price index (a value that excludes the more volatile food and energy prices) unexpectedly dropped 0.6% - its largest monthly decline since July 2006.
Calmer, cooler heads have now moved in to completely counter the earlier selling pressure in the mortgage market. These more experienced traders clearly know that with output and employment expected to remain modest well into the coming year, producer price inflation will likely be a "no show" for some time to come.
As expected, the separate October Industrial Production and Capacity Utilization report released later in this morning trading session drew little more than a passing glance from mortgage investors.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Monday, November 16, 2009
Daily Commentary by Larry Baer 11/16/2009
SHORT-TERM TREND (10 days or less). Different day . same story. Favors lower rates and higher investor prices but very vulnerable to a near-term reversal.
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Earlier this morning the government reported the pace of October Retail Sales rose a brisk 1.4% -- but were much less impressive once auto sales were stripped out. The "ex. auto" component of this report posted a lower than expected gain of 0.2%. Even so, given the backdrop of a very anemic labor market, the October retail sales numbers were about as good as could be hoped. Consumers remain financially constrained with wage income running 5.0% below its year-ago mark - a condition strongly suggesting recovery at the retail level will continue to be lethargic for many months to come. In the convoluted world of mortgage interest rates investors see slow retail sales activity as a indication that demand for capital will remain low - a scenario that tends to support steady to perhaps fractionally lower mortgage interest rates.
Definitely worth mentioning again - the Federal Reserve reached a milestone with its direct mortgage-backed purchase program last week, topping the $1 trillion mark. The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009. The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th. The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010.
These security purchases by the Fed have been hugely supportive of lower mortgage interest rates. (The following maybe a bit technical for some - but bear with me - and please don't stop reading.) The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points last Thursday from 0.720 percentage points last Tuesday, according to Reuter's data. When yield premiums tighten - mortgage rates move lower. For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program.
The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close. Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook. The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become. Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels. I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Earlier this morning the government reported the pace of October Retail Sales rose a brisk 1.4% -- but were much less impressive once auto sales were stripped out. The "ex. auto" component of this report posted a lower than expected gain of 0.2%. Even so, given the backdrop of a very anemic labor market, the October retail sales numbers were about as good as could be hoped. Consumers remain financially constrained with wage income running 5.0% below its year-ago mark - a condition strongly suggesting recovery at the retail level will continue to be lethargic for many months to come. In the convoluted world of mortgage interest rates investors see slow retail sales activity as a indication that demand for capital will remain low - a scenario that tends to support steady to perhaps fractionally lower mortgage interest rates.
Definitely worth mentioning again - the Federal Reserve reached a milestone with its direct mortgage-backed purchase program last week, topping the $1 trillion mark. The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009. The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th. The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010.
These security purchases by the Fed have been hugely supportive of lower mortgage interest rates. (The following maybe a bit technical for some - but bear with me - and please don't stop reading.) The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points last Thursday from 0.720 percentage points last Tuesday, according to Reuter's data. When yield premiums tighten - mortgage rates move lower. For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program.
The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close. Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook. The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become. Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels. I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Friday, November 13, 2009
Daily Commentary by Larry Baer 11/13/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but very vulnerable to a near-term reversal.
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Trading volume in the mortgage market so far today has been light and sporadic - with the few transactions that are being completed drawing higher prices for the underlying security.
There is really not much to talk about in terms of economic news - even though some media sources are trying to make a mountain out of a mole hill with their breathless announcement that the University of Michigan's consumer sentiment index fell four (4) percentage points in October. Hmmm - let's see - I wonder if the fact the national jobless rate jumped to a 26-year high during the month might have bummed consumers out just a bit. I have yet to see one mainstream media report that drills down into the data deep enough to discover that while the index fell back to about the level seen in July and August -- it remains comfortably above its cyclical lows.
Take today's consumer sentiment report with a grain-of-salt. Mortgage investors are generally far more interested in what the consumer is actually doing - as opposed to how they say they are feeling during a telephone interview. Consumers' true underlying sentiment will be abundantly clear when the Commerce Department releases the October Retail Sales figures Monday at 8:30 a.m. ET. Interestingly enough, the headline number is expected to have posted a 0.9% gain - a handsome recovery from September's 1.5% slump. The ex. auto component of the report is expected to have matched September's 0.5% improvement. Not bad for the supposedly crestfallen consumer most media sources would have you believe currently dominates the retail marketplace.
Definitely worth a mention - the Federal Reserve reached a milestone with its direct mortgage-backed purchase program this week, topping the $1 trillion mark. The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009. The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th. The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010.
These security purchases by the Fed have been hugely supportive of lower mortgage interest rates. (The following maybe a bit technical for some - but bear with me - and please don't stop reading.) The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points on Thursday from 0.720 percentage points on Tuesday, according to Reuter's data. When yield premiums tighten - mortgage rates move lower. For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program. The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close. Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook. The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become. Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels. I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.
Looking ahead to next week -- Monday's October Retail Sales figures and Wednesday's inflation data contained in the October Consumer Price Index will draw considerable investor attention. As I mentioned earlier in this commentary, the retail sales report has the potential to be a bit stronger than many market participants are anticipating. If such an event were to occur -- it will likely put some slight upward pressure on mortgage interest rates. The Consumer Price Index is expected to show the prices consumers are paying for goods and services remain devoid of meaningful inflation adjustments.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Trading volume in the mortgage market so far today has been light and sporadic - with the few transactions that are being completed drawing higher prices for the underlying security.
There is really not much to talk about in terms of economic news - even though some media sources are trying to make a mountain out of a mole hill with their breathless announcement that the University of Michigan's consumer sentiment index fell four (4) percentage points in October. Hmmm - let's see - I wonder if the fact the national jobless rate jumped to a 26-year high during the month might have bummed consumers out just a bit. I have yet to see one mainstream media report that drills down into the data deep enough to discover that while the index fell back to about the level seen in July and August -- it remains comfortably above its cyclical lows.
Take today's consumer sentiment report with a grain-of-salt. Mortgage investors are generally far more interested in what the consumer is actually doing - as opposed to how they say they are feeling during a telephone interview. Consumers' true underlying sentiment will be abundantly clear when the Commerce Department releases the October Retail Sales figures Monday at 8:30 a.m. ET. Interestingly enough, the headline number is expected to have posted a 0.9% gain - a handsome recovery from September's 1.5% slump. The ex. auto component of the report is expected to have matched September's 0.5% improvement. Not bad for the supposedly crestfallen consumer most media sources would have you believe currently dominates the retail marketplace.
