Daily Commentary by Larry Baer: The National Association of Realtors said the pace of existing home sales in December was up 5.0% over the prior month's level. For all of 2011, sales edged up 1.7% to 4.26 million units on an annualized basis - well below the 2005 peak of 7.08 million units. The inventory of homes currently on the market have dropped to 6.2 months supply at the December sales pace - the lowest mark for this measure of activity in the housing sector since April 2006. Distressed sales accounted for 32% of all sales, up from 29% in November. The data from the NAR matched almost exactly the figures investors had already priced into the mortgage market - so the current level of rates was little changed following this report.
Looking ahead to next week Uncle Sam will be in the credit markets from Tuesday through Thursday looking to settle $99 billion worth of government debt at auction. Tuesday's sale will feature $35 billion of 2-year notes, followed by $35 billion of 5-year notes on Wednesday and concluding with $29 billion of 7-year notes on Thursday. The final gavel will fall at 1:00 p.m. ET at each auction. All three offerings will likely draw decent demand and are not expected to exert much, if any, influence on the trend trajectory of mortgage interest rates.
The Federal Open Market Committee will huddle for two-days of monetary policy discussions on Tuesday and Wednesday. Committee members are expected to release a post-meeting statement on Wednesday at 12:30 p.m. ET. Mortgage investors do not expect the Fed to announce any changes to existing policy that would materially affect the current level of mortgage interest rates.
Thursday's 8:30 a.m. ET release of the December New Home Sales report will be the only substantive macro-economic report on the calendar. New Home Sales last month will post a modest gain of 1.5% over November levels. If this assessment proves accurate, mortgage investors are almost certain to give this report nothing but a passing glance.
The upward pressure on mortgage interest rates today once again appears to be coming largely from news and rumors swirling around ongoing negotiations between Greece and its sovereign debt holders.
The global investment community is harboring hopes that talks between the Greek government and its creditors will be successful in avoiding a complete credit default. The stakes could not be higher. The two sides must thrash out a deal within days to pave the way for Greece to receive a new infusion of aid to avoid bankruptcy when about $18.5 billion (in U.S. dollar terms) of bond redemptions fall due on March 20th . The two sides are still struggling to come to mutually acceptable terms on the transaction - but the penalty for failure to hammer out a deal is so great for the participants involved that most observers believe a workable deal will be reached - perhaps before the weekend is over. If so, the massive flow of capital out of Europe into safe-haven investments live U.S. dollar denominated debt instruments and mortgage-backed security will likely slow to a trickle - and mortgage interest rates here at home will begin to slowly tick higher as a result.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
