KENNETH BARGERS BLOG

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Archive for March 2011

Market Comment for Week of March 28, 2011…

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MARKET COMMENT   Mortgage bond prices fell last week pushing mortgage interest rates higher. Stocks generally showed strength throughout the week, which didn’t help mortgage bonds. Reports of Japan stabilizing their nuclear facilities resulted in a reversal of the earlier flight to quality buying of US debt. New home sales data came in weaker than expected which helped rates bounce back a bit mid-week. Unfortunately Fed Official Plosser’s comments Friday afternoon sent bonds falling and rates higher. Plosser indicated monetary policy will soon need to reverse course and that the preferred exit strategy would raise rates and reduce the Fed’s balance sheet concurrently. Mortgage bonds ended the week worse by about 3/4 of a discount point. 

The Treasury will auction 2-year notes on Monday, 5-year notes on Tuesday, and 7-year notes on Wednesday.

LOOKING AHEAD 

  • Personal Income and Outlays; March 28; Consensus Estimate Up 0.4%, Up 0.6% Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
  • PCE Core Inflation; March 28; Consensus Estimate Up 0.2%; Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
  • Consumer Confidence; March 29; Consensus Estimate 70; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
  • ADP Employment; March 30; Consensus Estimate 180k; Important. An indication of employment. Weakness may bring lower rates.
  • Weekly Jobless Claims; March 31; Consensus Estimate 365k; Important. An indication of employment. Higher claims may result in lower rates.
  • Factory Orders; March 31, Consensus Estimate Up 2.4%; Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
  • Employment; April 1; Consensus Estimate 8.9%, 160k; Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
  • ISM Index; April 1; Consensus Estimate 61; Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.

INCOME & OUTLAYS   The personal income and outlays release is a monthly report issued by the Bureau of Economic Analysis (BEA). The data is important because it is thought to provide a solid indication of future consumer demand. The personal income component is primarily a measure of wages and salaries. The outlays component is primarily a measure of spending on goods and services. Together the figures provide analysts valuable insight into consumer economic standing and consumption. 

The prior release showed an increase in wages and salaries. Some of that was attributed to a cut in the payroll tax. If that trend reverses future weakness could adversely affect consumer spending and the entire US economy. Decreased or stagnant wages coupled with tighter borrowing restrictions make it difficult for consumers to spend money. It is important to note that no single economic indicator can consistently predict the future of the economy. However, the personal income and outlays report is a closely watched release. The consumer remains a vital component of the US economy. 

The release this week has the potential to move the financial markets. Now is a good time to take advantage of mortgage interest rates at their current levels to avoid market volatility. 

Source: Todd Kabel, F&M Mortgage; Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

Real Estate Web Site Traffic Jumps 27%

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Traffic to real estate Web sites increased 27 percent in February–the highest level since the first half of 2009. A bigger appetite for rentals has mostly driven the increase in real estate site traffic, according to a webinar by Experian Hitwise, in which it released its search tracking data.

The Web sites boasting the largest year-over-year increases in traffic were devoted to rental or rent-to-own listings, says Heather Dougherty, research director at Hitwise.

Also, traffic coming from social networks to real estate sites increased 61 percent year-over-year in February. Traffic to real estate sites from Facebook increasing 42 percent alone. Social networks now account for 4 percent of the overall traffic to real estate Web sites, Dougherty notes. The largest year-over-year increases in social media traffic last month were Yahoo! Real Estate, Trulia, Zillow, and Realtor.com.

The following are the 10 most popular search terms on real estate sites in the last year, according to Hitwise:

1. “rent to own homes”
2. “rent to own”
3. “foreclosure”
4. “for rent by owner”
5. “puerto rico real estate”
6. “houses for rent in orlando”
7. “apartments for rent in michigan”
8. “low income apartments”
9. “houses for rent by owner”
10. “reverse mortgage”

Source: “Rental Interest Drives Real Estate Search Traffic,” Inman News (March 25, 2011); Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

Market Comment for Week of March 21, 2011…

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MARKET COMMENT Mortgage bond prices rose last week helping mortgage interest rates improve. Flight to safety buying of US debt instruments helped rates improve as the Japanese stock market struggled. Oil prices eased a bit early in the week. However, clashes in Saudi Arabia Thursday sent prices back above $100/barrel. Core inflation readings remained relatively in check however the headline figures exceeded expectations. The Fed’s recent statement noted “short-term” increases in food and energy prices but indicated the spikes are not expected to spill over to the core. Despite the mixed data mortgage bonds ended the week better by about 1/4 of a discount point.

The weekly jobless data and Treasury auction will receive a lot of attention this week amid continued global economic uncertainty.

