Tucson Mortgages Home Loan News 5-17-2021

By Todd Abelson NMLS #180858 on .

Week of May 10, 2021 in Review

Last week brought a double whammy when it comes to inflation, as the reports for April showed it is blisteringly hot!

Consumer inflation as measured by the Consumer Price Index (CPI) rose by 0.8% in April while the year over year reading increased from 2.6% to 4.2%. Not only was this a much larger jump than expected, it was the highest annual increase in 13 years! Core CPI, which strips out volatile food and energy prices, also made headlines as it was up 0.9% in April – the highest month over month increase in 39 years!

Wholesale inflation also came in red hot, doubling expectations, as the Producer Price Index (PPI) rose 0.6% in April. Year over year, PPI rose from 4.2% to 6.2%, which is one of the hottest readings ever! Core PPI also rose more than expected.

Inflation is critical to monitor because rising inflation can have a big impact on Mortgage Bonds and the home loan rates tied to them. Don’t miss the important explanation below.

And speaking of inflation, the April National Federation of Independent Business Small Business Optimism Index showed that many companies were raising wages as a result of not being able to fill positions. Additionally, selling prices increased to the highest level in 40 years. This is just one of many contributing factors to the red-hot inflation readings we’re seeing.

There was some good news regarding Initial Jobless Claims, as the number of people filing for unemployment for the first time fell by 34,000 in the latest week to 473,000. While the number of people continuing to receive regular benefits also declined, the number of people receiving pandemic-related benefits rose sharply. All in all, 16.9 million people are still receiving benefits throughout all programs, which is an increase of 700,000 people from the previous week.

After jumping 10% in March (almost 11% with the revision), Retail Sales were flat in April. Taking out autos, gasoline, and building materials, sales were actually down 1.5%. This makes sense as the jump in March followed the latest stimulus package, and sales in April reflect an understandable pull back.

Lastly, Wednesday’s 10-year Note and Thursday’s 30-year Bond auctions also made headlines. Find out more about them below.

 

Consumer Inflation Blisteringly Hot

The Consumer Price Index (CPI), which measures inflation on the consumer level, rose by 0.8% in April. The year over year reading increased from 2.6% to 4.2%, which was a much larger jump than expected and the highest year over year increase in 13 years.

Core CPI, which strips out volatile food and energy prices, was up 0.9% in April, which is the highest month over month increase in 39 years! On a year over year basis Core CPI increased from 1.6% to 3.0%.

Within the report, it showed that rents are rising 2.0% across the US, which is up from 1.8% in the previous report.

And if we look even deeper into the numbers, while the 0.9% jump in Core CPI was big for the month of April, it was actually somewhat concentrated among airline fares (+10.2%), sporting events (+10.1%), used cars (+10%), hotels (+8.8%), and personal computers (+5.1%).

All of these were record highs and only represent 7% of the overall US economy. Many of these increases are explainable due to the shortage in semiconductor chips and the economy opening back up. The remaining 93% of the US economy was only up 0.3%, which is why some economists are arguing that the rise in inflation will be transient.

In addition, part of the reason for the increase in the annual comparisons is that readings for the more current months are replacing the readings from 2020 when much of the economy was shut down due to the pandemic. That’s why inflation is expected to move higher still when May’s readings are reported in June, as next month a -0.1% reading of the Core CPI from May 2020 will be replaced with data from May of this year.

Why is rising inflation significant?

Remember inflation erodes a Bond’s fixed rate of return. In other words, rising inflation can cause Bonds to worsen or lose value. This includes Mortgage Bonds, to which home loan rates are inversely tied. When Mortgage Bonds move lower, be it due to rising inflation or other reasons, home loan rates move higher. Though many factors influence the markets, keeping an eye on inflation is always important.

 

Wholesale Inflation Doubly Hot

The Producer Price Index (PPI), which measures wholesale inflation, rose 0.6% in April, which was twice as much as expected. Year over year, PPI rose from 4.2% to 6.2%, which is one of the hottest readings ever!

Core PPI, which again strips out volatile food and energy prices, rose 0.7% month over month and increased from 3.1% to 4.1% year over year.

Of note within the report, we saw price increases in things that affect housing. Steel was up 18%, furnishings wholesale was up 3.1%, flooring increased 3%, and household appliances rose 0.6%.

 

Initial Jobless Claims Fall in Latest Week

The number of people filing for benefits for the first time decreased by 34,000 from the previous revised report of 507,000 claims, as Initial Jobless Claims were reported at 473,000. This was just below expectations of 475,000 new claims.

Continuing Claims, which are filed by people who continue to receive regular benefits, fell by 45,000 to 3.66 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify for them) and Pandemic Emergency Claims (which extends benefits after regular benefits expire) increased by more than 700,000 combined claims.

