March 10, 2010 

 

KEY INDICATORS [3/9/10 close] 

 

Gold $1123.20/ounce [down]

Crude Oil (Brent) $80.24/brl [up]

U.S. Dollar to…

    Euro .7360 [down]

    Japanese Yen 89.95 [up] 

6-mo Treasury Bill Yield 0.20%

10-yr Treasury Note Yield 3.70%

[6-mo up 3 bps, 10-yr up 7 bps] 

11th Dist Cost of Funds 1.786%[-]

30-yr Fixed-rate Mortgage 5.30%

15-yr Fixed-rate Mortgage 4.72%

1-yr ARM 4.57%

[HSH averages rates: 30-yr

down 6 bps,15-yr down 4 bps; 1-yr ARM up 2 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 2/26

  Overall

    629.9 (up 14.6%; down 8.5%

the week prior)

  Purchase Money Loans

    214.5 (up 9%; down 7.3%

            the week prior)

  Refinancing Loans

    3054.7 (up 17.2%; down 8.9%

the week prior)

 

Jobless Claims 2/27

    469,000 – prior week 496,000 – continuing claims fell to 4.5 m

 

Employment Report Feb

    Nonfarm payrolls down by 36,000 – unemployment rate unchanged at 9.7%

 

Consumer Credit Jan

    Up 2.4% - revolving down 1.7%, nonrevolving up 5.1%

 

 

 

 

 

 

Weekly Commentary

 

“Notwithstanding the disappointing mortgage application and sales data, Moody's Economy.com expects sales to continue trending upward over the course of this year. By the time the tax credit expires in early summer, solid job creation will have taken hold. Nevertheless, increases in sales will be extremely modest until price declines cease, which is expected to happen by the end of the year.” [Michael Zoller, Moody’s Economy.com]

 

Though purchase money mortgage applications (to the left) rose by a substantial 9% in the last full week of February, the index still stands well below where it was four weeks ago and also below where it was a year ago. The number of refinancing loan applications, meanwhile, bounced higher with more favorable mortgage rates, as they generally do. But it is the purchase money loan figure that tells us the most about the real estate market, and the story it’s telling isn’t good as of yet.

 

However, there are signs that we may start seeing employment figures that surprise to the upside. The employment report for February, of course, was welcomed warmly by the markets because a solid majority of analysts had expected job losses to number 75,000 and the unemployment rate to rise by at least a point. Thus, though the report didn’t give us positive numbers, it gave us a mildly positive feeling for the jobs market.

 

Now, Michael Zoller (above) refers to “solid job creation” in the relatively near term. Is this overly optimistic? Apparently not. A recent survey found that 92% of American businesses plan to start hiring in 2010.

 

Notice, too, that consumers have begun to open their wallets, with stores like Nordstrom reporting better sales. Further, the spike in nonrevolving borrowing suggests that the pent-up demand for larger purchases is expressing itself. (The 1.7% decline in revolving credit, on the other hand, suggests that the American consumer remains a fiscal conservative, especially with his and her credit cards.)

 

Also important, the productivity rate for the fourth quarter of 2009 was raised to 6.9%. With greater productivity comes lower unit employee costs—and higher profits. We do indeed seem to be moving toward a time of hiring in America, and the resulting greater job security could mean far better real estate sales—and somewhat higher interest rates.