Definitely worth a mention - the Federal Reserve reached a milestone with its direct mortgage-backed purchase program this week, topping the $1 trillion mark. The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009. The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th. The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010.
These security purchases by the Fed have been hugely supportive of lower mortgage interest rates. (The following maybe a bit technical for some - but bear with me - and please don't stop reading.) The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points on Thursday from 0.720 percentage points on Tuesday, according to Reuter's data. When yield premiums tighten - mortgage rates move lower. For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program. The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close. Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook. The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become. Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels. I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.
Looking ahead to next week -- Monday's October Retail Sales figures and Wednesday's inflation data contained in the October Consumer Price Index will draw considerable investor attention. As I mentioned earlier in this commentary, the retail sales report has the potential to be a bit stronger than many market participants are anticipating. If such an event were to occur -- it will likely put some slight upward pressure on mortgage interest rates. The Consumer Price Index is expected to show the prices consumers are paying for goods and services remain devoid of meaningful inflation adjustments.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Thursday, November 12, 2009
Daily Commentary by Larry Baer 11/12/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Trading activity is thin this morning as investors await the results of this afternoon's $16 billion sale of 30-year bonds by the Treasury Department. This auction represents the last leg of a record-sized $81 billion three-part borrowing spree by Uncle Sam. The Treasury sold $40 billion of 3-year notes on Monday and $25 billion of 10-year notes on Tuesday. The 10-year sale drew decent demand while the 3-year note auction generated the strongest buyer appetite in more than 20 years.
One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today's 30-year bond sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital.
Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
In other news of the day - the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week. The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period. During the latest week for which data is available (week ended October 24th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400.
Behind all this statistical mumbo-jumbo a story of very gradual improvement in the labor sector is beginning to emerge. Even so, it will likely be an extended period of time before the worst collapse in the labor sector since the Great Depression is declared officially over. Recent economic improvement has to be sustained for many months for hiring to resume, as businesses first increase existing worker hours and bring on temporary workers before increasing payroll head count. The majority of analysts firmly believe it will be well into the second-half of 2010 before the Labor Department's headline nonfarm payroll report shows any meaningful gains. Over the same time frame labor market data will tend to mute the development of upward pressure on mortgage interest rates emanating from other influences.
FYI: Earlier today the Mortgage Bankers of America said their seasonally adjusted index of total mortgage applications rose 3.2% during the week ended November 6th. Requests for refinance loans were up 11.3% while purchase applications slid 11.7% lower.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: Trading activity is thin this morning as investors await the results of this afternoon's $16 billion sale of 30-year bonds by the Treasury Department. This auction represents the last leg of a record-sized $81 billion three-part borrowing spree by Uncle Sam. The Treasury sold $40 billion of 3-year notes on Monday and $25 billion of 10-year notes on Tuesday. The 10-year sale drew decent demand while the 3-year note auction generated the strongest buyer appetite in more than 20 years.
One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today's 30-year bond sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital.
Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
In other news of the day - the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week. The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period. During the latest week for which data is available (week ended October 24th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400.
Behind all this statistical mumbo-jumbo a story of very gradual improvement in the labor sector is beginning to emerge. Even so, it will likely be an extended period of time before the worst collapse in the labor sector since the Great Depression is declared officially over. Recent economic improvement has to be sustained for many months for hiring to resume, as businesses first increase existing worker hours and bring on temporary workers before increasing payroll head count. The majority of analysts firmly believe it will be well into the second-half of 2010 before the Labor Department's headline nonfarm payroll report shows any meaningful gains. Over the same time frame labor market data will tend to mute the development of upward pressure on mortgage interest rates emanating from other influences.
FYI: Earlier today the Mortgage Bankers of America said their seasonally adjusted index of total mortgage applications rose 3.2% during the week ended November 6th. Requests for refinance loans were up 11.3% while purchase applications slid 11.7% lower.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Tuesday, November 10, 2009
Home Buyer Tax Credits
I just discovered a great website that gives you all of the information you need to know about the extended first time home buyer tax credit as well as the repeat home buyers tax credit. The site is http://www.federalhousingtaxcredit.com
Daily Commentary by Larry Baer 11/10/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but very likely to be short-lived
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Trading activity is thin this morning as investors await the results of this afternoon's $25 billion sale of 10-year notes by the Treasury Department.
Market participants are divided in their opinion on whether today's record setting 10-year note auction will "coattail" off of yesterday's stellar 3-year note auction and go off without a hitch. Bids for Monday's 3-year note offering from Uncle Sam were the strongest in more than twenty-years.
One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today's 10-year note sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital.
Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Trading activity is thin this morning as investors await the results of this afternoon's $25 billion sale of 10-year notes by the Treasury Department.
Market participants are divided in their opinion on whether today's record setting 10-year note auction will "coattail" off of yesterday's stellar 3-year note auction and go off without a hitch. Bids for Monday's 3-year note offering from Uncle Sam were the strongest in more than twenty-years.
One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today's 10-year note sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital.
Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Monday, November 9, 2009
Daily Commentary by Larry Baer 11/09/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but very likely to be short-lived
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Trading activity in the mortgage market is extremely subdued this morning as investors await the results of Uncle Sam's record setting $40 billion auction of 3-year notes. The auction will conclude at 1:00 p.m. ET.
Demand will likely be solid for this offering as investors can earn an extra 0.50 percent point in yield as compared to the 2-year notes -- in exchange for taking only slightly more interest rate risk. The Fed's continuing pledge to keep their benchmark short-term rates near zero and a very weak October payroll report will probably make this offer hard to resist for domestic and foreign investors alike.
Uncle Sam will return to the credit markets tomorrow afternoon looking to borrow $25 billion in 10-year notes and he'll auction off a $16 billion stack of 30-year bonds on Thursday afternoon. Even though demand for government debt has remained strong this year it is unclear whether strong results from today's 3-year note auction will carry over to the two other auctions scheduled for this week. The Federal Reserve's $300 billion Treasury purchase program ended last month, removing one element of demand from the bidding process. This week's longer-dated auctions will be the first without direct participation from the Fed. Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Trading activity in the mortgage market is extremely subdued this morning as investors await the results of Uncle Sam's record setting $40 billion auction of 3-year notes. The auction will conclude at 1:00 p.m. ET.
