Sales of existing homes went up as expected in April. Homes bought  in lower price ranges led the way according to the National Association of Realtors on Wednesday. Another report came out from FHFA which indicate prices may be stablizing. 

Existing home sales were up 2.9% in April.  

“Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the midprice ranges, but high-end home sales remain sluggish,” said Lawrence Yun, NAR chief economist, in the report. 

First-time buyers were responsible for 40% of all transactions in April. Moreover, distressed properties accounted for 45% of all sales.

“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” Yun said, adding that the sale of foreclosure-related homes sets the stage for healthy conditions.

Single-family home sales rose 2.5% to a rate of 4.18 million in April, a pace that is 2.8% below the level one year ago.

Regionally, sales advanced in three of the four regions. Existing home sales in the Northeast jumped 11.6%, while those in the South increased 1.8%, and sales in the West rose 3.5%. In the Midwest, however, sales slipped 2.0%.

The national median price for all types of existing homes ― including single-family, townhomes, condominiums and co-ops ― was $170,200, representing a 15.4% fall from the same time last year. For single-family homes only, the price was $169,800 in April, which is 14.9% below a year ago.

Inventories of existing home rose 8.8% in April to to 3.97 million, representing a 10.2-month supplyat the current sales pace. The prior month’s figure was 9.6-months, while a healthy market has just a 6-month supply. 

Also released at 10 am was a home price report from by the Federal Housing Finance Agency. It said prices fell an additional 1.1% in March, following a 0.2% uptick in February.

"Our latest data are consistent with growing evidence that housing market conditions may be stabilizing in some parts of the country, especially areas not covered by the other major repeat sales price index," said FHFA Director James Lockhart.

His comments stand in opposition to those from David Blitzer, Chairman of Index Committee at Standard & Poor’s, who said on Tuesday the Case-Shiller study of home prices did not suggest price recovery.

“Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines,” Blitzer said on Tuesday. He added, “Based on the March data . . . we see no evidence that that a recovery in home prices has begun.”

 
 

Bill Gross started the concerns last week with AAA credit concerns.  This has sparked a 4 day selling spree that has gone through the roof today. Servicers, originators, banks, insurance funds, hedge funds, sovereign wealth are pulling their fund out for what looks like a breather.  Things should return back to normal once all all the sellers have their orders filled. It's a black Wednesday for mortgage backed securities for sure. It could be weeks or months before it bounces back if it even does. One huge factor is the naivete one must possess to think that the current state of the markets will not be addressed in a "Federal" manner. 

 
 

Uneasiness over the growing government debt load and the credit rating for the US is continuing to cast a large shadow over the bond market. This is in conjuction with a prolonged period of overly optomistic economic exuberance enjoyed by stock traders. The Case Schiller Home price index release yesterday indicated that home prices have fallen 18.7% over the last 12 months.

Regarding the consumer confidence data....although 10.2% of the surveyed consumers said they believed their income would increase in upcoming months (8.3% in last read).... only 2.3% of consumers said they were planning to buy a home....down from 2.6% in April. The expected lack of housing demand should have weighed on financial markets....as housing must stabilize if asset deflation is to decelerate and bank balance sheets are to be appropriately mended.

Today we continue to battle debt supply and the continued notion of a more optimistic economic tone. The TSY will auction $35bn 5 yr notes at 1 pm. The stock market is looking to extend it's market gains. 

 

 
 

Usually this is the most thinly traded time of the day for mortgage backed securities and the weakness is very apparent. 

It appears that long term analysis shows we have crossed over and may have seen the lowest rates for good.

Treasuies have fallen off a cliff on the long end. The 10 year T-bill is now down 23/32nds which has the yield up to 3.530

 
 

The final week of May is a big one for the real estate market as housing data dominates the headlines for the next three days. Tuesday sees the Case Shiller report on home prices for March as well as the first quarter; on Wednesday markets will receive the latest data on Existing Home Sales; and on Thursday April’s New Home Sales release is published. Overall, the reports are likely to show the recession slowing down but signs of full stabilization are still in the distance.

This week should also show consumer confidence slowly climbing from historical lows with the release of the Conference Board’s monthly survey on Tuesday and the revised survey from Reuters and the University of Michigan on Friday. In other macroeconomic data, April’s New Orders survey will be published Thursday, and the first revisions to the Q1 GDP release come out Friday.

Before the opening bell on Tuesday, market headlines are highlighting the impact of North Korea’s action over the weekend. Kim Jong Il’s regime tested a nuclear bomb on Monday, and the following day continued the testing with two more missiles, causing stocks across Europe and Asia to fall. e

U.S. markets may be heading in a similar direction on Tuesday, as index futures each point downwards. S&P 500 futures have lost 2.8 points to 882.1,  Dow futures dropped 40 points to 8220, and Nasdaq futures have slipped 10.75 points to 1350. Meanwhile, the U.S. dollar has been moving higher as equities slip.


Further Details:

At 10am, Consumer Confidence is expected to see a small gain in the Conference Board’s monthly index. April’s reading was 39.2; this month’s consensus is 42.6. 

