The Mortgage Bankers Association reported that the average contract interest rate for a 30-year, fixed-rate mortgage with a conforming loan limit fell to 4.73% from 4.80% last week. The 30-year, FRM jumbo dipped to 4.71% from 4.78% . The 15-year, FRM slipped to 3.75% from 3.84%, and the 5/1 ARM fell to 3.49% from 3.50%.
Short term consider locking, longer term floating. The 4% Mortgage Bond finished at 102.31, up 69bp and traded in an 81bp range, good for Rates. The Dow finished the week down 14.98 points to 14,922.50, the S&P 500 was flat at 1,655.17 while the Nasdaq also finished near flat at 3,660.01. Oil
was last seen at $110.19/barrel up $1.82.
The Jobs numbers are out and forget what you hear on TV – this report stinks. The lowest Labor Force Participation Rate in 35 years. Big downward revisions erasing 74,000 jobs from what was previously reported in the last two months. And 300,000 people disappeared from the Labor force.
The unemployment rate dropped to 7.3% – the lowest since Dec 2008…yeah! However, the number is lower because of people leaving the labor force rather than organic job growth. 169,000 jobs were created versus the 177K expected.
Stocks moved higher because QE3 is rolling on and we don’t see any reason for it to stop or taper anytime soon. Economic conditions are not on solid ground and the housing recovery is fragile. We anticipate the Fed underwriting this recovery for quite a while longer.
Thursday the 10-Year Note hit 3%. This from 1.61% on May 1st. Mortgage Bonds traded to their worst levels in two years. This market move was an exaggerated one and we think 3% yield on the 10-Year will serve as resistance against higher rates.
New Borrowers Feel the Pinch of Rising Rates
As rates and home prices start to rise, borrowers in top markets are finding themselves stretched thin as they make a move for homeownership. Read more
Housing News
CoreLogic reported that home prices, including distressed sales, increased 12.4% nationwide in July 2013 compared to July 2012, which is the 17th consecutive monthly year-over-year increase in home prices. Overall, home prices remain 17.6% below the April 2006 peak, but have increased 22.8% from the post-crisis low in February 2012. The top five performers on the month were Chicago (48.7%), Phoenix (30.5%), Las Vegas (29.3%), Los Angeles (23.9%), and Boston (23.2%).
Economic News
Upbeat Fed Outlook Suggests QE Tapering is Near
Conditions continued to improve in the U.S. over the past quarter, suggesting that the economy is reaching the point where monetary easing can be pulled back, according to the most recent assessment from the Federal Reserve. Read more
The U.S. Institute of Supply Management’s index rose to 55.7 in August. Economists polled by Reuters had expected the index of national factory activity to fall to 53.5 from 55.4 in July. (A reading above 50 indicates expansion in the sector.)
Construction spending in July rose 0.6 percent. Spending had been expected to increase 0.4 percent after a 0.6-percent drop in June.
Weekly claims for state unemployment benefits totaled 323,000. Economist had been expecting claims to total 330,000 compared to 331,000 the previous month.
Employers reported plans to cut payrolls by 50,462 in August, a 34 percent jump from the 37,701 planned job cuts announced in the previous month, according to a report from Challenger, Gray & Christmas
Sources: CNBC, MMG, Housingwire, Bloomberg