Demand will likely be solid for this offering as investors can earn an extra 0.50 percent point in yield as compared to the 2-year notes -- in exchange for taking only slightly more interest rate risk. The Fed's continuing pledge to keep their benchmark short-term rates near zero and a very weak October payroll report will probably make this offer hard to resist for domestic and foreign investors alike.
Uncle Sam will return to the credit markets tomorrow afternoon looking to borrow $25 billion in 10-year notes and he'll auction off a $16 billion stack of 30-year bonds on Thursday afternoon. Even though demand for government debt has remained strong this year it is unclear whether strong results from today's 3-year note auction will carry over to the two other auctions scheduled for this week. The Federal Reserve's $300 billion Treasury purchase program ended last month, removing one element of demand from the bidding process. This week's longer-dated auctions will be the first without direct participation from the Fed. Everybody will be watching intently to see if demand steps up on its own. If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed. On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher.
I'll provide auction results as soon as possible once the final gavel falls at 1:00 p.m. ET.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Friday, November 6, 2009
Daily Commentary by Larry Baer 11/06/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but very likely to be short-lived
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: The mortgage market was buoyed in this morning's early going by a surprisingly weak labor sector snapshot.
The nation's jobless rate jumped to a reading of 10.2% in October -- matching its highest level since April 1983, while employers axed a steeper-than-expected 190,000 jobs last month. The average workweek length of just 33 hours did not move from the historic low set in September. The bright spots in this morning's report were few - the government data wonks revised job losses for August and September to show 91,000 fewer jobs lost than first reported. Also worth noting was the fact that temporary employment has now risen for three consecutive months. Temporary employment always tends to accelerate in the early stages of a recovery in the labor sector as employers do everything possible to avoid adding permanent head-count until they are confident a sustained acceleration in economic activity is at hand. This reticence to add permanent jobs will not only forestall meaningful job growth, it will pose a drag on consumer spending - the engine that drives more than 70% of domestic economic activity.
Fixed income investors (those that buy and hold government debt obligations and mortgage-backed securities) are concerned that the government may feel compelled to develop another round of economic stimulus to replace the lack of spending at the consumer level. On its face it sounds like a very worth while and noble idea - but in practice it would lead to a massive expansion of government debt - a condition that would almost certainly put notable upward pressure on private borrowing costs of all sorts. No one knows for sure how the current economic quagmire will be resolved - but if it involves issuing more government debt you can take-it-to-the-bank the prospects for lower mortgage interest rates will come out on the proverbial "short-end-of-the-stick."
Speaking of government debt, Uncle Sam will be in the credit markets next week looking to borrow a record setting $81 billion in the form of three- and 10-year notes together with a smattering of 30-year bonds on Monday, Tuesday, and Thursday respectively. The three-year notes will likely draw strong demand but the other two offerings may prove to be a problem. If so, it will probably be difficult, if not impossible for mortgage interest rates to move conspicuously lower over the coming five business days.
Next week's economic calendar offers nothing of consequence but does include a mortgage market holiday on Wednesday for the Veteran's Day Holiday.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: The mortgage market was buoyed in this morning's early going by a surprisingly weak labor sector snapshot.
The nation's jobless rate jumped to a reading of 10.2% in October -- matching its highest level since April 1983, while employers axed a steeper-than-expected 190,000 jobs last month. The average workweek length of just 33 hours did not move from the historic low set in September. The bright spots in this morning's report were few - the government data wonks revised job losses for August and September to show 91,000 fewer jobs lost than first reported. Also worth noting was the fact that temporary employment has now risen for three consecutive months. Temporary employment always tends to accelerate in the early stages of a recovery in the labor sector as employers do everything possible to avoid adding permanent head-count until they are confident a sustained acceleration in economic activity is at hand. This reticence to add permanent jobs will not only forestall meaningful job growth, it will pose a drag on consumer spending - the engine that drives more than 70% of domestic economic activity.
Fixed income investors (those that buy and hold government debt obligations and mortgage-backed securities) are concerned that the government may feel compelled to develop another round of economic stimulus to replace the lack of spending at the consumer level. On its face it sounds like a very worth while and noble idea - but in practice it would lead to a massive expansion of government debt - a condition that would almost certainly put notable upward pressure on private borrowing costs of all sorts. No one knows for sure how the current economic quagmire will be resolved - but if it involves issuing more government debt you can take-it-to-the-bank the prospects for lower mortgage interest rates will come out on the proverbial "short-end-of-the-stick."
Speaking of government debt, Uncle Sam will be in the credit markets next week looking to borrow a record setting $81 billion in the form of three- and 10-year notes together with a smattering of 30-year bonds on Monday, Tuesday, and Thursday respectively. The three-year notes will likely draw strong demand but the other two offerings may prove to be a problem. If so, it will probably be difficult, if not impossible for mortgage interest rates to move conspicuously lower over the coming five business days.
Next week's economic calendar offers nothing of consequence but does include a mortgage market holiday on Wednesday for the Veteran's Day Holiday.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Thursday, November 5, 2009
A big new tax break coming for homebuyers
A big new tax break coming for homebuyers
by STEPHEN OHLEMACHER, Associated Press Writer
Originally printed at http://www.katu.com/news/business/69320077.html
WASHINGTON (AP) - Missed out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you're a first-time homebuyer, get up to $8,000.
As part of the government's efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who plans to sign it Friday.
First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring - and to expand it to many people who already own homes.
Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers - or people who haven't owned homes in the previous three years - could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.
"It's huge. I think it's going to have a big impact," said Patti Ketcham, who owns a real estate firm in Tallahassee, Fla. "I hope I'm right. Golly, I hope I'm right."
Like housing markets across the country, Tallahassee's has been depressed since even before the nation's economy plunged into recession. There was no huge boom and bust like there was in many coastal areas, Ketcham said, "but ask anybody trying to sell a house and they'll tell you it's been no fun."
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
Real estate agents say the first-time homebuyers' tax credit that's already in effect has boosted sales, much in the same way the Cash for Clunkers program increased auto sales last summer by paying car buyers as much as $4,500 for exchanging their old gas guzzlers for new, more fuel efficient models.
