Sixth Straight Monthly Gain For Home Prices
U.S. single-family home prices rose for a sixth month in a row in July. The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.4 percent in July on a seasonally adjusted basis. On a non-adjusted basis, prices fared better, rising 1.6 percent.
Compared to a year ago, prices in the 20 major metro cities were up 1.2 percent, beating expectations for 1 percent. It was the second month in a row year-over-year prices have risen.
Six years after its collapse, economists believe the housing market has turned a corner. Recent data show home resales and groundbreaking on new properties rose in August, while business sentiment among homebuilders picked up to a more than six-year high this month.
The home price data confirmed “recent good news” about the sector, David Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.
“All in all, we are more optimistic about housing. Upbeat trends continue,” said Blitzer.
“This shows a continual recovery in the housing market, which continues to progress,” said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +55 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move lower. We had our highest mortgage rates on Monday and our lowest rates on Wednesday.
We had another mixed bag of economic data. The housing picture continued to brighten with a better than expected rise in home prices. Also, both Consumer Confidence and Consumer Sentiment were higher than market forecasts. But Durable Goods orders were very weak and the final revision to the 2nd quarter GDP moved us from the first release of 2.0% down to a measly 1.3% growth rate.
However, Spain overshadowed any U.S. economic data as the market awaited details on their budget deficit and the results of their banking system stress test. Seven of their major banks failed the stress test and seven passed. Their budget and deficit were actually less worse than the market feared and caused MBS to reverse course from Wednesday’s highs (and your lowest rates of the week) as the market pulled back both Thursday and Friday.
From a technical perspective we may have found a top end for the prices investors are willing to pay for a mortgage backed security as the FNMA 3.0 October coupon tested the 106.00 price point on Wednesday and Thursday and it held nicely. If this ceiling of resistance continues to hold then Wednesday’s pricing might be the best that we see for a while.
What to Watch Out For This Week:
The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|1-Oct||10:00 AM||ISM Index||–||49.7||49.6|
|1-Oct||10:00 AM||Construction Spending||–||0.40%||-0.90%|
|2-Oct||2:00 PM||Auto Sales||–||NA||5.3M|
|2-Oct||2:00 PM||Truck Sales||–||NA||6.3M|
|3-Oct||7:00 AM||MBA Mortgage Index||–||NA||2.80%|
|3-Oct||8:15 AM||ADP Employment Change||–||133K||201K|
|3-Oct||10:00 AM||ISM Services||–||53||53.7|
|3-Oct||10:30 AM||Crude Inventories||–||NA||-2.446M|
|3-Oct||2:00 PM||FOMC Minutes||–||–||–|
|4-Oct||7:30 AM||Challenger Job Cuts||–||NA||-36.90%|
|4-Oct||8:30 AM||Initial Claims||–||365K||359K|
|4-Oct||8:30 AM||Continuing Claims||–||3273K||3271K|
|4-Oct||10:00 AM||Factory Orders||–||-6.00%||2.80%|
|5-Oct||8:30 AM||Nonfarm Payrolls||–||120K||96K|
|5-Oct||8:30 AM||Nonfarm Private Payrolls||–||130K||103K|
|5-Oct||8:30 AM||Unemployment Rate||–||8.10%||8.10%|
|5-Oct||8:30 AM||Hourly Earnings||–||0.20%||0.00%|
|5-Oct||8:30 AM||Average Workweek||–||34.4||34.4|
|5-Oct||3:00 PM||Consumer Credit||–||$5.0B||-3.3B|
I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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