It has been a bad week for Mortgage Rates as better than expected economic news helped to fuel Stocks which pressured Mortgage Bond prices, which moved Mortgage Rates higher. The better than expected Jobs report caused a plunge in Bond prices and and moved Stocks higher. The downtick in the unemployment rate was due to more people leaving the labor force – not a great statistic, but it was taken with a grain of salt in what otherwise was an OK Jobs Report.
Bonds have fallen 5 days in a row while Stocks have rallied for the past 6 days that one sided trend can’t continue. Mortgage Bonds continue to slide in the Falling Channel with prices making new lows over time, not a good sign. Mortgage Bond prices are now lower (Mortgage Rates higher) than when QE3 was announced back in September. Even though the Fed is buying up $85B worth of Bonds every month, there is a lot of selling pressure in the Bond Market as investors seek higher returns in Stocks.
Its possible Bonds can recover, but for now the trendline is down for Bond Prices and the reverse is true for Mortgage rates, which have been inching higher. Bonds have suffered a lot of technical damage over the last few days. Therefore, the advise is to lock into rates at this time.
The 3% coupon fell by 50bp to end at 102.25. The Dow hit yet another closing high of 14,397.07 up 67.58 points. The
S&P rose 6.92 points to 1,551.18 while the Nasdaq was up 12.28 points to end the week at 3,244.37. Oil was last seen at $91.81/barrel up 25 cents.
Housing News
Six Reasons Housing Inventory Keeps Declining- Wall Street Journal
Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months. For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007.
Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday.
Home Prices Rose Nationwide by 6%
Clear Capital reported on Tuesday that home prices nationwide rose by 6% year-over-year in the month ended in February, but did say that short term gains will moderate. The firm cites rising consumer confidence as the catalyst in the housing recovery. Clear Capital serves the mortgage and lending industries, offering clients intelligent valuation solutions for properties nationwide. This is just another industry metric highlighting that Housing is indeed improving.
CoreLogic reports that home prices rose by 0.7% in January from February and have surged 9.7% compared to a year ago.
Economic News
Employers Add 236K Jobs in February; Jobless Rate Drops to 7.7%
Employers added 236,000 jobs in February, far more than analysts had expected, offering some much-needed momentum to the long-sluggish U.S. labor market. The headline unemployment rate dropped to 7.7% last month from 7.9% in January. Construction jobs led the way, as they have for several months. Recovery efforts from Superstorm Sandy in the fall have provided work in that sector. With the positive gains in unemployment, combined with record highs in stock markets, many analysts are going to start calling for the Federal Reserve to pull back on its loose fiscal policies.
But that’s not likely to happen anytime soon. Fed Vice Chair Janet Yellen said in a speech earlier this week that economic conditions still require an “accommodative” strategy and Fed Chairman Ben Bernanke took a similar position last week in testimony before Congress.
In fact, this is the sort of momentum the Fed has been looking for for months, ever since pinning their policies to the struggling housing and labor sectors. The Fed’s bond buying purchases, known as quantitative easing, plus historically low interest rates, are designed to stimulate mortgage lending in an effort to kick start the important housing sector. Once that sector awakens, the impact will be felt across the economy, from the financial services to retail and construction. The Fed would seem to be in a position to take some credit today for the positive jobs report.
Weekly Initial Jobless Claims fall 7K to 340K in the latest week and below expectations of 350K.
ADP says private sector jobs increased by 198K in February vs the 150K expected. January ADP number revised to 215K vs the 192K that was first reported.
Beige book reports economic activity expanding at a moderate pace.
Sources: CNBC,Bloomberg, Fox Business News, Reuters, MMG, Housing Newswire