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.
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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.