Consumer Sentiment Best Levels in 4 Years:

U.S. consumer sentiment rose to its highest level in more than four years in early May as Americans remained upbeat about the job market, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s preliminary May reading on the overall index on consumer sentiment improved to 77.8 from 76.4 in April, topping forecasts for 76.2. It was the highest level since January 2008.

Despite the recent slowdown in job growth, nearly twice as many consumers reported hearing about new job gains than said they had heard about recent job losses, the survey said.

The data suggests that either more positive numbers on the labor market will be seen soon, or that consumers have ratcheted up their expectations too high, survey director Richard Curtin said in a statement.

Housing demand is very closely tied to Consumer Sentiment reading, so this is more great news to go along with fantastic mortgage rates as the busy purchase season ramps up.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -11 basis points from last Friday to the prior Friday which caused mortgage rates to increase slightly from the beginning of the week.  However, they remained near the best levels of 2012.

The highest rates of the week were on Friday and the lowest rates of the week were on Tuesday.

MBS were pressured lower (higher rates) on better than expected U.S. economic news.  The Mortgage Industry Index, Initial Jobless Claims and Consumer Sentiment were all better than market expectations.

However, MBS also received a lot of support with strong demand for the 30 year U.S. Treasury Bond and heightened concern over the future of Europe.  This concern caused U.S. based bonds such as mortgage backed securities to be in high demand as a safe way to park your money.

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• Consumer Sentiment Moves Off Of Highs: (michael-mcdevitt.com)

Consumer Sentiment Moves Off Of Highs:

Americans turned less optimistic about the economy in early February on worries about falling income even as their outlook on the jobs market rose to a record high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell back in February with a preliminary score of 72.5 that is 2.5 pts lower than January’s score of 75.

Current conditions, and more precisely a negative tone towards current finances, was the heaviest drag. Even though optimism towards the job market kept up, the CSI was unable to hang on to sentiment expressed last month. Market expectations averaged to 74.5.

The optimism in their job outlook is encouraging though and is certainly reflective of the steady string of better than expected Initial Weekly Jobless Claims and the recent decline in the national Unemployment Rate.  As these trends in lower Unemployment continue, look for the Consumer Sentiment to regain some ground.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -26 basis points from last Friday to the prior Friday which moved mortgage rates higher on a week-over-week basis.  That also marked a -68 basis point drop in MBS pricing from our all time high on 02/02/12.

Mortgage backed securities (and therefore mortgage rates) moved sideways during the week with only minor movements in reaction to the 10 year and 30 year U.S. Treasury auctions.  But MBS did sell off on Friday on news that Greece would come through with another austerity package that would qualify them for additional bailout funds.

The Greek story has been an important one for mortgage rates.  Mortgage rates are artificially too low due to increased demand for U.S. bonds as a pure “safety play” against a European financial collapse.  A default by Greece would start a “domino effect” of other countries defaults too.  So, any positive news that a default is postponed will cause our rates to increase.

Today? 

Fed Releases Orders Related to Banks in Mortgage Settlement

The Federal Reserve Board released today the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.

ABA: Statement on Proposed Bank Tax

“The banking industry strongly opposes the $61 billion bank tax included in President Obama’s budget proposal. Despite claims to the contrary, the facts on TARP are very clear: Taxpayers have profited $13 billion from their investments in banks through the program and Treasury predicts they will see a lifetime positive return of more than $20 billion. Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred.

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Consumer Sentiment Increases Again:

Consumer Sentiment Increased for the Third Straight Month

Confidence among U.S. consumers rose more than projected in November, offering additional support to the biggest part of the economy.  It was the third straight month of increases in consumer sentiment.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

U.S. consumers are entering the holiday shopping season with a more optimistic outlook than they had a month ago, largely because of a recent decline in gas prices, according to the widely watched index.

Consumer Sentiment is very key to the housing industry.  As consumers feel more confident in their expectations about the economy, they are more likely to finally make the move to purchase their next home.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -54 basis points from last Friday to the prior Friday which moved mortgage rates higher. As we have reported for the past several weeks, bonds have been trading in reaction to what has been going on in Europe and have largely ignored the U.S economic data. Last week certainly followed that trend.  Bonds (which include mortgage backed securities) sold off (causing rates to rise) as Greece appointed a new Prime Minister and on news reports that the Italian Prime Minister would step down.  This helped to remove some uncertainty from the market place and investors removed some funds from the safe-haven of bonds. On the domestic front, we had a luke-warm 30 year U.S. Treasury auction and Initial Jobless Claims and Consumer Sentiment were much better than expected. These also pressured MBS lower.

