Friday July 8th,, 2011 4:58 pm ET
By John Sauro
What a Difference One Report Makes
Jobs Report shocker – only 18K new Jobs created in June. Way below economists’ expectations for a 90,000 rise. Bonds jump higher on the news. The jobs were the weakest since Sept 2010. The unemployment rate, expected unchanged at 9.1%, increased to 9.2%, the highest since Dec 2010.
U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dashing hopes that the economy was beginning to lift itself from the soft patch.
The Jobs Report news was a shocker because only yesterday ADP reported a drop in Weekly Jobless Claims to 418,000, more than expected. So everyone expected today’s Jobs Report to be similar.
However, this was good news for Mortgage Rates as they are determined by Bond prices. The Bond market rallied on the surprising jobs report news. The 4 percent Bond closed at $100.59, up 81 basis points from yesterday’s close of $99.78 and pushing the Bond above the 200-day Moving Average.
U.S. Home Prices Poised to Climb as Foreclosures Wane, HUD’s Donovan Says
An article written July 4th by Kim Chipman for Bloomberg
Home sales have increased in six out of the past nine months .Prices for U.S. homes may climb as soon as the third quarter, ending declines as foreclosures decline make more home available for sale, Housing and Urban Development Secretary Shaun Donovan said. “It’s very unlikely that we will see a significant further decline,” Donovan said yesterday on CNN. “The real question is when will we start to see sustainable increases. Some think it will be as early as the end of this summer or this fall.”
Home sales have increased in six out of the past nine months and the number of property owners in default is declining, Donovan said on CNN’s “State of the Union” program. Housing prices will begin rising as the number of foreclosures declines, he said.
“In the long run, it’s a good time to buy,” Donovan said. “It’s so affordable today compared to where it’s been for generations.”
Contracts to buy previously owned U.S. homes rose 8.2 percent in May, following a revised 11 percent drop in the previous month, the National Association of Realtors said on June 29. A separate report by the Chicago-based group on June 21 showed sales of existing houses, which make up about 96 percent of the market, declined in May to a six-month low.
Home prices fell 4 percent in April from a year earlier, the biggest drop in 17 months for the S&P/Case-Shiller index of values in 20 cities.
An estimated 1.7 million U.S. homes were in the foreclosure process and expected to be put on the market as of April, down 18 percent from the peak, as fewer loans entered delinquency and more distressed homes were sold, CoreLogic Inc. said in a report on June 22.
Shadow Inventory
The so-called shadow inventory represented a five-month supply at the current sales pace, the Santa Ana, California- based real-estate information company reported. The inventory’s size is a barometer of housing-market health because foreclosed homes sell for lower prices and falling values discourage buying, said Sam Khater, CoreLogic’s chief economist.
Donovan said lenders are adding requirements “that don’t make sense” for risky borrowers after the government, through the Federal Housing Administration, raised the minimum down payments for a house purchase.
“We can’t over correct,” Donovan said. “We can’t go so far in the other direction that we cut off homeownership for people who really can be successful homeowners.”
Encouraging home ownership should avoid giving buyers an expectation of making $1 million overnight, Donovan said. “We can get back to the place where it’s a good investment and we will be able to make money over time.”
Economic News
European Central Bank Raises Rates to 1.5 Percent.
China Raises Interest Rates by 25 Basis Points.
ISM Manufacturing Index Slips to 53.3 in June, Below Estimates.
Factory orders Rise 0.8 percent in May. Slightly Below Expectations.