Pat Hill Realtor

Housing for the week of June 8, 2009

>> Home Base

INFO THAT HITS US WHERE WE LIVE  Lots of encouraging housing news last week. April Pending Home Sales came in UP 6.7%, rising for the third straight month and a 3.2% improvement over a year ago! The National Association of Realtors housing affordability index is near a record high and mortgage rates, while creeping up last week, are still at historically low levels. In fact, applications for purchase loans were UP 4.3% last week, according to the Mortgage Banker's Association.

Prospective buyers should take note that Freddie Mac's weekly Primary Mortgage Market Survey reported that 30-year fixed-rate mortgages averaged 5.29% with an average 0.7 point. This was up from 4.91% the previous week, but still well under the 6.09% average rate a year ago. These rates, incidentally, are for buyers with good credit and a 20% down payment.

Finally, two large homebuilders reported that losses in the quarter ending April 30 had shrunk from levels of a year ago. They cited lower prices as the big draw for buyers, but the pace of price declines seems to be slowing. IHS Global Insight, a research firm, reported home prices fell on average at a 2.2% annual rate in Q1 of this year, a big improvement over the 12.5% drop measured in Q4 of last year.

>> Review of Last Week

ANOTHER WEEK UP!... The market had a strong rally Monday and although the moves were modest the rest of the week, the major indexes closed up nicely at the end. This was particularly gratifying since the week began with General Motors filing bankruptcy. Investors felt GM bondholders had made concessions over the weekend that would permit a new, more competitive GM to emerge fairly soon.

Some experts say the economy has bottomed and we're beginning a "v-shaped" recovery. The week gave them ample support. April Personal Income was UP, with wages and salaries increasing for the first time in eight months! Personal Spending was down –0.1%, indicating consumers are still cutting spending. ISM Manufacturing increased in May, with new orders showing expansion, posting its highest reading in 18 months. China's manufacturing grew for the third month in a row, so the global economy may be recovering. There were also better-than-expected manufacturing numbers from the UK and Eurozone. ISM Non-Manufacturing increased to its highest level since October. Even autos helped out, with sales up 6.4% for the month, the fastest rate of climb this year. The good news in Pending Home Sales is covered above.

Friday's employment report showed nonfarm payrolls down 345,000 in May, with March and April revisions adding 82,000 jobs. This brought the net job loss for May to 263,000, way better than expected and the smallest drop since August 2008. The pace of job losses is clearly slowing from the 749,000 level hit in January. The unemployment rate was 9.4%, still below the 11% of 1982, and the rise all came from an increase in the labor force. Without that, the rate would be 8.7%.

The Dow ended UP 3.1% for the week, to 8763.13; the S&P 500 gained 2.3%, to 940.09; and the NASDAQ was UP 4.2%, to 1849.42.

It wasn't a great week in the bond market, with prices hammered as stocks rose. Because of decreases in the price of mortgage bonds, we're now tracking the FNMA 30-year 4.5% bond. The week ended with this bond at $98.19, down 81bp for the day. When prices improve, we'll get back to following the FNMA 30-Year 4.0% bond. At the moment, lower prices are pushing up yields and mortgage rates, now over 5%. These are still historically low rates that are VERY ADVANTAGEOUS for homebuyers and homeowners looking to refinance higher rate mortgages.

>> This Week’s Forecast

ANOTHER LOOK AT CONSUMER SPENDING... There aren't a lot of economic reports coming out this week, but we will have Retail Sales numbers that should show us whether the consumer is helping things along just yet. The trade balance could be interesting, but there are no big names reporting corporate earnings.

>> The Week’s Economic Indicator Calendar

Published Monday, June 08, 2009 11:20 AM by Pat Hill