The optimistic expectation is based on similar reports that have shown recent improvement, but the labor focus in the report could put a damper on any improvement, as more people than ever before continue to receive unemployment benefits. In addition, rising gas prices could hurt the present situation index.

Analysts at IHS Global Insight warn that a gain confidence might not translate into higher consumer sales, as is usually the case, as there’s been a broad shift towards increased savings. 

“This slight improvement will have little impact on spending behavior, which remains cautious,” they said. “Rising unemployment, tight credit conditions, and depleted household wealth continue to restrain spending, offsetting the benefits of fiscal stimulus and lower energy prices.”

Beginning the week at 9am, the Case Shiller index for March is expected to show house prices have fallen 18.40% compared to 12 months prior. That’s a dramatic loss, but the February report posted a -18.63% fall, so the deflation is actually slowing. 

Case Shiller will also posts results for the entire first quarter, which takes into account nationwide prices, whereas the monthly index look only at 20 metropolitan areas. Prices in Q1 are expected to have dropped 18.7%, a worse reading than the -18.2% print from Q4 2008.


On Wednesday, Existing Home Sales are set to see a minor gain, following a 3.0% fall in March. The consensus view among economists is to see an annualized pace of 4.67 million sales in April, up from 4.57 million in the March report.

“Home affordability has certainly helped drive buyers back into the market, especially those searching for existing homes where prices have fallen the most due to foreclosures,” said BTMU’s Ellen Zentner several days before the release. “Nevertheless, affordability is at an all-time high, mortgage rates are very low, and the government’s $8,000 first-time home buyer tax credit is hard to ignore.” 

Not everyone is optimistic about the report, however. Analysts from IHS Global Insight said existing sales are driven by distressed sales versus weak demand, and in April “weak demand will win this tug-of-war, resulting in another drop in existing home sales.” They forecast a figure of 4.47 million sales.

On Thursday, the 8:30am release of New Orders is anticipated to show no change from the prior month, though expectations differ widely. Some analysts look for 2% decrease in the month while others look for a 2% gain.

Defense orders are expected to have a positive impact in the report, as are motor vehicles, but generally output is struggling across the board.  

As with every Thursday, Jobless Claims will also be released at 8:30. Initial claims have been north of 600,000 for 15 weeks now, and continuing claims continue to break ceilings. Last week’s survey, which garnered extra attention because it was the surevy week for Nonfarm Payrolls,  showed 631,000 new claims.

At 10 am, New Home Sales couldshow signs of stabilization in the housing market. Analysts look for a slight uptick in the seasonally-adjusted annual pace to 360,000 sales, up from 356k in March.

“Single-family housing starts and permits and builder confidence have improved since January, and were all up in April,” commented Brian Bethune and Nigel Gault from IHS Global Insight. “Stronger demand (i.e. new home sales) probably accounts for these recent improvements, and we project that new home sales increased to 368,000 units (annualized) in April.”

To end the week, Friday posts the first revisions to Q1 GDP at 8:30, which originally came in at -6.1%. Economists look for an upward revision to -5.5%, as new data on inventories  suggests a less steep decline than firth thought. The uptick has a downside though: that inventory has to be worked off in the present quarter instead.

At 10 am, markets will receive revisions to the Consumer Sentiment survey compiled by Reuters and the University of Michigan.  Analysts look for little change from the preliminary reading of 67.9.



 
 

Make sure to thank a vet today for everything they have done!

 
 

Friday won’t see a single data release, but there’s plenty on the minds of investors as worries abound that the U.S. currency could lose its AAA-rating. In addition, two gloomy speeches from central bank officials Thursday evening brought the U.S. dollar down a notch overnight. 

Back to the ratings worries: Over the past month, the U.S. dollar index has fallen from nearly 87 cents to 80.221, sparking concerns that S&P could drop its AAA-rating for the currency. 

Federal Reserve chairman Ben Bernanke speaks to graduates of Boston College Law School at 2pm, but there’s no Q&A. Judging by his graduation speech to Harvard last year, there’s little potential for market-breaking news.

Elsewhere in the news: The Obama administration has been rather optimistic in its forecasts for a 2010 recovery, but Boston Fed President Eric Rosengren was more cautious when he spoke Thursday evening.

Even Pimco’s Bill Gross, a prominent bond investor, voiced such concerns, concluding that the U.S. would in fact lose the rating, but in a few years rather than in the coming weeks. Concerns were also sparked last week when the UK was warned by S&P to rein in deficits to maintain the AAA-status.

Rosengren said when the U.S. economy switches directions, a quick recovery will be hindered by high unemployment, weak banks, and a consumer wishing to increase savings. "My best judgment is that a rather slow recovery is likely," he said.

Meanwhile, Philadelphia Fed President Charles Plosser said he was worried that the government reaction to the economic crisis is threatening the independence of the Federal Reserve. 

"When a nation's treasury or finance ministry and its central bank work too closely together, there is a clear risk that the government's spending will end up being financed by the central bank's power to create money," Plosser said on Thursday night.

