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.

Pending Home Sales Hit 19 Month High:

The number of Americans who signed contracts to buy homes in November rose to the highest level in a year and a half. The best reading on pending homes sales since a federal home-buying tax credit expired appeared to encourage traders on Wall Street.
The Realtors group said Thursday that its index of sales agreements jumped 7.3 percent last month to a reading of 100.1. A reading of 100 is considered healthy. The last time the index was that high was in April 2010, one month before the tax credit expired.

Contract signings usually indicate where the housing market is headed. There’s a one- to two-month lag between a signed contract and a completed deal.

Homes are the most affordable they’ve been in decades. Long-term mortgage rates are at historic lows and prices in most metro areas have tumbled since late 2006.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +95 basis points from last Friday to the prior Friday which moved mortgage rates lower.

We had much better than expected U.S. economic data.  Pending Home Sales, Consumer Confidence, and the Chicago PMI were all very strong.

Normally, these type of strong readings would cause bonds to sell off and your mortgage rates to rise.  But last week was a holiday shortened week that saw very low volumes.

Traders simply “parked” their funds into the safe-haven of bonds over the holiday week which increased demand for bonds and temporarily lowered mortgage rates.

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.