The agents hope the expanded housing credit will help stabilize housing markets during typically slow sales months in the winter. Today, many would-be buyers are still worried that home values could drop further, said Lawrence Yun, chief economist at the National Association of Realtors.
"Once the consumer fear factor disappears, then housing can move into a sustainable recovery," Yun said. "I think we will be there by the middle of next year."
Yun said the tax credit has helped to increase demand and reduce inventory, enabling sellers to get higher prices than they would have otherwise.
About 1.4 million first-time homebuyers had qualified for the credit through August. The Realtors estimate that 350,000 of those buyers would not have purchased their homes without the credit.
The real estate industry, including Realtors, home builders and mortgage bankers, have lobbied hard for the expanded tax credit. Lawmakers said the program will not be extended again.
Critics say the tax credit is poorly targeted because the vast majority of people receiving it would have bought homes anyway.
"Essentially we're giving money to people for doing nothing different," said Ted Gayer, co-director of economic studies at the Brookings Institution, a Washington think tank.
But Susan Marvin, president of Marvin Windows and Doors in Warroad, Minn., near the Canadian border, said the economic benefits can be broad. She said, "If people are buying a home, they are far more likely to replace products or upgrade products."
Rep. John Lewis, D-Ga., said, "This tax credit has created jobs in the housing industry and real estate, and it will continue to create more jobs throughout our country."
Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes.
The credit is equal to 10 percent of the purchase price of a primary residence, up to a maximum of $8,000 for first-time homebuyers and $6,500 for others.
Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit.
Also on Thursday, the government-controlled mortgage company Fannie Mae announced a new program that could allow thousands of borrowers on the verge of foreclosure to have the option of renting their homes for a time from the company.
But the effort is likely to affect a relatively small number of people in comparison to the number of homes being repossessed.
The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that were included in a bill extending unemployment benefits for those without jobs for more than a year. The other tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years.
That break would help industries that have suffered big losses in the recession, including retailers, homebuilders and newspapers.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.
The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.
The bill is H.R. 3548.
by STEPHEN OHLEMACHER, Associated Press Writer
Originally printed at http://www.katu.com/news/business/69320077.html
WASHINGTON (AP) - Missed out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you're a first-time homebuyer, get up to $8,000.
As part of the government's efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who plans to sign it Friday.
First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring - and to expand it to many people who already own homes.
Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers - or people who haven't owned homes in the previous three years - could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.
"It's huge. I think it's going to have a big impact," said Patti Ketcham, who owns a real estate firm in Tallahassee, Fla. "I hope I'm right. Golly, I hope I'm right."
Like housing markets across the country, Tallahassee's has been depressed since even before the nation's economy plunged into recession. There was no huge boom and bust like there was in many coastal areas, Ketcham said, "but ask anybody trying to sell a house and they'll tell you it's been no fun."
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
Real estate agents say the first-time homebuyers' tax credit that's already in effect has boosted sales, much in the same way the Cash for Clunkers program increased auto sales last summer by paying car buyers as much as $4,500 for exchanging their old gas guzzlers for new, more fuel efficient models.
The agents hope the expanded housing credit will help stabilize housing markets during typically slow sales months in the winter. Today, many would-be buyers are still worried that home values could drop further, said Lawrence Yun, chief economist at the National Association of Realtors.
"Once the consumer fear factor disappears, then housing can move into a sustainable recovery," Yun said. "I think we will be there by the middle of next year."
Yun said the tax credit has helped to increase demand and reduce inventory, enabling sellers to get higher prices than they would have otherwise.
About 1.4 million first-time homebuyers had qualified for the credit through August. The Realtors estimate that 350,000 of those buyers would not have purchased their homes without the credit.
The real estate industry, including Realtors, home builders and mortgage bankers, have lobbied hard for the expanded tax credit. Lawmakers said the program will not be extended again.
Critics say the tax credit is poorly targeted because the vast majority of people receiving it would have bought homes anyway.
"Essentially we're giving money to people for doing nothing different," said Ted Gayer, co-director of economic studies at the Brookings Institution, a Washington think tank.
But Susan Marvin, president of Marvin Windows and Doors in Warroad, Minn., near the Canadian border, said the economic benefits can be broad. She said, "If people are buying a home, they are far more likely to replace products or upgrade products."
Rep. John Lewis, D-Ga., said, "This tax credit has created jobs in the housing industry and real estate, and it will continue to create more jobs throughout our country."
Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes.
The credit is equal to 10 percent of the purchase price of a primary residence, up to a maximum of $8,000 for first-time homebuyers and $6,500 for others.
Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit.
Also on Thursday, the government-controlled mortgage company Fannie Mae announced a new program that could allow thousands of borrowers on the verge of foreclosure to have the option of renting their homes for a time from the company.
But the effort is likely to affect a relatively small number of people in comparison to the number of homes being repossessed.
The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that were included in a bill extending unemployment benefits for those without jobs for more than a year. The other tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years.
That break would help industries that have suffered big losses in the recession, including retailers, homebuilders and newspapers.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.
The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.
The bill is H.R. 3548.
Daily Commentary by Larry Baer 11/05/2009
SHORT-TERM TREND (10 days or less). Tilted ever so slightly in favor of higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Mortgage investors will likely spend the balance of the day putting the finishing touches on their risk management strategies before moving to the safety of the sidelines in front of tomorrow morning's October nonfarm payroll report.
News from the Labor Department earlier today indicating third-quarter productivity surged 9.5% on an annualized basis spawned a rally in the stock market while data contained in the same report showing unit labor costs plunged 5.2% ignited some buying interest in the mortgage market. Mortgage investors view the very powerful productivity gain and super-low labor costs as conditions reinforcing the Fed's ability to forgo any increase in their benchmark short-term interest rates for an "extended period of time" - and that is a condition that tends to be supportive of steady to perhaps fractionally lower mortgage interest rates.
