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.

Retail Sales Strongest Rate Since February:

Headline Retail Sales for September increased at a rate of 1.1% which more than doubled market forecasts of 0.5%. The Core Retail Sales (this excludes autos) also increased more than expected.  It came in at 0.6% which was three times better than the market forecasts of 0.2%.

This is very important for the housing market because housing demand is very closely tied to consumer confidence. This brings up a very interesting point. Various consumer sentiment and consumer confidence reports have shown a recent dip in their readings. So, consumers are telling the survey takers that they feel less positive about the economy and that they are less willing to spend money. But those reports are based upon surveys.

Retail Sales are based upon real and actual sales. And clearly, consumers are spending more which means their economic outlook is positive and that is always a positive for the housing market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -75 basis points from last Friday to the prior Friday which moved mortgage rates upward and landed mortgage rates at their highest levels in three weeks.

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 Retail Sales.  MBS also pulled back (higher rates) as the European Union appeared to have some less-negative news. This is important because their is certainly a “flight to safety” premium in all bonds due the concerns over the Eurozone and that has been a major factor in pushing mortgage rates lower. So, the less-negative news hurt mortgage rates.

Related articles

• Mortgage Delinquency Rates Decline: (michaeltmcdevitt.wordpress.com)

Fannie Mae: September Economics and Mortgage Market Analysis

Leading indicators for home sales point to subdued housing demand. Respondents to the Fannie Mae National Housing Survey indicate a continued shift of sentiment toward renting and away from ownership, at least in the near term. In the second quarter, 26 percent of Americans were worried about their job stability. When combined with the 9 percent of unemployed households, more than a third of the potential workforce was worried about their employment status – hardly a strong support for housing demand.

After rising for two consecutive months, pending home sales (contract signings of existing homes) fell in July, which bodes poorly for existing home sales in August and September. Pending home sales generally lead the existing home sales data by one or two months. However, the link between contract signings and closings has weakened lately such that the gains in pending home sales in recent months have not materialized into contract signings. Low appraisals compared to contract prices and concerns about the economy may have led to contract cancellations and delays. Also, some contracts have had to be cancelled because the potential buyers could not sell their current homes.

September Economic Developments
September Economic Forecast
September Housing Forecast

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.