Home Sales Up – Stocks Up – Bonds Down

First-time homebuyers who purchase a home before December 1, 2009, will receive up to $8,000 in tax credit. Here’s a great article from the IRS for more information: www.irs.gov/article

Last week saw more unexpected good data on the housing market. February existing homes sales increased 5.1%, to a 4.72 million annual rate. Sales were up in all regions for both single-family homes and condos/co-ops. Plus, the Federal Housing Finance Agency reported home prices UP 1.7% for January. That puts them off just 10% from their April 2007 peak. The supply of existing homes stayed at 9.7 months, with the number of homes in inventory showing its first increase since July. Some observers feel sales have finally bottomed. Wednesday saw February new home sales UP 4.7% to a 337,000 annual rate. The supply fell to 12.2 months as inventories dropped to 325,000, their lowest level since 2002 and 43.0% below their mid-2006 peak.

Finally, mortgage applications were up for the week ending March 20. Although most of the activity was for refinances, applications for purchase mortgages were up a good 4.2%, according to the Mortgage Bankers Association. Freddie Mac's survey for the week ending March 26 reported 30-year fixed-rate mortgages averaged 4.85% with an average of 0.7 points. This was for conventional conforming mortgages with a 20% down payment and was the lowest rate since the survey began in 1971. Compared to last year's high rate of 6.63%, the current rate saves about $225 a month on a $200,000 mortgage, according to Freddie Mac.

>> Review of Last Week

UP AGAIN… The market boom continued, as the rally that started March 6 went for one more week, this time at a very nice 6% clip. The rise was fueled by the unexpectedly good housing data, plus Treasury Secretary Geithner's plan to set up a series of public-private investment funds to buy $500 billion to $1 trillion worth of troubled bank assets. The government is enticing the private sector to join in by taking on the bulk of the risk and offering subsidies. The world's largest bond fund said they'll go along with the program. Not ba d for starters.

There's clearly been a change for the better in the economic data we've been getting. Indicators have come in above expectations the last few weeks. In addition to the housing numbers, the list includes retail sales, the Philly Fed Index (a manufacturing gauge) and durable goods. This bolsters the position of those economists who believe the recession is quickly losing steam and will probably be over by mid-year, way earlier than some expect. The President, in his prime time news conference Tuesday, commented on the economic situation: "We're beginning to see signs of progress."

For the week, the Dow shot UP 6.8%, to 7776.18; the S&P 500 was UP 6.2%, to 815.94; and the NASDAQ ended UP 6.0%, to 1545.20.

With stocks up, bond prices went down. But stocks ended the week on a down day Friday, so bond prices recovered a bit. The yield on the benchmark 10-year Treasury settled at 2.755%. This indicates mortgage rates should stay at their current attractive levels, which is just what the Fed wants to see. 

>> This Week’s Forecast

ACCOUNTING, THEN JOBS… This Thursday, April 2, the Financial Accounting Standards Board (FASB) will tell us whether they'll modify mark-to-market accounting. The hope is an analysis of cash flow can be used to value assets, so income-generating securities won't be marked down because of an accounting rule. The week ends with the March employment report. No one is expecting a change for the better just yet.

Economic indicators include the ISM Index, which measures national manufacturing. It went up a bit in February, so let's see if the rate of manufacturing contraction continues to slow. Tuesday is Chrysler and GM's deadline to show Congress how they figure to survive long term. Also April 2, world leaders meet in London for the G-20 Summit. Look for more resolve to fix the financial system, along with tougher regulation and oversight.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Mar 30 – Apr 03

>> Federal Reserve Watch    

Forecasting Federal Reserve policy changes in coming months. The Fed made it pretty clear the week before last that they were going to keep the fed funds rate down for an extended period. The economists are believing them. 

Current Fed Funds Rate: 0%–0.25%

Odds of change from current policy:

This post information was provided by: Greg Brooks southwest area manager San Diego Mortgage Network (800) 287-8292 x 225                                                                              San Diego homes for sale

Recent Related Posts:

Housing & Stock Market Worries

San Diego Real Estate & Mortgage Views

Eternal Optimism Meets Reality or Know When to Fold Them