In a separate report the Labor Department said the number of people receiving first-time jobless benefits fell by 20,000 last week to the lowest level since March. That is the good news portion of the current story from the labor market. The bad news is that during the week of October 17th enrollment in extended benefits programs increased by 24,600 while the Emergency Unemployment Compensation program enrollment rose by 90,000+. In recovery, businesses generally first expand existing worker hours and hire temporary workers before more permanently expanding payroll size. Neither of these trends has shown signs of picking up yet, implying the near-term prospects for the job market remain fairly bleak. The "so what" factor here is that against such a backdrop -- the power of a "surprise" improvement in the headline October nonfarm payroll figure to create a "Maalox Moment" in the mortgage market featuring rising rates and falling investor prices -- looses much of its potency.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Mortgage investors will likely spend the balance of the day putting the finishing touches on their risk management strategies before moving to the safety of the sidelines in front of tomorrow morning's October nonfarm payroll report.
News from the Labor Department earlier today indicating third-quarter productivity surged 9.5% on an annualized basis spawned a rally in the stock market while data contained in the same report showing unit labor costs plunged 5.2% ignited some buying interest in the mortgage market. Mortgage investors view the very powerful productivity gain and super-low labor costs as conditions reinforcing the Fed's ability to forgo any increase in their benchmark short-term interest rates for an "extended period of time" - and that is a condition that tends to be supportive of steady to perhaps fractionally lower mortgage interest rates.
In a separate report the Labor Department said the number of people receiving first-time jobless benefits fell by 20,000 last week to the lowest level since March. That is the good news portion of the current story from the labor market. The bad news is that during the week of October 17th enrollment in extended benefits programs increased by 24,600 while the Emergency Unemployment Compensation program enrollment rose by 90,000+. In recovery, businesses generally first expand existing worker hours and hire temporary workers before more permanently expanding payroll size. Neither of these trends has shown signs of picking up yet, implying the near-term prospects for the job market remain fairly bleak. The "so what" factor here is that against such a backdrop -- the power of a "surprise" improvement in the headline October nonfarm payroll figure to create a "Maalox Moment" in the mortgage market featuring rising rates and falling investor prices -- looses much of its potency.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Tuesday, November 3, 2009
Daily Commentary by Larry Baer 11/03/2009
SHORT-TERM TREND (10 days or less). Tilted slightly in favor of higher rates and lower investor prices
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Market participants will likely spend the next day holding their collective breath as they await the release of the Federal Open Market Committee's post-meeting statement scheduled for 2:15 p.m. ET tomorrow.
The members of the Federal Open Market Committee convened the first of a two-day monetary policy strategy session earlier this morning. Mortgage investors will be keenly interested to see what, if anything has changed in the Fed's thinking about the economy, government economic stimulus tactics and the appropriate level of short-term interest rates. In each of their post-meeting statements since March, the Fed has said it plans to keep interest rates "exceptionally low" for an "extended period."
There is a small chance the Fed may choose to do a little wordsmithing to the verbiage of their post-meeting statement this time around -- by dropping the phrase "exceptionally low" and/or "extended period" -- to clearly set the stage for a change in monetary policy in coming months. If this event were to occur -- holding out hope for notably lower mortgage interest rates would almost certainly be akin to betting on the worm to beat the feathers off of the robin.
Sooner or later the Fed is going to have to remove enough monetary policy support from the economy to see if it can stand on its own. In my opinion, as well as that of the vast majority of other analysts, the Fed will avoid any substantive change to their current strategies until the trend trajectory of employment turns higher for a least three consecutive months.
The likelihood that Friday's October nonfarm payroll report proves to be stronger than expected ramped up a couple of notches yesterday when detail in the October Institute of Supply Management report showed the manufacturing sector employment indexed jumped a sharp 6.9 points higher to 53.1. The "so what" factor here is significant. It was the first time this economic metric has been above the expansionary threshold since July 2008, and it was the highest reading since 2006 -- and all of that sharply increases the risk of a "knee-jerk" reaction to the employment data that sends mortgage interest rates higher. Heads up.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates and higher investor prices.
Commentary: Market participants will likely spend the next day holding their collective breath as they await the release of the Federal Open Market Committee's post-meeting statement scheduled for 2:15 p.m. ET tomorrow.
The members of the Federal Open Market Committee convened the first of a two-day monetary policy strategy session earlier this morning. Mortgage investors will be keenly interested to see what, if anything has changed in the Fed's thinking about the economy, government economic stimulus tactics and the appropriate level of short-term interest rates. In each of their post-meeting statements since March, the Fed has said it plans to keep interest rates "exceptionally low" for an "extended period."
There is a small chance the Fed may choose to do a little wordsmithing to the verbiage of their post-meeting statement this time around -- by dropping the phrase "exceptionally low" and/or "extended period" -- to clearly set the stage for a change in monetary policy in coming months. If this event were to occur -- holding out hope for notably lower mortgage interest rates would almost certainly be akin to betting on the worm to beat the feathers off of the robin.
Sooner or later the Fed is going to have to remove enough monetary policy support from the economy to see if it can stand on its own. In my opinion, as well as that of the vast majority of other analysts, the Fed will avoid any substantive change to their current strategies until the trend trajectory of employment turns higher for a least three consecutive months.
The likelihood that Friday's October nonfarm payroll report proves to be stronger than expected ramped up a couple of notches yesterday when detail in the October Institute of Supply Management report showed the manufacturing sector employment indexed jumped a sharp 6.9 points higher to 53.1. The "so what" factor here is significant. It was the first time this economic metric has been above the expansionary threshold since July 2008, and it was the highest reading since 2006 -- and all of that sharply increases the risk of a "knee-jerk" reaction to the employment data that sends mortgage interest rates higher. Heads up.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Friday, October 30, 2009
Daily Commentary by Larry Baer 10/30/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices
LONG-TERM TREND (11 days or more) Tilted slight in favors of lower rates and higher investor prices.
Commentary: It appears the mortgage market is poised to drift through the last trading day of October taking directional cues from trading activity in the stock markets. Lower stock prices will tend to support steady to fractionally lower mortgage interest rates. In the off-chance stock prices rally - look for mortgage investors to push rate sheet prices lower.
This morning's report of September Personal Income and Spending fell almost exactly on values most economists had projected - rendering the whole thing essentially toothless with respect to its influence on the trend trajectory of mortgage interest rates.