LOOKING AHEAD
• Existing Home Sales; March 21; Consensus Estimate Down 6%, 5.05M; Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
• New Home Sales; March 23; Consensus Estimate Unchanged, 288k; Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
• Weekly Jobless Claims; March 24; Consensus Estimate 384k; Important. An indication of employment. Higher claims may result in lower rates.
• Durable Goods Orders; March 24; Consensus Estimate Up 0.8%; Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
• 10YR TIPS Treasury Note Auction; March 24; Important. $11 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Q4 GDP 3rd estimate; March 25; Consensus Estimate 2.9%; Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
• U of Michigan Consumer Sentiment; March 25; Consensus Estimate 68; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

EXISTING HOME SALES The National Association of Realtors releases existing home sales data near the end of each month. The data is derived from a sampling of MLS data across the nation. The release shows the current sales rate for existing single-family, coops, and condos. A national figure and 4 regional figures are provided. The NAR Chief Economist indicated in February the current methodology used to calculate the benchmarks will be revised in the near future. There is no timetable for the revision.

The housing market is a critical component of the US economy. A house is usually one of the largest assets a consumer owns. Housing usually leads market recoveries. Unfortunately the housing industry remains in transition as the effects of massive foreclosures still weigh heavily. Most analysts agree that the housing market will remain wobbly for some time. The important thing to remember is that housing is a “local” issue. The maxim about housing being strongly tied to “location, location, location” still holds true. The overall housing market shows signs of trouble while there are areas that don’t follow the overall trend.

While the data usually isn’t a big market mover it still has the potential to result in some market volatility. The release usually includes remarks from the Chief Economist regarding prices, inventory, and interest rates.

Source: Todd Kabel, F&M Mortgage; Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

Special Price Incentive for Sunday’s Open House in Barnes Crossing!

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Beautiful Center Hill Lake Property for All Seasons!

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Survey: Buyers, Sellers Optimistic About Housing

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Nearly 70 percent of buyers and sellers say they believe the housing market and property values will recover in the next year or two, according to a new survey by Prudential Real Estate and Relocation Services Inc. 

What’s more, 86 percent of the more than 1,000 buyers and sellers surveyed believe real estate is still a good investment despite the souring market conditions in many areas the past few years. 

Those surveyed said they also are ready to buy: Six in 10 respondents say they are more interested in buying real estate and 59 percent say they are optimistic about buying now with recent momentum from the economic recovery. They also believe they can get a better deal now because of lower prices. 

But many survey respondents said that buying a home relies on them being able to sell their existing home. About 67 percent respondent said they are concerned about getting a fair price for their existing home. 

“This survey clearly demonstrates that Americans continue to be optimistic about the real estate market and believe that home prices will rise,” says James Mallozzi, chief executive officer of Prudential Real Estate and Relocation Services. “A key take away from the survey is although consumers recognize that it is a good time to buy, they are concerned about their ability to sell their homes. This is one of the reasons the market is still struggling to recover.” 

Source: “Americans Confident in Recovery of Real Estate Market,” RISMedia (March 14, 2011); Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

Market Comment for Week of March 14, 2011…

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MARKET COMMENT   Mortgage bond prices rose last week helping mortgage interest rates improve. The US Treasury auctions generally showed decent foreign demand for US debt instruments. Oil prices fluctuated which continued to cause market volatility. Weekly jobless claims came in higher than expected which sent mortgage interest rates lower as stocks struggled. Retail sales came in as expected while the inflation component of the Michigan consumer sentiment survey shocked to the upside. Despite the mixed data mortgage bonds ended the week better by about 1/2 of a discount point. 

The Fed meeting Tuesday will take center stage this week and set the tone for the days ahead. The inflation data that follows has the real potential to cause mortgage interest rate volatility. 

LOOKING AHEAD 

  • Fed Meeting Adjourns; March 15; Consensus Estimate No rate change; Important. Few expect a rate change, but some volatility may surround the adjournment of the meeting.
  • Housing Starts; March 16; Consensus Estimate 550k; Important. A measure of housing sector strength. Weakness may lead to lower rates.
  • Producer Price Index; March 16; Consensus Estimate Up 0.6%, Core up 0.2%; Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
  • Weekly Jobless Claims; March 17; Consensus Estimate 380k; Important. An indication of employment. Higher claims may result in lower rates.
  • Consumer Price Index; March 17; Consensus Estimate Up 0.4%, Core up 0.1%; Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
  • Industrial Production; March 17; Consensus Estimate Up 0.6%; Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
  • Capacity Utilization; March 17; Consensus Estimate 76%; Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
  • Leading Economic Indicators; March 17; Consensus Estimate Up 0.4%; Important. An indication of future economic activity. A smaller increase may lead to lower rates.
  • Philadelphia Fed Survey; March 17; Consensus Estimate 35; Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

PRODUCER PRICE INDEX   The producer price index is a measure of prices at the producer level and is important because it is the first inflation report to be released each month. Investors are typically able to gain an initial indication of inflationary pressures from the release. If producer prices are increasing, there is a tendency for producers to pass the increases on to consumers in the form of higher priced goods. It is important to note that the PPI is only a measure of goods, while the consumer price index is a measure of goods and services. It is possible for the price of goods to remain stable, while the price of services increases. In this scenario PPI would do little to warn of a change in inflationary pressures, while the CPI report would provide an indication of the inflationary effects of the service component. This distinction between the two reports shows why most analysts view the CPI as a more accurate indicator of inflation. Nevertheless, market participants still gain valuable insight into potential volatility in the financial markets from the PPI release. Be cautious heading into the inflation data this week.

Source: Todd Kabel, F&M Mortgage; Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

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