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	Economic Release
15-Nov	NY Empire State Manufacturing Idx
15-Nov	Producer Price Index (MoM)
15-Nov	Prod Price Index (YoY)
15-Nov	Prod Price Index ex (MoM)
15-Nov	Prod Price Index ex (YoY)
15-Nov	Retail Sales (MoM)
15-Nov	Retail Sales ex Autos (MoM)
15-Nov	Business Inventories
16-Nov	MBA Mortgage Applications
16-Nov	Consumer Price Index (MoM)
16-Nov	Consumer Price Index (YoY)
16-Nov	Cons Pr Idx Ex (MoM)
16-Nov	Co Price Index Ex (YoY)
16-Nov	Net Long-Term TIC Flows
16-Nov	Total Net TIC Flows
16-Nov	Capacity Utilization
16-Nov	Industrial Production (MoM)
16-Nov	NAHB Housing Market Index
16-Nov	EIA Crude Oil Stocks change
17-Nov	Building Permits (MoM)
17-Nov	Continuing Jobless Claims
17-Nov	Housing Starts (MoM)
17-Nov	Initial Jobless Claims
17-Nov	Ph Fed Manufacturing Survey
18-Nov	Leading Indicators (MoM)

 

 

 

 

 

 

 

 

 

 

 

 

 

Employment Picture Improving And Pressured MBS

While unemployment levels will continue to be a major concern and a drag on our economy, several reports showed some improvement last week. The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

“This is the single biggest factor in housing. Regardless of interest rates – people simply don’t purchase homes when they are unemployed or are concerned about their employment picture. This is why the following data is welcome news for the housing industry.”

The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

Non-farm Payrolls jumped up to 103K in September, from the revised previous month’s result of 57K, the U.S. Department of Labor reported. The results considerably exceeded forecasts of 73K growth. The change in total non-farm Payroll employment for July was also revised upward from 85K to 127K.

Average Hourly Earnings increased to 0.2% in September, following a 0.2% drop in August. On an annual basis Average Hourly Earnings remained flat at 1.9% for the second consecutive month in September.

Average Weekly Hours increased to 34.3 in September from 34.2 in August, despite forecasts of remaining at the same level.

In a separate report, the ADP Private Payroll data which measures U.S. non-farm private business sector hirings increased by 91K in September, after rising 89K in August. This was higher than market forecasts of only a 75K increase.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -130 basis points from last Friday to the prior Friday which moved mortgage rates upward. This was in reaction to a slew of much better than expected U.S. economic data.

“One of the main reasons that mortgage rates are so low (we hit our historical low on 09/22/11) is due to concern over a perceived weak economic recovery. So, when the market sees data that is better than expected (and even shows economic growth), MBS sell off which causes mortgage rates to rise.”

We received much better than expected news out of both the manufacturing and servicing sectors with strong ISM data. The improvement in the non-farm and private payroll data also pressured MBS.

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	Economic Event
9-Oct	Columbus Day
11-Oct	IBD/TIPP Economic Optimism (MoM)
11-Oct	FOMC Minutes
12-Oct	MBA Mortgage Applications
13-Oct	Continuing Jobless Claims
13-Oct	Initial Jobless Claims
13-Oct	Trade Balance
13-Oct	EIA Crude Oil Stocks change
13-Oct	Monthly Budget Statement
14-Oct	Export Price Index (MoM)
14-Oct	Import Price Index (MoM)
14-Oct	Import Price Index (YoY)
14-Oct	Retail Sales (MoM)
14-Oct	Retail Sales ex Autos (MoM)
14-Oct	Reuters/MI Consumer Sentiment
14-Oct	Business Inventories

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 that are the only thing government and conventional mortgage rates are based upon.

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Pending Home Sales up 13%:

NAR 'DC'

Pending Home Sales are homes that have a purchase contract in place but have not yet closed. The National Association of Realtors released their data for August and it showed a year-over-year annual improvement of 13.1%.

When comparing August to July, pending home sales slipped but less than market forecasts. Economists expected Pending Home Sales to decrease month-over-month by -1.8%. The actual number was a little better at -1.2%. Hurricane Irene, which battered the Northeast at the end of the month, was likely a factor in the decline.