Looking ahead to next week the release of the Fed's post-meeting statement on Wednesday afternoon and the October nonfarm payroll numbers on Friday morning will dominate the macro-economic calendar. There is a chance the Fed will tweak the language in their statement to open the door for a potential short-term rate hike somewhere down the road. Most believe economic conditions are still too fragile for the Fed to run the risk of upsetting the credit market's apple cart. If the consensus view proves accurate, the Fed meeting will come and go without exerting much, if any direct influence on the direction of mortgage interest rates. On the other hand, if the Fed chooses to do a little wordsmithing - and investors interpret the change to indicate the Fed is considering moving away from their accommodative monetary policy stance -- expect market participants to register their displeasure by pushing interest rates higher and prices lower.
In my judgment the only threat of higher mortgage interest rates in Friday's nonfarm payroll data will be if the numbers prove to be significantly stronger than market participants now anticipate. In my judgment it will take a headline payroll number that shows job losses of 150,000 or less and/or a national jobless rate of 9.7% or lower and/or an average work week of 33.0 hours or more. The likelihood that one or any combination of these values actually appears in the Labor Department report is very small.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Tilted slight in favors of lower rates and higher investor prices.
Commentary: It appears the mortgage market is poised to drift through the last trading day of October taking directional cues from trading activity in the stock markets. Lower stock prices will tend to support steady to fractionally lower mortgage interest rates. In the off-chance stock prices rally - look for mortgage investors to push rate sheet prices lower.
This morning's report of September Personal Income and Spending fell almost exactly on values most economists had projected - rendering the whole thing essentially toothless with respect to its influence on the trend trajectory of mortgage interest rates.
Looking ahead to next week the release of the Fed's post-meeting statement on Wednesday afternoon and the October nonfarm payroll numbers on Friday morning will dominate the macro-economic calendar. There is a chance the Fed will tweak the language in their statement to open the door for a potential short-term rate hike somewhere down the road. Most believe economic conditions are still too fragile for the Fed to run the risk of upsetting the credit market's apple cart. If the consensus view proves accurate, the Fed meeting will come and go without exerting much, if any direct influence on the direction of mortgage interest rates. On the other hand, if the Fed chooses to do a little wordsmithing - and investors interpret the change to indicate the Fed is considering moving away from their accommodative monetary policy stance -- expect market participants to register their displeasure by pushing interest rates higher and prices lower.
In my judgment the only threat of higher mortgage interest rates in Friday's nonfarm payroll data will be if the numbers prove to be significantly stronger than market participants now anticipate. In my judgment it will take a headline payroll number that shows job losses of 150,000 or less and/or a national jobless rate of 9.7% or lower and/or an average work week of 33.0 hours or more. The likelihood that one or any combination of these values actually appears in the Labor Department report is very small.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Thursday, October 29, 2009
Daily Commentary by Larry Baer 10/29/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but vulnerable to a near-term pull-back.
LONG-TERM TREND (11 days or more) Titled slight in favors of lower rates and higher investor prices.
Commentary: Mortgage investors suffered a major "Maalox Moment" this morning when the government reported the economy grew at a significantly faster-pace than expected in the July through September period. The Commerce Department said their first estimate of Gross Domestic Product, a statistical measure of the value of all the goods and service produced in the country, showed a gain of 3.5%. The economic growth in the third-quarter of 2009 was the fastest since the third-quarter of 2007. The gain in third-quarter GDP was generally broad-based, with solid gains in consumer spending, exports and investment in home-construction. It seems for the time being mortgage investors are simply glossing over the fact that the big gains in consumer spending and residential investment were largely driven by limited term government stimulus programs like "cash-for-clunkers" and the first-time homebuyer tax credit.
The latest gain in GDP growth stands in stark contrast to the 12 month period that ended in June 2009, a period when the economy turned in its worst performance in 70 years. The four consecutive quarterly GDP declines through the Q2 2009 marks the longest stretch of negative national economic growth since quarterly records began in 1947.
The question that bond traders and stock investors will be attempting to answer now has to do with the sustainability of economic growth. Was the outstanding third-quarter performance a "one-trick-pony," created by large amounts of government support - or was it another piece of evidence suggesting the Great Recession is coming to a close?
Some analysts point to the fact that if we strip out auto sales, production, and inventories, the economy grew at 1.9% last quarter - a very lethargic rate of growth at best. While I agree with the idea that modest growth is better than no growth at all - the likelihood of sustainable and meaningful economic growth is, in my judgment, still very much dependant on job growth. The consumer is the engine that drives more than 70% of our domestic economic activity -- and until the employment picture improves dramatically - the probabilities are high that the national economic growth prospects will remain anemic.
Speaking of employment -- a separate report from the Labor Department this morning showed the number of workers filing new claims for jobless benefits dipped by 1,000 during the week ended October 24th. The still-elevated numbers of continuing claims (a measure of those drawing benefits after the initial week) and those claiming extended benefits and support from the Emergency Unemployment Compensation program paints nothing but a very dismal picture of current conditions in the labor market.
Uncle Sam is conducting the last of this week's scheduled four-part Treasury auctions. On the block today is a $31 billion stack of 7-year notes. Since March of this year the Fed has been a relatively strong buyer of these securities. That is the good news. The bad news is their $300 billion dollar direct purchase program draws to a close today. The Fed as already spent $298.063 billion of their total allocation -- and they will drop the last of it on Treasury securities maturing in the next 4- to 7-years before the end of the day.
Keep your fingers crossed that the bidding at today's auction remains aggressive without the support of the Fed direct purchases. The more aggressive the bidding is for the 7-year notes -- the better the prospects for steady mortgage interest rates. If today's 7-year note sale is a bust - look for mortgage interest rates to edge higher before the end of the day. I'll provide an update with the auction details as soon as possible following the conclusion of bidding at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Titled slight in favors of lower rates and higher investor prices.
Commentary: Mortgage investors suffered a major "Maalox Moment" this morning when the government reported the economy grew at a significantly faster-pace than expected in the July through September period. The Commerce Department said their first estimate of Gross Domestic Product, a statistical measure of the value of all the goods and service produced in the country, showed a gain of 3.5%. The economic growth in the third-quarter of 2009 was the fastest since the third-quarter of 2007. The gain in third-quarter GDP was generally broad-based, with solid gains in consumer spending, exports and investment in home-construction. It seems for the time being mortgage investors are simply glossing over the fact that the big gains in consumer spending and residential investment were largely driven by limited term government stimulus programs like "cash-for-clunkers" and the first-time homebuyer tax credit.
