What a week! Many reports indicated stronger than expected data and signs of a strong economy. This was bad news for Bonds and home loan rates, as with of good news, investors tend to pull money from safe-haven Bonds and inject them into Stocks, which have a better chance of profiting from a strong US economy. Overall, home loan rates worsened by about .125%.
In my opinion very decent news on the housing front, as New Home Sales came in better than expectations, and while Existing Home Sales were slightly less than expected, both enjoyed improved paces of inventory.
Last week allowed us to look at last year. Did you know that, 2006 represented the 3rd best existing home sale market on record. I am to the opinion that sometimes the media has to always spin good news. Here is their spin...steep drop from 2005 to 2006, and the fact that sales haven't fallen off this much year-over-year since the early 80's.
Just the facts please:
- 2006 is coming off a record year in 2005, so to see a drop off in record levels is not unexpected.
- The media is comparing the drop in year-over-year sales to the early 80's - but in 1982 the national unemployment rate was 9.7% (that is more than double unemployment rate today)
As I have stated in previous posts, my thesis is that August 2006 was the bottom of the housing market. This will be great for Raleigh Home-Buyers, Raleigh Realtors and Raleigh Mortgages.
PUT YOU SEAT BELTS ON...this week highlights a very juicy and potentially market moving economic calendar. We get to see the Fed's favorite measure of inflation, Personal Consumption Expenditures (PCE); the always intriguing monthly Jobs Report; and yes there is more...the next interest rate decision and policy statement from the Fed.
The most recent reports seem to indicate that inflation is cooling, and responding to the Fed's long string of rate hikes during 2005 and 2006. If the reports of the week show inflation moving higher, or if Friday brings a hot jobs number - Bonds could move lower and cause home loan rates to move higher.
(on a technical note...Bonds and home loan rates holding their ground is a nice floor of support. Yes Bond pricing and home loan rates have worsened slightly since the beginning of the year, this level might just help stop the bleeding if the upcoming news does indeed come in hot.)
As always your feedback is welcome.
Kevin Martini - Mortgage Banker - kmartini@HomeBanc.com