January 19th, 2010 Weekly Commentary
Several real-estate-related economic indicators are, like a very unusual alignment of stars, appearing today and tomorrow. Each indicator could further define our reaction to all the others, possibly creating synergistically a clearer view of whether the real estate market is improving or is still weak. On the other hand, the indicators could contradict each other, leaving us with no summary judgments. We'll know by next week, in any case. Here's the schedule of releases to watch for:
*Later today (Wednesday): Housing Starts. This measures the relative number of new homes whose construction was begun in December. Again, a new construction indicator-but this one shows builders putting their money on where they think the market is going. (It also shows government and multi-family construction.) If it starts to rise, the implications for the future health of the real estate market are good.
*Also later today: The Mortgage Bankers Association Mortgage Applications Index. This covers mortgage application activity, as computed from surveys of lenders, for the week ending last Friday. The data are divided into the following classifications: 1.purchase money (which is inevitably the most important to us, because it indicates the growth or contraction of home sales volume); 2. refinancing loans; and 3.a weighted composite of the two. Because the Pending Home Sale Indices, compiled by the National Association of RealtorsÒ, showed a rise of over 10% month-to-month in the number of signed (but not closed) purchase contracts in October and a 3.5% rise in November, we've been watching for far more purchase money loan originations than we've been seeing.
* (Thursday): Existing Home Sales. Also collected by the National Association of RealtorsÒ, these figures show us the growth or decline, month-to-month, of completed sales of existing (as opposed to newly-constructed) homes. The figures tell us about the past, obviously, not the future-but they have a strong effect on investor, buyer and seller psychology, and you will often find them cited in front-page articles in the financial press. Given the improvement in Pending Home Sales Indices (cited above), we should see improving home sales figures. But we are at a loss to understand how those figures can improve if the number of purchase money loans isn't rising.
* (Thursday): and also worthy of scrutiny...the weekly tally of Jobless claims, which had been falling of late but surprised the markets with an upward spike last week, will hopefully continue their decline, indicating probable improvements in the jobs market...and the Index of Leading Indicators, which often predicts the future direction of the overall economy with useful accuracy. Have a good week!
January 19, 2011
KEY INDICATORS [1/17/11]
Gold $1361.10/ounce [down]
Crude Oil (Brent) $97.46/brl [down]
U.S. Dollar to...
Euro .75321 [down]
Japanese Yen 82.72 [down]
6-mo Treasury Bill Yield 0.17%
10-yr Treasury Note Yield 3.33%
[6-month unchanged, 10-yr down 3 bps]
11th Dist Cost of Funds 1.571%[-]
30-yr Fixed-rate Mortgage 5.05%
15-yr Fixed-rate Mortgage 4.43%
1-yr ARM 3.82%
[HSH average includes jumbo rates: 30-yr down 7 bps; 15-yr down 8 bps; 1-yr ARM up 4 bps]
Freddie Mac weekly average rate
4.71% [down 6 bps]
Mortgage Bankers Association Mortgage Applications Index
week ending 1/7
Down 2.2%; up 2.3% the week prior
Purchase Money Loans
Down 3.7%; down 0.8% the week prior
Up 4.9%; up 3.9% the week prior
Jobless Claims 1/8
445,000 - prior week 409,000 - Continuing claims down 248,000 to 3.879 million
Consumer Price Index (CPI) Dec
Up 0.5% - core level (with food & energy prices removed) up 0.1% - gasoline up 8.5% m/m - annualized cored inflation 0.6% (very low)
Information provided by:
-Senior Loan Officer-
O'Dowd & Associates Mortgage Co., Inc.