The latest gain in GDP growth stands in stark contrast to the 12 month period that ended in June 2009, a period when the economy turned in its worst performance in 70 years. The four consecutive quarterly GDP declines through the Q2 2009 marks the longest stretch of negative national economic growth since quarterly records began in 1947.
The question that bond traders and stock investors will be attempting to answer now has to do with the sustainability of economic growth. Was the outstanding third-quarter performance a "one-trick-pony," created by large amounts of government support - or was it another piece of evidence suggesting the Great Recession is coming to a close?
Some analysts point to the fact that if we strip out auto sales, production, and inventories, the economy grew at 1.9% last quarter - a very lethargic rate of growth at best. While I agree with the idea that modest growth is better than no growth at all - the likelihood of sustainable and meaningful economic growth is, in my judgment, still very much dependant on job growth. The consumer is the engine that drives more than 70% of our domestic economic activity -- and until the employment picture improves dramatically - the probabilities are high that the national economic growth prospects will remain anemic.
Speaking of employment -- a separate report from the Labor Department this morning showed the number of workers filing new claims for jobless benefits dipped by 1,000 during the week ended October 24th. The still-elevated numbers of continuing claims (a measure of those drawing benefits after the initial week) and those claiming extended benefits and support from the Emergency Unemployment Compensation program paints nothing but a very dismal picture of current conditions in the labor market.
Uncle Sam is conducting the last of this week's scheduled four-part Treasury auctions. On the block today is a $31 billion stack of 7-year notes. Since March of this year the Fed has been a relatively strong buyer of these securities. That is the good news. The bad news is their $300 billion dollar direct purchase program draws to a close today. The Fed as already spent $298.063 billion of their total allocation -- and they will drop the last of it on Treasury securities maturing in the next 4- to 7-years before the end of the day.
Keep your fingers crossed that the bidding at today's auction remains aggressive without the support of the Fed direct purchases. The more aggressive the bidding is for the 7-year notes -- the better the prospects for steady mortgage interest rates. If today's 7-year note sale is a bust - look for mortgage interest rates to edge higher before the end of the day. I'll provide an update with the auction details as soon as possible following the conclusion of bidding at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Wednesday, October 28, 2009
Senators agree to extend homebuyer tax credit
By Stephen Ohlemacher, Associated Press Writer WASHINGTON (AP) - Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new homes sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to "repeat buyers" who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev. (Note that the federal definition for first-time homebuyers are those that have not owned a home for the past three years.)
The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.
Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.
Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.
Majority Democrats have refused to add the amendments.
If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
The tax credit for money-losing businesses is a favorite among Republican lawmakers. Businesses could get tax refunds by using losses from 2008 and 2009 to offset taxable profits made in the previous five years. Under current law, they can only offset profits from the previous two years.
The provision would help a variety of industries, including retailers, manufacturers and home builders, though it's expensive.
"It's clearly a way to put cash in the hands of some major economic players," said Clint Stretch, a tax policy expert at Deloitte Tax.
A similar proposal that was ultimately dropped from the economic stimulus package enacted in February would have cost nearly $20 billion over 10 years. Lawmakers are working to reduce the price tag.
"Because everybody is so cash strapped, this is a good way to get refund when businesses need it for operating expenses," said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation.
Copyright 2009 The Associated Press.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new homes sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to "repeat buyers" who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev. (Note that the federal definition for first-time homebuyers are those that have not owned a home for the past three years.)
The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.
Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.
Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.
Majority Democrats have refused to add the amendments.
If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
The tax credit for money-losing businesses is a favorite among Republican lawmakers. Businesses could get tax refunds by using losses from 2008 and 2009 to offset taxable profits made in the previous five years. Under current law, they can only offset profits from the previous two years.
The provision would help a variety of industries, including retailers, manufacturers and home builders, though it's expensive.
"It's clearly a way to put cash in the hands of some major economic players," said Clint Stretch, a tax policy expert at Deloitte Tax.
A similar proposal that was ultimately dropped from the economic stimulus package enacted in February would have cost nearly $20 billion over 10 years. Lawmakers are working to reduce the price tag.
"Because everybody is so cash strapped, this is a good way to get refund when businesses need it for operating expenses," said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation.
Copyright 2009 The Associated Press.
Daily Commentary by Larry Baer 10/28/2009
SHORT-TERM TREND (10 days or less). Favors lower rates and higher investor prices but vulnerable to a near-term pull-back.
LONG-TERM TREND (11 days or more) Titled slight in favors of lower rates and higher investor prices.
Commentary: The mortgage market got off to a friendly start this morning as lower-than-expected September new home sales figures offset encouraging data from the manufacturing sector that came in the form of surprisingly solid September Durable Goods numbers.
In a separate report the Mortgage Bankers of America reported their index of seasonally adjusted mortgage applications (a value that includes requests for both purchase and refinance loans) slipped 12.3% lower during the week ended October 23rd. Purchase applications were down 5.2% and refinance applications declined 16.2%. During the reporting period the average 30-year fixed-rate mortgage was 5.04%, down three basis-points from the prior week -- and down 122 basis-points from the year ago mark.
The mixed signal from the economy was enough to induce a round of selling in the stock markets. As capital leaves riskier asset classes like stocks - it is typically looking for a safe place in which to hang-out - and that is a condition that tends to make government debt obligations and mortgage-backed securities shine as an attractive sanctuary for these money flows. The more money that flows into the credit markets - and particularly into mortgage-backed securities - the more supportive it becomes of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The timing of ramped-up selling pressure in the equity markets could not have come at a better time from a credit market perspective. Uncle Sam is conducting an auction today looking to borrow $41 billion in the form of 5-year notes. The more aggressive the bidding becomes for these securities -- the better the prospects for steady to perhaps fractionally lower mortgage interest rates. The first two legs of this week's Treasury auctions - Monday's $7 billion of 5-year inflation indexed securities and yesterday's $44 billion of 2-year notes - drew slightly better-than-expected demand. If today's 5-year note sale keeps the string alive this event's impact on the trend trajectory of mortgage interest rates will likely be very limited. In the off-chance today's 5-year note sale is a bust - look for mortgage interest rates to edge higher before the end of the day. I'll provide an update with the auction details as soon as possible following the conclusion of bidding at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
LONG-TERM TREND (11 days or more) Titled slight in favors of lower rates and higher investor prices.
