Home Prices to Rise in 2010:

According to a recent poll by Reuters, U.S. house prices will manage a small gain in 2010.  Home sales and prices may retreat slightly in the near-term after government tax credits to homebuyers end.  But that trend will be countered by historically low mortgage rates and the fact that housing affordability is now near the best it has ever been.  This is likely to put prices back on a slow path upward.

Three-quarters of the economists that were polled said it was possible for the average home price to return to where they were in 2006 – before the crash.  That would require a rise of more than 40 percent and will still take a long time.  Home prices as measured by the Case-Shiller 20 city index should rise 1.4% this year and 3% next year according to the economists’ median forecast.

Most States Show Improvement in Jobless Rates:

Most states across our country saw an improvement in employment in April as jobless rates dropped from the previous month, according to government data released on Friday.

34 states and the District of Columbia saw their rates decrease in April from the previous month.  Only six states saw increases and 10 states had no change in their unemployment, according to the Labor Department.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +56 basis points last week which caused 30 year fixed rates to decrease for both government and conventional loans to their best levels of 2010.  MBS pricing increased (which causes mortgage rates to go down) due primarily to concerns about a default by Greece and the instability and uncertainty over the future of the European Union. This is a very rare event, as it is the first time since the formation of the EU that their system has been tested.  This is helping to push massive amounts of international funds into our Treasuries and our mortgage backed securities and temporarily pushing 30 year fixed rates to record lows.

Foreclosure Rates Fall:

The most recent sign of growth in the housing industry comes from a new report released by RealtyTrac.  They reported that foreclosures in the U.S. fell by more than 2% in April from a year earlier.  The great news is that this is the very first year-over-year decline since the housing crisis began.

RealtyTrac’s index fell 9% from March 2010 to April 2010 and 2.4% from April 2009 to April 2010.  This data shows that the foreclosure situation is slowing and may have already hit a plateau.  Currently, 1 out of 387 homes are in foreclosure.  That means that 386 out of 387 homes are not in foreclosure!

Consumer Sentiment Strong:

The University of Michigan’s Consumer Sentiment Index rose to its best levels since our Recession began.  This is very important because housing demand is very clearly tied with how consumers feel about economic conditions and their own financial outlook.

Consumer Sentiment rose to 73.3 in May, up from the April reading of 72.2.  Buried within this report were two other nuggets:  The survey showed that the consumer inflation expectation index rose to 3.1% which is the highest reading since June of 2009.  Inflation naturally causes mortgage rates to increase, so we need to keep an eye on this.

The survey’s gauge of current economic conditions edged upward to a very high 81.1 and the barometer of consumer expectations also rose in May to 68.3.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +7 basis points last week which caused 30 year fixed rates to decrease for both government and conventional loans to their best levels of 2010.  MBS pricing increased (which causes mortgage rates to go down) due primarily to Greece. Although there is over $1 trillion that has been made available through loans by the IMF, the European Union, and individual countries in the EU, most economists are skeptical that it is enough to stem the tide.  The global uncertainty causes investors to park their money into U.S. treasuries and MBS.  This artificial (and temporary) demand helped to push mortgage rates down after a very volatile week.

Pending Home Sales Rise 21.1%:

Pending sales of previously owned homes from March of 2009 to March of 2010 rose 21.1%, showing continued strength in the housing market.

The National Association of Realtors said its Pending Home Sales Index, which is based upon contracts signed in March, increased 5.3% on a monthly basis – building on the prior month’s revised rise of 8.3%.

It is clear that we have seen a steady increase in housing demand.  Now is the time to start to seriously consider buying now before prices start to accelerate.

Payrolls Increase Again:

The Labor Department reported that Non-Farm Payrolls increased by 290,000.  This is the second consecutive week where our economy has added jobs.  Plus, they revised March’s numbers from 162,000 all the way up to 230,000.

