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.
• 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.