Weekly National Economic Commentary as it affects the Incline Village Home Market-April 22, 2011

We have a number of important reports to review—more than we can fit in the ‘Key Indicators’ column—so let’s get at them.

 First, though, a couple of telling figures in the listed ‘Key Indicators.’ The ten-year Treasury note has plunged to 3.35%, suggesting that the rise of longer-term interest rates is stalled for the moment. We could sift among a dozen or more possible reasons for this. Suffice to say, the credit markets are stalled at this time. Look, for confirmation of this fact, at the mortgage rates we’ve listed. They just aren’t moving.

 The applications for new and refinanced mortgages have also stalled. Not a surprise for refis, whose rates haven’t moved lower and aren’t all that attractive as a result—but disappointing as regards purchase money loans, which reversed their recent upward trend. (Surely it isn’t just a coincidence that the number of new applications for unemployment insurance climbed back above 400,000, after a steady decline into the 300,000s.)

 The Producer Price Index, measuring inflation at the level of materials used in manufacturing, climbed by 0.7% in March, largely because of the cost pressures created by expensive crude oil. The core index, removing food and energy prices, rose at a less brisk 0.3%.

 

Meanwhile, the NAHB (National Association of Home Builders) Market Index for newly-constructed homes fell a point from 17 to 16. Though not a big decline, 17 and 16 are extremely low and this month’s downward movement is disheartening. It suggests that builders don’t anticipate much improvement in sales for at least six months, though this is not a conclusive indicator at all.

 

Perhaps contrarily, housing starts were up 7.2% in March, coming off a very weak winter. The number of new homes under construction is still very low but the improvement very likely results from the fact that it is expensive to hold on to unimproved land and if sales improve at all, builders could be caught with inadequate inventory on the market and lose potential sales as a result. This might also explain the improvement in the number of new building permits—showing an 11.2% rise (after the prior month’s decline of 5.2%).

 

On April 20th, we will see how the existing homes market fared in March, as reported by the National Association of RealtorsÒ. Given the generally poor numbers from the new homes sector and the weakening number of applications for new mortgages, it is hard to imagine heartening news from the existing home sector. But since the political world is fraught with problems, it is amazing how stable these indicators remain. They seem ready to edge higher, therefore—rates included—once a bit of optimism is injected into the marketplace.

 

 

KEY INDICATORS [4/19/11]

 

Gold $1499.00/ounce [up!]

Crude Oil (Brent) $121.14/brl

[down slightly]

U.S. Dollar to…

    Euro .6962 [up]

    Japanese Yen 82.4180 [down]

    Chinese Yuan 6.5287 [down]

    Canadian Dollar 0.9572 [down]

6-mo Treasury Bill Yield 0.11%

10-yr Treasury Note Yield 3.35%

[6-month up 1 bp, 10-yr down 14 bps]

11th Dist Cost of Funds 1.469%[-]

30-yr Fixed-rate Mortgage 5.18%

15-yr Fixed-rate Mortgage 4.46%

1-yr ARM 3.65%

[HSH average includes jumbo rates: 30-yr up 1 bp; 15-yr up 2 bps; 1-yr ARM unchanged]

Freddie Mac weekly average rate

            [4.91 - up 4 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 4/8

   Overall

    Down 6.7%; Down 2%

the week prior

   Purchase Money Loans

    Down 4.7%; Up 6.7%

            the week prior

  Refinancing Loans

    Down 7.7%; Down 6.2%

the week prior

 

Jobless Claims 4/9

    412,000 – prior week 385,000 (rev) – continuing claims 3.680 m

 

Retail Sales Mar

    Up 0.4% - up 0.8% if data for auto sales removed