Rising Rates and Rising Prices

Home prices rose at the fastest annual pace in 7 years in March as the sector continues to rebound after the housing bubble burst. The Case Shiller 20-city Home Price Index rose 10.9% year-over-year ended in March, above the 10.1% expected. On a month-over-month basis, the index rose 1.12%. In the first quarter of 2013, the seasonally adjusted national index was up 3.9%, above the 2.4% from the final quarter of 2014.

Global Stocks are rising after central banks around the globe reassured investors that easy money policies will continue through 2013 and should last until mid-2014. U.S. Stocks opened sharply higher and is putting a big dent in Bond prices. The recent fall in Bond prices have caused home loan rates to rise in the past few week, though rates are still closer to record low levels.

Americans across the nation are feeling more optimistic on the economy due to an improving job market and better than expected economic data that has been reported lately. The Consumer Confidence Index rose to 76.2 in May, the highest level since February 2008. A spokesperson for the Conference Board, which issues the survey, said, "Consumers’ assessment of current business and labor-market conditions was more positive and they were considerably more upbeat about future economic and job prospects."


LV Market Update

The foreclosure front received some good news today as Lender Processing Services (LPS) reported that the number of Americans in the foreclosure process continues to decline as the housing markets recover, down almost 25% in the past year. LPS went on to say that total delinquency for loans 30 days or more past due, but not yet in foreclosure, dropped below 6.5% for the first time since July of 2008.

The past few weeks have seen a rise in home loan rates to the highest level since 2012, which led to a decline in mortgage applications in the latest survey. The Mortgage Bankers Association reported that its Market Composite Index, a measure of loan application volume, fell by nearly 10% as the downward trend continues. The refinance gauge dropped 12% while the purchase index fell 3%.

Over in the home purchase markets, home resales rose to the highest level in three and a half years in April as the sector continues to recover. The National Association of Realtors reported that Existing Home Sales rose to an annual rate of 4.97 million units to the highest level since November of 2009, but was slightly below the expectation of 4.98 million. When compared to last year, sales climbed nearly 10%. The rise has been due in part to tighter supplies in parts of the country, but with the rise in home prices, sellers have come back into the market.


Fannie Mae

Government Sponsored Enterprise Fannie Mae published its monthly market update yesterday reporting that the U.S. economy should see a modest re-acceleration in the second half of 2013, with housing one of the main catalysts to sustain the growth. Fannie Mae went on to say that economic activity eased in the past few months due to fiscal drags and the sequester.

The GSE sees growth of 2.2% in 2013, which follows a 1.7% gain and 2% growth in 2012 and 2011, respectively. Fannie sees improvements in home purchase demand. Fannie Mae was founded in 1938 and guarantees and purchases loans from mortgage lenders to ensure families can buy homes, refinance, or rent a home.


Daily Market Update

The Bond markets got a boost this morning after tame inflation data and weaker than expected manufacturing data hit the wires. Throw in continuing debt woes in Europe and France falling back into a recession and you have a recipe for rising yields. Stocks, as measured by the closely watched S&P 500, closed at yet another record level yesterday of 1,650 due to the ongoing stimulus programs enacted by the U.S. Federal Reserve and a recovering economy.

The Bureau of Labor Statistics reported this morning that prices at the wholesale level as measured by the Producer Price Index fell by 0.7% in April due in a large part to falling energy prices. This was below the -0.5% expected and adds to the notion that as long as inflation remains tame, the Federal Reserve will continue with its easy money policies and continue to stimulate the economy.

Over in the housing markets, the National Association of Home Builders (NAHB) reported this morning that its Housing Market Index rose to 44 in May, up from the 41 reading in April and was the first increase in 2013. The improvements were seen in current sales conditions, sales expectations and traffic of prospective buyers. The NAHB noted that builders are seeing an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies. However, readings below 50 generally indicate that builders are pessimistic about sales trends - there hasn't been a 50 reading since April of 2006.

Manufacturing data continues to weaken and remains a sore spot for the U.S. economy. The New York Federal Reserve reported this morning that the New York State Manufacturing Index fell by 1.43 in May, down from the 3.1 reading in April and lower than the 3.5 that was expected. The general business gauge and the employment component also declined. Any readings below zero indicate that respondents see conditions getting worse than better.


Accelerating Home Prices

Home prices continue to accelerate across the nation as the housing market rebounds from one of its worst downturns in history. Corelogic reported yesterday that home prices rose by 10.5% year-over-year in the month ended in March, the largest annual increase since March 2006 and the 13th consecutive increase in prices. From February to March, home prices rose by 1.9%, but home prices nationwide remain 25% below the peak levels from April 2006. CoreLogic is a leading property information, analytics and services provider in the U.S. and Australia.

Due to the uptick in home prices and a better outlook on the job market, credit reporting agency TransUnion reports that the percentage of late payments on mortgages has been declining. In the first quarter of 2013, the number of mortgage holders behind on payments for at least two months dropped 21% from the same period last year. It was the largest decline since TransUnion started collecting the data back in 1992. Across the nation, every state posted an annual decline in the late-payment rate.

The Mortgage Bankers Association reported today that its Market Composite Index, a measure of total loan application volume, surged by 7% in the latest week as home loan rates continue to hover near record low levels. The refinance index made up most the activity rising by 8% while the purchase index gained 2%.

In corporate news, Freddie Mac, the number two provider of U.S. mortgage money reported today that profits in the first quarter of 2013 rose to $4.6 billion, up from $577 million in the same period last year. It was the second largest profit in company history and it sixth straight quarter of profits. Fannie Mae and Freddie combined drew a total of $187.5 billion in bailouts and they must turn over most of their profits to the government.

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