A much weaker than expected March payrolls number sent the Bond markets soaring this morning, but as the day wore on, investors felt that the weaker than expected economic data this week will keep the printing presses running longer than expected at the Fed. The 3% coupon was up 59bp at one point earlier in the session, but closed higher by 34bp at 104.31. Stocks finished lower but as mentioned, were able to cut some of those losses near the close. The Dow fell by 40.86 to 14,565.25 after being down almost 160 points after the jobs numbers were released. The S&P lost 6.70 points to 1,553.28 while the Nasdaq fell by 21.12 points to end at 3,208.86.
The chart below shows how Bond Prices were up against a ceiling of resistance prior to todays run up in prices and has since broken through that ceiling. This makes the trend our friend. Mortgage Rates to moved lower, as Mortgage Rates move in the opposite direction of Bond Prices. Hence, my recommendation to Lock into Mortgage Rates in the short term and float for longer term transactions.
The Federal Reserve could begin cutting back on its massive bond-buying program this summer if the economy continues to improve, San Francisco Fed President John Williams said Wednesday. He pegs growth at 2.5 percent in 2013 and 3.5 percent in 2014. The Stock Market reacted negatively dropping 100 points on Wednesday and such action would not bode well for Mortgage Rates.
Housing News
Home prices nationwide are going into the second quarter on solid ground and are expected to remain positive throughout the year, according to data from Clear Capital. For the nation, the three-quarter forecast is 1.7%, which would bring home price growth for the entire total year to 2.6%. Compared to January’s one-year forecast, growth is anticipated to be even stronger, due partly to the solid winter season in which home prices stayed positive over the winter for the first time since 2006. “It has been seven years since home price growth continued throughout winter. This is very strong evidence of the start to a new leg of the recovery, one that should give further confidence to consumers and lenders alike that the recovery is real,” said Alex Villacorta, director of research and analytics at Clear Capital. Villacorta notes that as buyers become more confident the recovery is sustainable, this sentiment should grow to create a positive feedback loop.
Broken down, the Northeast is expected to see the largest gain in home prices over the next three quarters with a 2.1% jump. The Midwest, South and West are expected to see gains of 1.9%, 1.8% and 0.7%, respectively.
According to Clear Capital, this year should experience a balance in growth across the regions, with the hardest-hit markets seeing buyer interest cool due to price appreciation. Conversely, more fair market sellers may help boost supply. While regional trends do indicate national trends, the Clear Capital report analyzes market-by-market behavior. Major metro markets are likely to continue seeing noteworthy variability in price trends over the next three quarters, according to the report. Over the next 9 months, Seattle is expected to see 6.9% growth, indicating healthy fundamentals overall. On the other hand, Phoenix is predicted to cool off substantially over the next nine months after staying hot for so long.
“Phoenix is a great example where we expect to see that cooling trend support a more sustainable recovery. After a strong year of growth, rising prices should bring the metro back into a more normal range of growth,” said Villacorta. He added, “In addition, the typical influx of spring and summer supply will also help subdue price gains. All in all, this is great news for housing, where prices are sustainably on the rise, demand continues to grow, and the expected supply influx should curtail any bubble-like price trend behavior.”
CoreLogic reports that home prices across the country, including distressed sales, rose by 10.2% on a year-over-year basis in the month ended in February. It was the largest annual gain since March of 2006 and the 12th consecutive monthly rise in prices.
Hot local housing markets will cool as builders rush in in coming months, pumping up inventories depleted by a scarcity of new construction since 2007. Nationwide, a third of U.S. homes now sell within 14 days. A year ago…24%. And the current 4.4-month supply of unsold homes is well under the six-month figure deemed healthy. Where the pendulum has swung much too far…San Francisco, Los Angeles and San Jose, Calif., for example…over 50% of homes are snapped up within two weeks. And the pace isn’t much slower in Seattle, Portland, Ore., and Denver. Metro areas that didn’t suffer the construction drought but have strong job growth… Washington, D.C., Dallas and Austin, Texas, for example…are also seeing hot sales. Despite the current heat, the housing industry is a long way from robust. It’s two or three years away from matching the 6.5-million-a-year pace of home sales and 1.5 million building starts a year racked up before the mid-2000s run-up.
Don’t Be Fooled By These 3 Real Estate Myths
As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents’ house-hunting experiences. Maybe they’ve learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized “real estate myths.” Here are three such myths that many less-seasoned home buyers and sellers assume are true.
Economic News
Jobs Market
Job creation slowed to a crawl during March, with the U.S. economy creating just 88,000 positions though the unemployment rate fell to 7.6 percent. The number was a sharp slide from February’s upwardly revised 268,000. The Labor Department reported Friday that nonfarm payroll growth eased amid hopes that the economy had begun to achieve the escape velocity needed for sustained growth. Friday’s report fell short of economist expectations of 200,000 new jobs, confirming some of the weakness in recent reports. Moreover, the drop in the jobless rate was little more than a statistical anomaly, with the labor-force participation rate tumbling to a 34-year low of 63.3 percent. However, a broader measure of unemployment that counts the discouraged and underemployed also fell, declining to 13.8 percent from February’s 14.3 percent. Read More
The Labor Department reported that Weekly Initial Jobless Claims surged by 28K in the latest week to 385K, the highest number since November and well above the 345K expected. In addition, Challenger Gray & Christmas reported that planned layoffs are up 30% from the same period last year. All of a sudden things are not so rosy in the Labor Market…a positive for Mortgage Rates.
It’s not just the modest rate of job growth that’s worrying policymakers. It’s also the quality of the jobs being created. Two-thirds of the jobs lost during the recession were in decent-paying occupations in manufacturing, construction and office administration. But most of the jobs created since then are low-paid positions in home health care, retail sales and manual labor. At least 28% of workers have jobs that pay poverty-level wages… less than about $24,000 a year, the minimum needed to support a family of four. That’s up about five percentage points from 2002, and it’s headed higher still. The low-pay problem isn’t only an issue of equity and compassion… An economy can’t grow if too many workers don’t have money to spend.
ADP reported that private employers added 158K new jobs in March, below the 197K that was expected, but the month of February was revised higher to 237K from 198K. A spokesman for Moody’s Analytics said that construction employment gains paused as the rebuilding surge in the Northeast after Superstorm Sandy ended. With our corporate office near the storm ravaged areas, we can attest that a lot of construction is still on the way.
Fannie Mae posted net annual income of $17.2 billion for 2012 and a quarterly profit of $7.6 billion for the fourth quarter, setting new earnings records in both categories. The government-sponsored enterprise credits ‘improved credit results’ and a falling delinquency rate for pushing profits higher.
Sources: CNBC, Housingwire, Bloomberg, Kiplinger, MMG, Fox Business