Hiring for the census accounted for 66,000 of the new jobs.  If you subtract the jobs added by the federal government, we can see that the private sector accounted for 224,000 new jobs.  This shows that our economy is adding jobs.  This is the largest increase since March of 2006.  This is very important because housing is not about location, location, location.  It is about jobs, jobs, and jobs!

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +81 basis points last week which caused 30 year fixed rates to decrease for both government and conventional loans to their best levels since March.  MBS pricing increased (which causes mortgage rates to go down) due primarily to Greece.  Yes, Greece.  With concern about their looming default on their sovereign debt and the subsequent “domino affect” all across Europe, money flew into U.S. treasuries and MBS.  This artificial (and temporary) demand helped to push mortgage rates down.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date	ET	Release	For
11-May	10:00	Wholesale Inventories	Mar
12-May	8:30	Trade Balance	Mar
12-May	10:30	Crude Inventories	8-May
12-May	14:00	Treasury Budget	Apr
13-May	8:30	Continuing Claims	8-May
13-May	8:30	Initial Claims	8-May
13-May	8:30	Export Prices ex-ag.	Apr
13-May	8:30	Import Prices ex-oil	Apr
14-May	8:30	Retail Sales	Apr
14-May	8:30	Retail Sales ex-auto	Apr
14-May	9:15	Capacity Utilization	Apr
14-May	9:15	Industrial Production	Apr
14-May	9:55	Mich Sentiment	May
14-May	10:00	Business Inventories	Mar

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Home Prices Rise Nationwide for First Time:

The Case-Shiller 20 city and 10 city indexes increased year-over-year for the first time since December 2006 which is considered the beginning of the housing slump.

The index rose 1.4% for the 10 city index and 0.6% for 20 city index.  It is first time in over three years that the indexes were above zero.  A reading above zero shows price increases.

This housing indicator clearly shows that the housing market is making its way back.  That means that this is the year to purchase before the market takes off.

Economy Grows at 3.2%:
The Gross Domestic Product (GDP) for this first quarter grew at a rate of 3.2%.  The GDP is our nation’s report card and shows if we growing or shrinking.  This is the third straight GDP report that is in positive territory.

The report showed that consumer spending accelerated at a 3.6% rate which was double the 1.6% pace in the 4th quarter of last year.  Consumer spending makes up approximately 70% of U.S. economic activity, and it added 2.55 percentage points to GDP last quarter.  That is the biggest percentage contribution since 2006.

Manufacturing also continued to show growth as businesses continue to rebuild low inventory levels.  This generally leads to job growth which, is the precursor to increased housing demand.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +65 basis points last week which caused 30 year fixed rates to decrease for both government and conventional loans to their best levels in two weeks.  MBS pricing increased (which causes mortgage rates to go down) due primarily to Greece.  Yes, Greece.  With concern about their looming default on their sovereign debt and the subsequent “domino affect” all across Europe, money flew into U.S. treasuries and MBS.  This artificial (and temporary) demand helped to push mortgage rates down.

Date	ET	Release	For
3-May	8:30	Personal Income	Mar
3-May	8:30	Personal Spending	Mar
3-May	10:00	Construction Spending	Mar
3-May	10:00	ISM Index	Apr
3-May	14:00	Auto Sales	Apr
3-May	14:00	Truck Sales	Apr
4-May	10:00	Factory Orders	Mar
5-May	8:15	ADP Employment Change	Apr
5-May	10:00	ISM Services	Apr
5-May	10:30	Crude Inventories	1-May
6-May	8:30	Continuing Claims	1-May
6-May	8:30	Initial Claims	1-May
6-May	8:30	Productivity-Prel	Q1
7-May	8:30	Average Workweek	Apr
7-May	8:30	Hourly Earnings	Apr
7-May	8:30	Nonfarm Payrolls	Apr
7-May	8:30	Unemployment Rate	Apr
7-May	15:00	Consumer Credit	Mar

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.