Despite the improvement in Initial Jobless Claims, all in all there are still 16.9 million people receiving benefits throughout all programs. This represents an increase of 700,000 people from the previous week.

 

Update on Auctions

Investors were closely monitoring the 10-year Note and 30-Year Bond auctions held on Wednesday and Thursday, respectively, to see the level of demand. High demand, which is reflected in the purchasing of Bonds and Treasuries, can push prices higher and yields or rates lower. Weak demand, on the other hand, can signal that investors think yields will continue to move higher, which can have a negative effect on rates.

While the 10-year Note auction showed strong demand, with the yield 1.684 versus a one-year average of 0.98 and direct and indirect bidders taking in 80.5% versus a one-year average of 76.1%, the hot inflation headlines had more of an impact on the markets Wednesday.

Thursday’s 30-year Bond auction was met with below-average demand. The bid to cover of 2.22 was below the one-year average of 2.33. Direct and indirect bidders took 80% of the auction compared to 79.4% in the previous 12 months. However, Mortgage Bonds did not react to the weak auction.

 

Family Hack of the Week

National Pizza Party Day is this Friday, May 21. Making your own pizzas from scratch can be a fun activity for the whole family to enjoy together. These recipes from the Food Network can help.

For the dough, combine 3 1/2 cups bread flour, 1 teaspoon sugar, 1 envelope instant dry yeast and 2 teaspoons Kosher salt in the bowl of a stand mixer. While the mixer is running, add 1 1/2 cups water (lukewarm, approximately 110 degrees Fahrenheit) and 2 tablespoons of olive oil.

Beat until the dough forms into a ball. If the dough is sticky, add 1 tablespoon at a time of flour until the dough comes together in a solid ball. If the dough is dry, add 1 tablespoon at a time of water. Scrape the dough onto a lightly floured surface and gently knead into a smooth, firm ball.

Grease a large bowl with 2 teaspoons olive oil, add the dough, and cover the bowl with plastic wrap. Place in a warm area to let it double in size (approximately 1 hour). Turn the dough out onto a lightly floured surface and divide it into 2 equal pieces. Cover each with a clean kitchen towel or plastic wrap and let them rest for 10 minutes.

For the sauce, heat 2 tablespoons olive oil in a medium saucepan over medium-high heat. Add 1/2 teaspoon dried oregano, 3 cloves minced garlic and 1 pinch of red pepper flakes. Stir until the garlic is golden brown, 1 to 2 minutes. Add one 32-ounce can crushed tomatoes, 1 sprig of fresh basil and 1/2 teaspoon salt and bring to a simmer. Reduce the heat to medium and simmer, stirring occasionally until the sauce thickens, approximately 5 to 10 minutes. Remove the basil.

Once the sauce reaches room temperature, roll out the dough and top with sauce, a healthy layer of mozzarella cheese and your family’s favorite toppings. You can also divide the dough into mini-pizzas to make a variety of favorite combinations.

 

What to Look for This Week

Reports on housing and manufacturing will highlight those sectors in the week ahead.

Housing news begins Monday with the National Association of Home Builders Housing Market Index for May, which will give us a real-time read on builder confidence. On Tuesday, we’ll get an update on Housing Starts and Building Permits for April, while Friday brings the data on April’s Existing Home Sales.

Manufacturing news will also be reported Monday with May’s Empire State Index, which gives us an update on the New York region. May’s Philadelphia Fed Index follows on Thursday.

Also of note, the minutes from the Fed’s April meeting will be released on Wednesday while the latest Jobless Claims figures will be reported on Thursday, as usual.

 

Technical Picture

Mortgage Bonds are in the middle of a wide range between support at the 50-day Moving Average and overhead resistance at the 25-day Moving Average. Bonds are susceptible to large price swings when they are in a wide range like this, so it’s important to be on guard.

The 10-year is trading at 1.63%, testing the 50-day Moving Average. Yields have several floors beneath present levels, which will make it hard to see an improvement lower. Conversely, there is room to the upside until the highs from two days ago at 1.70%, followed by 1.76%.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 5-10-2021

By Todd Abelson NMLS #180858 on .

Week of May 3, 2021 in Review

The number of job creations didn’t bloom as fully as expected in April, as the Bureau of Labor Statistics (BLS) Jobs Report fell well below the million new jobs that were anticipated.

Just 266,000 jobs were created in April, per the BLS. Not only was this a big disappointment, there were also negative combined revisions to February’s and March’s figures, totaling 78,000 fewer jobs in those months than previously reported. The Unemployment Rate did tick higher from 6% to 6.1%, but the real Unemployment Rate is actually higher than this headline number, as explained below.

