Daily Commentary by Larry Baer: Against
expectations, new single-family home sales declined 0.3% month-over-month to an
annualized rate of 373,000 units. The average sales price rose a record 11.2%
and demand remained at a two-year high.
While the improvement is certainly a step in the right direction -- the
new home market still has a long way to go to recovery. According to data gathered by Jeffery
Bartash, writer for the Wall Street
Journal's "Market Watch" website -- purchases of new homes fell
to just 306,000 in 2011, the lowest level every recorded since the government
started to keep track in 1963. By
contrast, new home sales averaged from 877,000 to 1.28 million annually in the
six years before the 2007 - 2009 recession.
In a separate report the Mortgage Bankers of
America said their Mortgage Application Survey for the week ending September 21st
showed mortgage demand for both refinance and purchase money mortgages expanded
by 2.8%. The purchase loan demand
component of the index rose 0.7% while refinance requests increased by
3.3%. Refinance applications accounted
for 81.2% of all applications and 79.6% of the prospective loan volume.
The contract rate for 30-year fixed-rate
conforming mortgages fell by 9 basis-points to 3.63%, a new historical
low. The interest rate is down by 17
basis-points from four weeks ago and down 61 basis-points from the year ago
mark.
Mortgage investors will likely take
directional cues from stock prices as they go about managing interest rate risk
over the balance of the day. Should stock
prices trade notably higher -- look for mortgage rates to trade fractionally
higher as well. It will likely take a
rather sharp sell-off in the stock markets to provide enough momentum to drag
mortgage interest rates notably lower from current levels.
Still to come -- Thursday's August Durable
Goods Orders, weekly jobless claims numbers and the final revision to Q2 Gross
Domestic Product will all be overshadowed by the Treasury Department's
remaining auctions of $35 billion of 5-year notes today and tomorrow's sale of
$29 billion of 7-year notes. Demand for
both offerings is expected to be strong enough to avoid creating much, if any
upward pressure on mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