 

Three of four regions throughout the United States saw declines in the number of contracts to purchase previously owned homes. The Northeast region experienced the largest loss of 5.8 percent as a result of significant disruption by Hurricane Irene, according to NAR chief economist Lawrence Yun. Meanwhile, sales in Midwest and West also fell 3.7 percent and 2.4 percent, respectively. In contrast, a 2.6 percent gain in the South helped reduce the total loss of pending home sales in the month.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) were unchanged from last Friday to the prior Friday but we stilled closed down -100  basis points from our best pricing levels in history on 09/22/11.

We had a very volatile week where mortgage rates escalated Monday through Wednesday and then rebounded by Friday.

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	Economic Event	Cons.	Previous
3-Oct	ISM Manufacturing Index	50.50%	50.60%
3-Oct	Construction Spending	-0.06%	-1.30%
3-Oct	Fed’s Lackert Speaks
4-Oct	Factory Orders	-0.10%	2.40%
4-Oct	Bernake Speaks
5-Oct	Challenger Job Cuts		47%
5-Oct	ADP Private Payroll Report	48K	91K
5-Oct	ISM Servicing Index	53	53.3
6-Oct	Initial Jobless Claims	401K	391K
6-Oct	Continuing Jobless Claims	3.7M	3.729M
7-Oct	Non-Farm Payrolls	63K	0K
7-Oct	Unemployment Rate	9.10%	9.10%
7-Oct	Wholesale Inventories	0.60%	0.80%
7-Oct	Consumer Credit	7.0B	12.0B

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.

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Housing Market Update: Consumer Confidence Rises

Confidence among U.S. consumers rose in September from the lowest level since November 2008 as Americans’ views of current economic conditions improved.The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August. The median estimate of economists surveyed by Bloomberg News called for a reading of 57. The group’s measure of consumer expectations six months from now dropped to the lowest level since May 1980.

The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, increased to 74.5 from 68.7 the prior month.

This is very important to the housing industry because it it not interest rates but the consumer’s outlook on the economy that drives demand for housing.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -68 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday.  Mortgage rates were pressured due to some inflationary economic news.  Both the Producer Price Index and the Consumer Price Index showed increases which is inflationary and mortgage rates do not react well to any inflationary data.  We also saw better than expected Consumer Sentiment which is also usually bad for mortgage rates.

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	Time	Economic Release
19-Sep	10:00	NAHB Housing Market Index
19-Sep	10:30	Barack Obama Press Conference
20-Sep	8:30	Building Permits (MoM)
20-Sep	8:30	Housing Starts (MoM)
21-Sep	7:00	MBA Mortgage Applications
21-Sep	10:00	Existing Home Sales (MoM)
21-Sep	10:00	Existing Home Sales Change
21-Sep	10:30	EIA Crude Oil Stocks change
21-Sep	14:15	Fed Interest Rate Decision
21-Sep	14:15	Fed’s Press Conference
22-Sep	8:30	Continuing Jobless Claims
22-Sep	8:30	Initial Jobless Claims
22-Sep	10:00	Housing Price Index (MoM)
22-Sep	10:00	Leading Indicators (MoM)

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.

Existing Home Sales Jump Again:

Despite bad weather, U.S. home sales jumped more than expected in December.  Sales of previously occupied homes soared 12.3 percent last month which far surpassed national forecasts of an increase of only 4.5%.  This marks the second straight month of significant gains in sales.  In November, Existing Home Sales surged 6.1%.  The national median home price in December was $169,300 which was only 0.2% lower than levels a year ago.  This is important to note because 36% of homes sold in December where under the “distressed” category.  And even though this is a larger than normal percentage of sales, the national median home price barely moved.  In fact, it actually increased in some ares such as the Midwest (+3.3%).

In other news, Housing Starts decreased from 553K to 529K.  While the media has had a field day of reporting this as bad news…it is actually good news!  The number one reason that the housing industry fell was over supply.  And with supply levels still above where they need to be, any addition to those levels (for example by building even more homes) is not a good idea.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -54BPS from Tuesday’s open (Monday was closed due to the holiday) to Friday’s close which caused 30 year fixed rates to move higher.  MBS generally trade in the opposite direction of positive economic news.  And last week we had a lot of positive economic news with strong results from Existing Home Sales, Initial Jobless Claims, Leading Economic Indicators and more.

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