MMG WEEKLY – WHAT ARE THEY SAYING THIS WEEK

Forecast for the Week 

The economic calendar is light this week, but there’s still the potential for market-moving news:

  • Housing Starts and Building Permits will be released on Tuesday while Existing Home Sales will be released on Thursday. Investors continue to look for any signs that the housing markets are turning the corner to greener pastures. Speaking of housing markets, check out the View article below regarding a new report released about the State of the Nation’s Housing.
  • Weekly Initial Jobless Claims will be delivered on Thursday as usual. The number of claims remains stubbornly high and points to a troubled labor market.
  • Also on Thursday, the Philadelphia Fed Index will be closely watched as to the state of factory conditions in that region.

In addition, all eyes and ears will be glued to Wednesday’s announcement from the Fed. The FOMC meeting will begin on Tuesday and end Wednesday at 12:30pm ET with the release of the monetary policy statement.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.

To go one step further – a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates continue to improve. I’ll be watching closely to see what happens this week.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jun 15, 2012)
Japanese Candlestick Chart

 

The Mortgage Market Guide View… 

Outlook for a Housing Market Recovery

Home prices may well find a bottom this year, and stronger sales should pave the way for a pickup in single-family construction over the course of 2012.

That’s the assessment made by Harvard University’s Joint Center for Housing Studies (JCHS) in its recently released “State of the Nation’s Housing” report. The report — which has been released since 1988 — is an essential resource for both public policy makers and private decision makers in the housing industry.

The bottom line of the report is that — after several false starts — there is reason to believe that 2012 will mark the beginning of a true housing market recovery.

However, employment growth remains a key factor, providing the stimulus for stronger household growth and bringing relief to some distressed homeowners. And, if the broader economy weakens in the short-term, the housing rebound could again stall.

Here are just some of the findings in the report:

  • The monthly mortgage payment for the typical home currently compares more favorably to rents than at any time since the early 1970s.
  • By the first quarter of 2012, existing home sales were 5.2 percent above year-earlier levels, with single-family sales up 6.3 percent.
  • Sales of newly constructed homes in the first quarter of 2012 stood 16.7 percent above year-earlier levels.
  • The inventory of existing homes for sale shrank by some 23 percent in 2011, reducing the supply in the first quarter of 2012 to its lowest level since 2006.
  • Single-family permitting, a leading indicator of starts, was also up 16.9 percent in the first quarter of 2012.

The complete report provides a current assessment of:

  • The state of the housing market and the foreclosure crisis
  • The economic and demographic trends driving housing demand
  • The state of mortgage finance
  • Ongoing housing affordability challenges

You can download the full report from the JCHS’s website. You can also download a convenient handout of Key Housing Industry Facts from the website.

Economic Calendar for the Week of June 18 – June 22

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. June 19
08:30
Housing Starts
May
NA
717K
Moderate
Tue. June 19
08:30
Building Permits
May
NA
715K
Moderate
Wed. June 20
12:30
FOMC Meeting
Jun
No Change
.25%
HIGH
Thu. June 21
08:30
Jobless Claims (Initial)
6/16
NA
NA
Moderate
Thu. June 21
10:00
Existing Home Sales
May
NA
4.62M
Moderate
Thu. June 21
10:00
Philadelphia Fed Index
Jun
NA
-5.8
HIGH
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