Mortgage Market Review - 5/24/10

This Morning…Monday, May 24, 2010:
April existing home sales released at 10:00 were expected to be up 4.4% and came in up 7.6%. The dark side however, according to NAR there is now an 8.4 month supply of homes, increasing from 8.1 months in March. Single family sales were down from March adding credence to our long held view that the housing sector is nowhere near a turn. The April increase was mostly in condos which were up 9.1%. Sales increased in April mainly on the tax credit. Markets' reactions were choppy on the data but by 10:10 the DJIA which jumped to -95 had come back to -60 and mortgage rates about where they traded prior to the report. No additional economic releases today; the remainder of the day is as it has been for three weeks; watching equity markets and the euro currency.

Last Week:
Last week interest rates fell on a 426 point decline in the stock market and increasing concern that Europe's economy is going to slow and drag down recovery here. The euro rallied three days last week but traders and investors appear no longer to be tying their pessimism solely to the euro currency. Weekly jobless claims unexpectedly jumped to a two month high of new unemployment claims. What was the strong belief the economic recovery was solid has now been redefined as a potential double dip with the economy slipping on Europe's debt problems headlined by Greece. For two months after a strong run up in the equity markets most were expecting a correction in the stock market but didn't believe it would be this bad. Money running headlong to the safety of US treasuries and has allowed mortgage rates to fall which has been the good news for us.

This Week:
This week we have another set of auctions with which to grapple (2-year notes, 5-yr, and 7-yr. notes). We have Existing Home Sales today and New Home Sales on Wednesday. Durable Good is on Wednesday, and on Thursday one of the usual GDP revisions for the 1st quarter (old news). The Chicago PMI manufacturing index and Personal Income & Consumption are scheduled for Friday. It should be a volatile week.

EconomicIndicator
Consumer Confidence
Tuesday, May 25,10:00 am, et
58.5
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction
Tuesday, May 25,1:15 pm, et
None
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders
Wednesday, May 26,8:30 am, et
Up 0.9%
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales
Wednesday, May 26,10:00 am, et
Up 2.2%
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury Note Auction
Wednesday, May 26,1:15 pm, et
None
Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Q1 GDP
Thursday, May 27,8:30 am, et
3.3%
Important. The aggregate measure of US economic production. Weakness may lead to lower rates.
7-year Treasury Note Auction
Thursday, May 27,1:15 pm, et
None
Important. $31 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Personal Income and Outlays
Friday, May 28,8:30 am, et
Up 0.4%,Up 0.2%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core
Friday, May 28,8:30 am, et
Up 0.1%
Important. An indication of inflation. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, May 28,10:00 am, et
73.2
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
Overall, I think we have a busy week ahead of us. The big reports of the week are Tuesday’s CCI and Wednesday’s Durable Goods Orders. If Thursday’s GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. The Treasury auctions are also worth noting which might influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors. The bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. There is a pretty good possibility of seeing mortgage rates change several times this week, especially if there is more volatility in the stock markets, so please proceed extremely cautiously.

Some Humor:
My neighbor found out her dog could hardly hear so she took him to the veterinarian. She found that the problem was hair in his ears! The veterinarian cleaned both ears and the dog could hear fine.
The vet then proceeded to tell my neighbor that if she wanted to keep this from reoccurring she should go to the store and get some 'Nair' hair remover and rub it in the dog's ears once a month. So my neighbor went to the drug store and gets some 'Nair' hair remover.
At the register, the druggist tells her, “If you're going to use this under your arms don't use deodorant for a few days.”
The lady says, “I'm not using it under my arms.”
The druggist says, “If you're using it on your legs don't shave for a couple of days.”
The lady says, “I'm not using it on my legs either; I'm using it on my schnauzer.”
The druggist says, “Stay off your bicycle for a week.”

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