 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
237 West Parkway, Pompton Plains NJ 07444 | 973-617-8700 | Toll-Free: 1-800-UPDATES | www.HSH.com For the week ending May 25, 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HSH contacts over 2,000 lenders each week, and generates reports for consumers, and competitive analysis services and statistics from its databases with over 20 years of current and historical data. Daily statistics and samples of our services and information are available at no cost at http://www.hsh.com/. The HSH Market Trends is free and informative -- subscribe today! | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Rates Rise to Year's High May 25, 2007 -- A few months ago, weak economic data led to minor declines in rates, but that failed to generate headlines. This week, though, the reverse was true, as a mild rise in mortgage rates caused a stir. The average 30-year fixed rate mortgage (FRM) climbed by eight basis points (.08%) to close the nation's leading survey of mortgage prices at 6.46%, just above the previous 2007 high of 6.45% which held since February 2. Five-one Hybrid ARMs moved upward as well, closing the week a tenth-percent higher at 6.30%, a level last seen late August 2006.
The rise in bond yields over the past couple of weeks (such movements usually presage increases in mortgage rates of varying degree) are, among other factors, reflective of the waning of hope for any Fed rate cuts in 2007. The last few holdouts who believed that the soft economy would get renewed stimulus from cheap money have apparently given up, and stock markets flirting with new highs on a daily basis seem a more compelling buy at the moment. Factor in mild-but-firm inflation and growing investment opportunities in bonds in other countries, and you've got sufficient ingredients to produce a fall in bond prices and a lift in yields. The domestic economy remains in a lumbering pattern. It seems to be resistant to the kind of decline-toward-recession which would be of great concern, but instead shows uneven flashes of increasing activity, especially as it pertains to business investment and such.
Orders for Durable Goods rose by a mild 0.6% in April, and while not a notable figure by itself, it did mark a break in the "two months up, one month down" pattern often seen here. Capital goods spending by business posted a second consecutive monthly gain, enjoying a bit of a rebound after declines in January and February. A broad estimation of national economic activity put together by the Chicago Federal Reserve remained in declining territory in April, albeit a little less so than in March. The National Activity Index hasn't posted a positive reading since last December, and that was the only plus-side mark since last August. Overall, the -.10 measurement means that growth is happening at a level below the economy's potential, though mildly so. The Richmond Federal Reserve Bank's report of local market conditions remained weak in May, holding at about the same soft level seen every month in 2007. Other local surveys have found some mild improvements to growth in manufacturing, but that cheer hasn't yet seemed to spread to this district.
Gasoline prices are beginning to ruin consumer moods. The weekly ABC News/Washington Post poll of consumer comfort dipped to a level last seen in October 2006 with a reading of -9 for the week of May 20. Three-dollar-plus gasoline to start the summer isn't enough to ruin vacations, but it certainly may alter spending plans as more money into the tank means less for food and souvenirs and such. New claims for unemployment benefits flared higher during the week ending May 19. The 311,000 new applications was the highest in about four weeks, but generally, we're of the mind that hiring for May was probably above the 88,000 seen in April, perhaps somewhat over 100,000 for the month. We'll find out about the employment situation for May next Friday, and if history is any guide, the particulars of that report will begin to set the stage for the quiet summer markets just ahead. Much was made of the sizable increase in new home sales this week. The 981,000 annualized rate of sale in April represented a 16% leap from March. With that increase, sales levels improved to a decline of only 10% when compared against year-ago figures. Inventory levels declined sharply, from over 8 months of product available to just 6.5 months -- but, of course, those figures are only relative to the present pace of sales (is in, "if homes continue to sell at this rate, we'll be out of inventory in N months".) However, the actual number of units available for sale remains quite high. Still, the April drawdown in stocks may help to improve builder sentiment as we move forward, but profitability has become a greater issue as homes are being sold at sometimes-sizable discounts. The median price of a new home sold fell by 15% in April when compared to March. News of the kick-up in new home sales raised hopes that sales of existing homes might follow suit, thereby signaling some end of the housing slump. That didn't happen, and in fact, existing home sales fell even more than was expected. The 5.99 million (annualized) units moved in April represented a four-year low, and inventories ballooned to 8.4 months of available stock. Prices eased just a notch, though. In looking at the new and existing home sales numbers, we were struck by a thought: In April, the median price of a New Home ($220,645) was a couple thousand dollars below the median price ($222,700) for an Existing Home. If a new home could be had for less money than a used home, it's perfectly logical that new homes would sell better during the same time period, which makes the dichotomy between new and used sales less puzzling. After all, if there are only so many homebuyers in the market, and those who might only have been able to consider used homes may now be in the market for new. Retailers know it well: sale prices attract customers (if at the sake of per-unit profitability). It can be argued that if builders continue to discount prices to sell homes, that may put some additional pressure on existing home prices at the margin, as existing home sellers must compete for the same audience the builders are after. Depending upon the seller's equity position, there can be more leeway (at least initially) in a new home's price than one occupied by a homeowner with a mortgage to pay off. As such, we'll need to see what happens next month: will sharp discounting continue? Housing remains weaker than it was at the peak of the boom, it's true. Despite that, applications for mortgages are higher when compared against year-ago levels, according to the Mortgage Bankers Association. Applications for purchases are up by 11%, and refinancing -- already stronger than expected this year as homeowners side-step ARM resets -- are now 46% above last year at this time. While the rise in interest rates this week isn't especially good news, perspective is important. Weighed against historical periods, interest rates have been remarkably stable for years; the last time we cracked 7% on a meaningful basis was over five years ago, but we've seen plenty of mid- and upper-six-percent price points during that time. In fact, we ran a 26-week consecutive period of rates above today's levels just last year (from March 31 to September 22), and nearly touched 7% but fell just short. That said, it appears that some stability crept into bonds about mid-week, and the 10-year Treasury posted three straight days of 4.86% yields. All of the rise in rates may not be behind us just yet, but we reckon that most of it has now been realized. A long weekend for reassessment of the situation is just the ticket. It's too soon to become summer lazy-complacent, though, as a slew of new and quite relevant data comes next week in the form of GDP revisions, Construction Spending, an ISM survey, personal income and spending and the minutes from the last Fed meeting. Although the general trend for rates has been upward, the mid-week flattening seems like it trimmed the upward pressure. We think that a rise of another couple of basis points may come next week... and we could see rates as high as 6.5% on average. For more pithy commentary, see our latest two-month forecast.Did you ever actually read your mortgage docs? Yes? No? Which ones? Tell us about it! Read a discussion of the results of our last survey question: "Did you actually read the documents provided to you both before and after you got your mortgage?". The results may surprise you! | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For further Information, inquiries, or comment: Keith T. Gumbinger, Vice President Copyright 2007, HSH® Associates, Financial Publishers. All rights reserved. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HSH Weekly Market Trends
To be removed from HSH Weekly Market Trends, click here.
To modify your record in HSH Weekly Market Trends, click here.
HSH Associates, Financial Publishers
http://www.hsh.com/
No comments:
Post a Comment