Market Report 5/26-5/29

Was it really only a 4-day workweek? For some reason it seems longer…
 
A college girlfriend once told me, “The more I think of you, the less I think of you.” At first I thought that was pretty clever, but then it dawned on me what she was saying… The same goes for rates. These rates, relative to where they were two weeks ago, are bad. 30-yr conforming is back into the low 5% area, “high balance” conforming is priced about .5% higher than “low balance” conforming, and on the wholesale side jumbo loans are in the mid-6% area. Suddenly any borrowers who waited to lock, especially if they incurred expenses in processing or having an appraisal done, are upset. And on the jumbo side, there is still no securitization of larger loans, with portfolio lenders holding on to the product. If housing is going to take us out of the recession, rates moving up won’t help.
 
There are definitely signs, however, that certain markets are turning around. Yes, prices are lower, but one broker reported, “Things are starting to pick up here in Arizona.  The outlying counties are seeing multiple bids on homes in the starter home price range ($95,000 – $150,000), and they are driving other prices up.  The move-up homes are getting more foot traffic and sales. And, of course, the luxury home builders are hopeful about the future – now, if only MBS prices would rally and behave! If rates would stay under 5% we might actually have a nice summer.”
 
Yesterday we learned that Home Sales in the U.S. climbed 0.3%, slightly lower than was expected, and the median price of a new home decreased to $209,700 from $246,400 in April 2008. Still, last month’s value was up from March. And, at first rates continued their march higher as bond prices dropped, but then turned around. Why did they improve, leading to a few intra-day price improvements? “Treasuries rose for the first time in five days on speculation that the highest yields since November are unsustainable given forecasts that the U.S. housing market shows few signs of recovery.” In addition to that, apparently there is some feeling that, with rates where they are, our debt has become more attractive to own. Heck, if a buyer wanted to own 10-yr Treasury debt at 3.00%, they must really like 3.60%, right? It is not quite that simple, but nonetheless rates came down a little.
 
GDP came out this morning, showing that the U.S. economy contracted slightly less than initially estimated in the first quarter. Another hint that the recession is moderating? Maybe – Gross Domestic Product, which measures total goods and services output within U.S. borders, dropped at a 5.7% annual rate which is less than the 6.1% estimated by the government last month. Output, however, has declined for three straight quarters for the first time since 1974-1975. We still have the Chicago Purchasing Manager’s survey due out (estimated at “42”) along with the University of Michigan survey. After the GDP number the 10-yr yield is 3.61% and mortgage prices are perhaps .5 to .75 better than yesterday afternoon.
 

Tagged as: erin brumett, Finance, home sales, Interest Rates, real estate, seattle, Seattle Market, Urban Living Seattle