We are floating Mortgage Rates, Not Locking and will say “Thank You” for the Treasury auctions being “Over the Hills and Far Away” as the Bond always seems to perform better with the additional supply on the rearview mirror. Technically, the 4% Bond has successfully closed above resistance at the 100 and 200-day Moving Averages, which now become support.
It is worth noting that the trading action in Stocks and Bonds have been a mirror image. Stocks have been opening higher and closing well off those best level each day. And oh, by the way, this trading trend started last week, exactly when the Fed announced another $10B taper, so if anyone says the decline in Stocks is anything but removal of the Fed’s Kool-Aid pack…they should think again. There is a saying, “don’t fight the Fed”…if the Fed is removing easy money, Stocks may not be a great place to be….especially with prices at historical highs.
Americans spent in February at its fastest pace since November… but the biggest gains were in healthcare costs and utilities, certainly not areas we think makes the world go around. Personal Spending was up 0.3%, inline with estimates and up from the 0.2% (revised from 0.4) in January. Personal Incomes were also up 0.3%, also in line with expectations. Inflation remained non-existent…the Core PCE came in at 0.1%, inline and matched the January reading, while year-over-year Core PCE is at 1.1%, well below the upper end of the Fed’s target of 2%. While we see inflation in areas like healthcare and college costs, many other areas are seeing prices recede. This low inflation reading is likely going to keep the Fed Funds Rate at zero for quite some time.
Weekly Survey of Rates from the Mortgage Bankers Association
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.56 percent, the highest level since January 2014, from 4.50 percent, with points increasing to 0.29 from 0.26 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.45 percent from 4.39 percent, with points increasing to 0.27 from 0.19 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.62 percent, the highest level since January 2014, from 3.52 percent, with points decreasing to 0.24 from 0.25 (including the origination fee) for 80 percent LTV loans.
Commercial Real Estate Lending
Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.80%, down from last weeks 2.83%.
Fed’s Plosser: Market reaction to the Fed statement was surprising
Philadelphia Federal Reserve President Charles Plosser told CNBC Tuesday that Fed policymakers found the market’s reaction to its recent policy statement surprising, and that they tried to say very explicitly that they hadn’t changed their view. Read more
Housing News
Pending home sales fell for the eighth straight month in February, down 0.8 percent month-to-month from a downward revised January reading, according to an index from the National Association of Realtors. Sales are now down 10.5 percent from a year ago. read more
Economists in a consensus survey expected new home sales to rise by 0.5 percent in February, against a similar rate of increase in the prior month. March’s consumer confidence index was expected to have risen to 78.6, from 78.1 in the previous month. Read more
A composite index of home prices in 20 major metropolitan cities rose 13.2 percent in January from the year-earlier period, S&P/Case-Shiller reported Tuesday. Economists had expected the 20-city index to increase 13.3 percent. Read more
Economic News
U.S. consumer sentiment fell to 80.0, according to the Thomson Reuters/University of Michigan’s final March reading, down from 81.6 during the month before. Economists polled by Reuters expected a reading of 80.5.
U.S. personal income rose 0.3 percent in February, while consumer spending climbed 0.3 percent. Economists had expected personal income to increase by 0.2 percent, slower than the prior 0.3 percent reading. Consumption had been seen up 0.3 percent, against the previous reading of 0.4 percent.
First-time claims for state unemployment benefits came in at 311,000 in the most recent week. Economists had expected initial claims to rise by 5,000 to 325,000. Read more
Fourth-quarter U.S. gross domestic product
The Bureau of Economic Analysis (BEA), an arm of the Commerce Department, reported on Thursday that the final reading of 4th quarter 2013 Gross Domestic Product (GDP) came in at 2.6%, well below the 4.1% recorded in the 3rd quarter. For all of 2013, GDP averaged 2.6%, a modest number considering how much and how long the Fed has been underwriting the economic recovery through Quantitative Easing. Within the report it revealed that consumer spending in the final quarter rose by 3.3%, the best in three years.
GDP measures the output of goods and services produced by labor and property in the U.S.
Orders for long-lasting U.S. factory goods increased 2.2 percent in February. Economists polled by Reuters had expected durable goods orders to rise by 1 percent, compared with the prior month’s 1 percent drop.
Sources: CNBC, Reuters, MMG, Housingwire, Bloomberg