Commentary: The mortgage market got off to a friendly start this morning as lower-than-expected September new home sales figures offset encouraging data from the manufacturing sector that came in the form of surprisingly solid September Durable Goods numbers.
In a separate report the Mortgage Bankers of America reported their index of seasonally adjusted mortgage applications (a value that includes requests for both purchase and refinance loans) slipped 12.3% lower during the week ended October 23rd. Purchase applications were down 5.2% and refinance applications declined 16.2%. During the reporting period the average 30-year fixed-rate mortgage was 5.04%, down three basis-points from the prior week -- and down 122 basis-points from the year ago mark.
The mixed signal from the economy was enough to induce a round of selling in the stock markets. As capital leaves riskier asset classes like stocks - it is typically looking for a safe place in which to hang-out - and that is a condition that tends to make government debt obligations and mortgage-backed securities shine as an attractive sanctuary for these money flows. The more money that flows into the credit markets - and particularly into mortgage-backed securities - the more supportive it becomes of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The timing of ramped-up selling pressure in the equity markets could not have come at a better time from a credit market perspective. Uncle Sam is conducting an auction today looking to borrow $41 billion in the form of 5-year notes. The more aggressive the bidding becomes for these securities -- the better the prospects for steady to perhaps fractionally lower mortgage interest rates. The first two legs of this week's Treasury auctions - Monday's $7 billion of 5-year inflation indexed securities and yesterday's $44 billion of 2-year notes - drew slightly better-than-expected demand. If today's 5-year note sale keeps the string alive this event's impact on the trend trajectory of mortgage interest rates will likely be very limited. In the off-chance today's 5-year note sale is a bust - look for mortgage interest rates to edge higher before the end of the day. I'll provide an update with the auction details as soon as possible following the conclusion of bidding at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
Tuesday, October 27, 2009
Home prices rise in most major cities in August
Home prices rise in most major cities in August
by Associated Press
Originally printed at http://www.katu.com/news/business/66415772.html
NEW YORK (AP) - Home prices rose for the third straight month in August, data Tuesday showed, a key ingredient for a broad and sustained housing recovery.
The Standard & Poor's/Case-Shiller home price index of 20 major cities climbed 1 percent from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February.
The index showed a widespread turnaround with prices rising month-over-month in 15 metro areas since June. San Francisco, Minneapolis and San Diego led the way.
Prices are at levels not seen since August 2003 and have fallen almost 30 percent from the peak in May 2006.
Low prices and mortgage rates combined with a temporary tax credit for first-time buyers have spurred sales. Home resales climbed more than 9 percent in September, the largest amount in more than 26 years, the National Association of Realtors said last week. Sales figures for newly built homes are due out Wednesday.
"In general we view the latest (price) increase as positive, while also recognizing that there could still be some further price drops still to come," said Abiel Reinhart, an economist at JPMorgan Chase Bank, in a research note.
Zach Pandl, an economist at Nomura Global Economics, expects prices to fall to levels reached earlier this year, possibly reversing all of the gains of the summer.
"We need to see flat to rising prices in the winter months. That would be a very encouraging sign that prices have bottomed out," he said.
Economists are concerned the nascent trend in home prices cannot withstand falling consumer confidence, rising unemployment and foreclosures and the looming deadline for a first-time homebuyer tax credit.
Congress is debating extending a temporary tax credit that saves first-time buyers 10 percent of the sales price, up to $8,000. This week, top Democrats in the Senate pressed a plan that would prolong the credit but gradually phase it out over the next year.
Supporters will likely point to new data Tuesday that showed confidence about the U.S. economy fell unexpectedly in October. With job prospects bleak, the Conference Board's Consumer Confidence Index fell almost 6 points from September to the lowest level since May.
And home prices are not rising everywhere.
Prices in Las Vegas, Seattle and Charlotte, N.C., all fell to their lowest levels in August. Prices in Las Vegas have plunged by 56 percent since peaking in April 2006, the largest peak-to-trough decline of all 20 cities.
by Associated Press
Originally printed at http://www.katu.com/news/business/66415772.html
NEW YORK (AP) - Home prices rose for the third straight month in August, data Tuesday showed, a key ingredient for a broad and sustained housing recovery.
The Standard & Poor's/Case-Shiller home price index of 20 major cities climbed 1 percent from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February.
The index showed a widespread turnaround with prices rising month-over-month in 15 metro areas since June. San Francisco, Minneapolis and San Diego led the way.
Prices are at levels not seen since August 2003 and have fallen almost 30 percent from the peak in May 2006.
Low prices and mortgage rates combined with a temporary tax credit for first-time buyers have spurred sales. Home resales climbed more than 9 percent in September, the largest amount in more than 26 years, the National Association of Realtors said last week. Sales figures for newly built homes are due out Wednesday.
"In general we view the latest (price) increase as positive, while also recognizing that there could still be some further price drops still to come," said Abiel Reinhart, an economist at JPMorgan Chase Bank, in a research note.
Zach Pandl, an economist at Nomura Global Economics, expects prices to fall to levels reached earlier this year, possibly reversing all of the gains of the summer.
"We need to see flat to rising prices in the winter months. That would be a very encouraging sign that prices have bottomed out," he said.
Economists are concerned the nascent trend in home prices cannot withstand falling consumer confidence, rising unemployment and foreclosures and the looming deadline for a first-time homebuyer tax credit.
Congress is debating extending a temporary tax credit that saves first-time buyers 10 percent of the sales price, up to $8,000. This week, top Democrats in the Senate pressed a plan that would prolong the credit but gradually phase it out over the next year.
Supporters will likely point to new data Tuesday that showed confidence about the U.S. economy fell unexpectedly in October. With job prospects bleak, the Conference Board's Consumer Confidence Index fell almost 6 points from September to the lowest level since May.
And home prices are not rising everywhere.
Prices in Las Vegas, Seattle and Charlotte, N.C., all fell to their lowest levels in August. Prices in Las Vegas have plunged by 56 percent since peaking in April 2006, the largest peak-to-trough decline of all 20 cities.
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About Me
- David Kimmer
- Beaverton, OR, United States
- David is a loan officer for American Pacific Mortgage. He has worked in the lending industry since 2000. Prior to that he invested 19 years in the insurance industry. He enjoys helping people finance the purchase of their dream home.