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.

Related articles

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

Housing Supply Decreases, Good for Housing:

In the latest release of the National Association of Realtors‘ Existing Home Sales report, there were some very interesting facts.  Even though they reported a month-over-month decrease of 2.6% in existing home sales, they revised February’s data upward. The NAR said even with March’s decline, the pace of sales in the first three months of the year marked the strongest first quarter since 2007.

But the real gem is the inventory data.  The nation’s glut of unsold homes is easing, as inventories fell to 2.37 million. Realtors in some markets have even reported shortages of housing stock. A decrease in the amount of homes on the market is always good for housing as it stabilizes and even drives prices upward.  Nationwide, the median price for a home resale rose to $163,800 in March, up 2.5 percent from a year earlier.

An improving labor market has realtors upbeat about sales prospects for the rest of the year.

Distressed home sales accounted for only 29 percent of resales, down from 34 percent in February, which is also a very positive trend.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +15 basis points from last Friday to the prior Friday which caused mortgage rates to move sideways.

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

MBS traded in a very narrow range all week as we had a light week in terms of the economic data that was released.

Retail Sales were much better than expected but Initial Jobless Claims and Existing Home Sales were worse than expected, there were no major Treasury auctions to guide the market last week.