Apple, Intel and broader tech sector earnings have led stocks higher since Tuesday (Dow +29, S&P +5.6), erasing Monday’s losses that came after Standard & Poor’s issued a negative outlook for U.S. debt.
Bonds are up slightly today (FNMA 30yr 4% coupon + 9 bps, 10yr Note +12 bps to yield 3.39) and trading quietly before closing 2:00pm ET today and reopening Monday. Below is a summary of how markets reacted to news of the past two days, and rationale for why mortgage shoppers should lock rates before Monday.
This morning the Philadelphia Fed’s April manufacturing outlook survey showed that demand for manufactured goods (measured by new orders) dropped sharply following seven months months of expansion—though most firms still expect growth in the next six months. The report also showed that inflation continues to be an issue, with 59% of firms surveyed reporting that they’re paying higher prices.
Also this morning the Federal Housing Finance Agency reported that U.S. home prices declined 1.6% from January to February, and prices dropped 5.7% since February 2010. The FHFA home price index is now 18.6% April 2007 peak and roughly the same as the February 2004 index level.
It should be noted that the FHFA home price index only includes homes that have Fannie or Freddie mortgages, so it’s not as comprehensive as the S&P Case Shiller home price report which is due Tuesday 4/26. Tuesday’s Case Shiller home price report will also be for February.
February brought dismal home sales, so Tuesday’s February Case Shiller may also show a poor number.
But Case Shiller is a month behind new and existing home sales. March new home sales come out Monday 4/25 and March existing home sales came out yesterday, showing improvement over February.
Existing home sales were up 3.7% in March, and here’s a recap of all other critical existing home sales stats:
Existing home sales were 6.3% below March 2010. First time buyers purchased 33% of homes in March, compared with 34% of homes in February, and 44% in March 2010.
All-cash sales were at a record 35% of all sales in March, up from 33% in February, and 27% in March 2010.
Investors accounted for 22% of sales activity in March, up from 19% in February, and 19% in March 2010.
The balance of sales were to repeat buyers.
The national median existing-home price for all housing types was $159,600 in March, down 5.9% from March 2010.
Distressed homes (typically sold at discounts in the vicinity of 20%) accounted for a 40% market share in March, up from 39% in February and 35% in March 2010.
Total housing inventory at the end of March rose 1.5% to 3.55 million existing homes available for sale, which represents an 8.4-month supply at the current sales pace, compared with a 8.5-month supply in February.
Rate Lock Advisory Prior To April 25
Consumers ready to lock rates—people who are in contract on purchase transactions, or are pre-approved and ready to go on a refi—should consider locking rates while bond markets are quiet this afternoon and tomorrow because next week’s economic calendar is packed with:
First quarter GDP, a Fed meeting and press conference, PCE (the Fed’s favorite inflation measure), Case Shiller home prices, new home sales, personal income/spending, Chicago area manufacturing index, and Treasury auctions throughout the week.
Bond investors may be looking to sell ahead of a Fed meeting (and subsequent press conference—the first-ever post-FOMC press conference) where the Fed is likely to give hints about their exit from extremely friendly rate policies of the past few years.
If they even hint at a winding down of their zero-rate-plus-quantitative-easing policy, mortgage bond will sell and rates will rise.