Loan Biz Blog

Oversold 10 year note conditions and a sour New Home Sales number may have nailed down a bottom in the market (for today). New Home Sales, expected to up 10K units, fell like a rock to 355K units annualized. The 11.3% drop caught the market by surprise, illustrating the impact that 8 G’s has the consumer. Remember, the program was going away until it was extended the first week of November. It also points out how fragile the economy and more specifically, housing really is. Continued foreclosures will compete with builders into the New Year, creating this teeter totter effect on our housing market. For the record, New Home Sales fell in every region of the country except the Midwest. That region jumped 21.4% while the other end of the spectrum pointed to sales in the South falling 21.1%. University of Michigan Sentiment survey, final revision for December hit the tape at 72.5. The index fell .9 from the last revision and 1.0 below economist’s expectations. Overall, it appears as if consumer sentiment is not deteriorating further but is not gaining much traction either. Personal Income/Spending were also in the docket, up .4% and .5% respectfully. Stronger stocks and perhaps a stabilizing employment picture has put a little bounce in the consumers step. It should put them in a better mood for Christmas spending. All of the above has helped to put a little green on the screen. Currently, the 10 year note is up 8/32’s (yield 3.71%), mortgage backs are plus 3/32’s, and stocks are off a dozen on the big board. Not much of a rally considering the “stinky” housing numbers but a net positive for us mortgage types. What you’re seeing in the big picture is a steepening of the yield curve, anchored on one end by “extended period of time” cheap Fed money and the other end, controlled by market forces, “front running” an economy that is growing (2.2% GDP) along with a hint of inflation. With so many cross currents to deal with, from the economy to the Fed, the road ahead will see choppy interest rates with sharp moves either way possible. Given the supply hitting the market next week (2’s, 5’s, and 7 year treasuries), best to stay defensive and use any price improvement to your advantage.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

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Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611