Both speeches contributed to a sell-off in the U.S. dollar, and with no data on Friday the comments could sway the direction of equities on Friday.  Just before 8:30 am, however, stock futures are actually up as another ratings agency, Moody’s, has reiterated its faith in its AAA-rating for the U.S. 

S&P 500 futures are up 5.2 points, Dow futures have climbed 46 points, while and Nasdaq futures have risen 9.75 points.



 
 

Long term mortgages rates declined slightly last week although none reached the record lows that were established a few weeks ago

According to results of Freddie Mac’s weekly Primary Mortgage Market Survey for the period ended May 21, the 30-year fixed-rate mortgage (FRM) averaged 4.82 percent with 0.7 point compared to 4.86 percent with 0.6 point a week earlier.

The 15-year FRM carried an average rate of 4.50 percent with 0.7 point.  Last week the average rate was 4.52 percent with 0.6 point.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was also down slightly from the previous week, averaging 4.79 percent compared to 4.82 percent.  Fees and points were unchanged at 0.6 point.

Freddie Mac’s one-year Treasury-indexed ARM numbers were the only ones that increased during the week.  The one-year rate was up 11 basis points to 4.82 percent.  Fees and points remained at 0.6 point

“Long-term fixed-rate mortgage rates have remained below 5.0 percent for the past 10 weeks as the U.S. Treasury and Federal Reserve (Fed) act to keep interest rates low through security purchases,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “The Treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May.  In addition, the Fed purchased $115 billion in Treasury bonds since March of this year.


“Housing construction continued to decline, as total starts fell to the lowest level since the Census Bureau began its monthly series in January 1959.  While single-family construction appears to be near or at a bottom, multi-unit construction continued to recede.  Reflecting the apparent stabilization in single-family construction levels, homebuilder confidence rose in May to the highest level since September 2008 and represented the first back-to-back up tick since February 2008.”

Weekly yields were announced by Fannie Mae on May 18. 

During the week ended May 15, the average yield of the conventional 30-year FRM was 4.34 percent, down from 4.57 percent the previous week.  Yields on the 15-year FRM were also down from 4.15 percent to 4.20 percent. 

Government guaranteed FHA and VA mortgages dropped substantially, from 5.88 percent to 5.14 percent.

The yield on Fannie Mae’s variable rate mortgage was also down.  One-year ARM’s had an average yield of 3.16 percent compared to 3.37 percent a week earlier.

All Fannie Mae figures are reported on a net basis and do not include servicing fees.

 
 

The weekly survey of Jobless Claims failed to indicate any turnaround in the labor market on Thursday. Initial claims for unemployment benefits were more than expected, and those continuing to receive benefits once again jumped to an all-time high. 

This week is the survey week for Nonfarm Payrolls, meaning the report has implications for the official statistics released the first week of June.

The Dept. of Labor said 631,000 people filed for first-time unemployment benefits in the week ending May 16, compared to an upwardly revised 643,000 is the previous week. Analysts were expecting claims to fall to 625k.

“It is a widely accepted view that claims will remain elevated in the coming months due to, among other things, auto sector shutdowns,” said Jennifer Lee from BMO Capital Market just before the release. “Continuing claims remain an important indicator to judge how much higher the jobless rate will climb and when the recession will end.”

Continuing Claims climbed 75k for the week ending May 9 to 6.662 million, a new all-time high. The rise indicates that those losing their jobs are finding it extremely difficult to regain employment.


Ian Pollick from TD Securities said the continuing claims figure “screams loud and clear that job destruction continues to outpace job creation.” He added, “It is safe to say that until U.S. economic activity begins to pick up, the level of continuing claims will likely continue to increase, at least in the near-term.”

Looking ahead, Joseph LaVorgna from DeutscheBank said initial claims could hit 700k in the coming weeks as shutdowns from the auto sector are captured in the data.

Translating the current report into a Nonfarm Payrolls forecast, LaVorgna said to expect another half-million jobs vanish in May.

 
 

As scheduled, the FOMC has released the minutes from it's recent policy meeting ending April 29th. 

Highlights are as follows:

GDP forecasts cut again.  Previous range was -1.3 to -0.5.  New forecast is -2.0 to -1.3.  2010 still seen turning positive again

Most Fed Governors see a "return to long run potential" taking 5 to 6 years

Most expected gradual recovery with elevated unemployment through 2011

FEWER saw risk to inflation outlook

some note risk that inflation could stay persistently too low

Most expected Inflation to be subdued over next few years

Most agreed inflation risks are balanced

Economy still facing significant downside risks.

Available data indicates stabilization still tentative

Some evidence emerging that the RATE of contraction is starting to decrease.  (aka "less bad")

Many believed risk of protracted deflationary period had decreased

Security Purchases remain intact

SOME THOUGHT SECURITIES PURCHASES SHOULD BE INCREASED IN ORDER TO STIMULATE RECOVERY

Long run forecasts unchanged

2009 core PCE target revised upward from .9 - 1.1 to 1.0-1.5

2009 unemployment forecast now 9.2 to 9.6 % versus 8.5 to 8.8% previously