Consumer Sentiment Rises and Delinquencies Drop
Consumer sentiment rebounded solidly early in February after a disappointing showing the previous two months, according to a survey released Friday.
The monthly Thomson Reuters/University of Michigan consumer sentiment index rose to 76.3, up from 73.8 in January. The readings in December and January were weighed down by Americans’ concerns about the potential drag from the so-called “fiscal cliff”, which federal lawmakers averted with a last-minute deal.
The consumer sentiment figure was an indication that the economic recovery is intact, though it’s below the readings in the low 80s late last year. Everyone knows that in the housing market, it is not so much about interest rates or housing prices but instead its about how potential home buyers feel about the economy. Strong sentiment about the economy and their job security has always lead to strong housing demand.
In a separate report, The number of homeowners behind on their mortgages has now fallen for four straight quarters to the lowest rate in four years. At the end of last year, the delinquency rate took its deepest dive since things began improving in 2010, falling 14 percent from a year ago, according to a new report from Transunion. Thirty-seven states and the District of Columbia saw improvements.
This is another strong sign for housing. With delinquencies continuing to fall, the number of distressed homes that hit the market is greatly reduced and these homeowners are getting back on track with their credit scores which will lead to more qualified buyers hitting the the market this year.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -3 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Wednesday and our lowest rates on Monday. It is also important to note that mortgage backed securities have now lost -203 basis points from the close on 12/31/12. As you can see by the chart above, MBS have lost ground consistently this year. This in turn has caused mortgage rates to slowly and steadily rise.
We traded in a very well-defined channel last week. Our biggest action was in the middle of the week as MBS tanked -37BPS on Wednesday (higher mortgage rates for you) on the back of much weaker than expected demand for our 10 year U.S. Treasury auction. But, MBS recovered +34BPS of that the very next day on much stronger than expected demand for our 30 year Treasury auction.
MBS did sell off on Friday which pressured rates on the much better than expected Consumer Sentiment report.
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|
|19-Feb||10:00 AM||NAHB Housing Markt Index||–||48||47|
|20-Feb||7:00 AM||MBA Mortgage Index||–||NA||-6.40%|
|20-Feb||8:30 AM||Housing Starts||–||910K||954K|
|20-Feb||8:30 AM||Building Permits||–||918K||903K|
|20-Feb||8:30 AM||Core PPI||–||0.10%||0.10%|
|20-Feb||2:00 PM||FOMC Minutes||–||–||–|
|21-Feb||8:30 AM||Initial Claims||–||358K||341K|
|21-Feb||8:30 AM||Continuing Claims||–||3150K||3114K|
|21-Feb||8:30 AM||Core CPI||–||0.20%||0.10%|
|21-Feb||10:00 AM||Existing Home Sales||–||4.94M||4.94M|
|21-Feb||10:00 AM||Philadelphia Fed||–||1.5||-5.8|
|21-Feb||10:00 AM||Leading Indicators||–||0.30%||0.50%|
|21-Feb||10:30 AM||Natural Gas Inventories||–||NA||-157 bcf|
|21-Feb||11:00 AM||Crude Inventories||–||NA||0.560M|
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.