Daily Commentary by Larry Baer: Persistent worries about the lack of progress in
Washington to avert the economically crippling effects of the looming
"fiscal cliff" continues to underpin the near-term prospects for
steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will be in
the credit market looking to borrow $35 billion in the form of 2-year notes
today. Most analysts expect this sale to go off without a hitch. If
that assessment proves accurate - this event will have a negligible impact on
the current trend trajectory of mortgage interest rates.
Earlier this morning
a gauge of U.S.
business spending, a component of the broader October Durable Goods Orders
report, increased by the most in five months. A fourth straight month of
declines in shipments highlighted the damage fears of tighter fiscal policy
next year is currently wreaking on the economy. Overall durable goods
orders were unchanged last month -- while the ex. transportation component rose
1.5% after posting a 1.7% increase in September. Mortgage investors took
notice of the numbers -- and concluded the entire data set is currently
mortgage interest rate neutral.
In other relevant
news of the day -- home prices in 20 major U.S.
cities grew 0.4% in September, reinforcing the view the housing sector is
beginning to show signs of sustainable growth. The driving force behind
the uptick in home prices is an improvement in consumer confidence -- which has
now risen to a four-and-a-half-year high.
Over the past few
months, consumers have grown increasingly more upbeat about the current and
expected state of the job market, and this turnaround in sentiment is boosting
housing demand. While persistently low mortgage rates and improving
employment prospects are attracting more buyers, consumers still face tight
credit standards. Unless/until the current credit standards are
relaxed to less stringent levels - it is a virtual certainty a more dynamic
recovery in the housing sector will not be forthcoming.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