Job gains fared better in the private sector, as the ADP Employment Report for April showed a gain of 742,000 jobs, slightly below the 800,000 new jobs expected. On a positive note, March’s report was revised higher by 48,000 jobs.

There was also some improvement in weekly Initial Jobless Claims, as the number of people filing for benefits for the first time decreased by 92,000 to 498,000. The number of people continuing to receive regular benefits held steady at around 3.7 million, while those receiving pandemic-related benefits declined. All in all, 16.2 million people are still receiving benefits throughout all programs, though this is 400,000 fewer than the previous week.

Lastly, home prices continue to appreciate nationwide, as CoreLogic reported that home prices increased 2.0% from February to March and 11.3% compared to March of last year. Within the report, the hottest markets were Phoenix (+18.3%), San Diego (+14%) and Denver (12%). Meanwhile, rent prices are on the rise. Don’t miss those details below.

 

April Job Creations Far Short of One Million

The Bureau of Labor Statistics (BLS) reported that there were only 266,000 jobs created in April, which was a big disappointment and much less than the one million job creations that were expected. Making things worse were negative combined revisions to February and March, totaling 78,000 fewer jobs in those months than previously reported.

Breaking down the numbers, there were some contributing factors to the weak figures.  Auto factories selectively shut down auto production in response to the lack of semis and there was no net hiring in construction, possibly due to higher costs and lack of labor. In addition, retail hiring was actually down 15,000, even with businesses reopening. Temporary help dropped a sharp 111,000 and this also contributed to the headline jobs miss. There was a positive development, however, in that 331,000 leisure and hospitality workers were hired.

Note that there are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, and it showed there were only 328,000 jobs created. The Unemployment Rate actually moved in the wrong direction, increasing slightly from 6% to 6.1%. While there were only 328,000 job creations, the labor force increased by 430,000. The number of unemployed people increased by 102,000, causing the Unemployment Rate to rise slightly.

However, it’s important to break down these numbers, as the true Unemployment Rate is actually higher than the headline figure. That’s because people who are not able to look for work due to pandemic reasons, and who are still unemployed, are not counted. And that number equates to 2.8 million people. When we add this into the calculations, the real Unemployment Rate is 7.8%.

In addition, there has been a lingering misclassification error where people were classified absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the headline Unemployment Rate would have been 0.3% higher or 6.4%, while the real Unemployment Rate counting those unable to look for work due to pandemic reasons would be closer to 8%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, improved from 10.7% to 10.4%.

Average hourly earnings were up 0.7% compared to last month and are flat year over year. Average weekly earnings, which we focus on more because it measures what people actually take home, rose 1% from last month. On a year over year basis, average weekly earnings fell from 6.7% to 2.7%, but this figure is likely skewed. Earnings spiked last April in the heart of the shutdowns as many people received hazard pay for going into work.

 

Private Payrolls Slightly Below Expectations

The ADP Employment Report, which measures private sector payrolls, showed that there were 742,000 jobs created in April, which was slightly lower than the 800,000 new jobs expected. However, March’s report was revised higher by 48,000 jobs, bringing the total number of job creations in March from 517,000 to 565,000.

Leisure and hospitality led the way with 237,000 new jobs. In total, the service-providing sector added 636,000 new jobs, while the goods-producing sector added 106,000 jobs. Also of note, manufacturing added 55,000 jobs and construction added 41,000.

We did see job gains across all sizes of businesses. Small businesses (1-49 employees) gained 235,000 jobs, mid-sized businesses (50-499 employees) gained 230,000 jobs, and large businesses (500 or more employees) gained 277,000 jobs.

 

Initial Jobless Claims Show Steady Improvement

 The number of people filing for unemployment for the first time fell below 500,000, as Initial Jobless Claims decreased by 92,000 to 498,000. California (+71K), Michigan (+31K) and New York (+29K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, was little changed at 3.7 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) and Pandemic Emergency Claims (which extends benefits after regular benefits expire) decreased by a combined 330,000 people.

All in all, 16.2 million people are still receiving benefits throughout all programs, which is down 400,000 from the previous week. As the economy continues to re-open, we should see this number improve and we will likely see significant progress after Labor Day as extended benefits expire.

 

Home Price Appreciation Continues

CoreLogic released their Home Price Index report for March, which showed that home prices increased 2.0% from February. Prices also rose 11.3% on a year over year basis, which is up from the 10.4% annual gain reported for February.

Within the report, the hottest markets were Phoenix (+18.3%), San Diego (+14%) and Denver (12%).

CoreLogic forecasts that home prices will rise 1.1% in April, which is an increase from their smaller forecasts we’ve seen in previous months. For instance, CoreLogic had only forecasted a 0.5% rise in home prices in March, but prices actually appreciated 2%. On an annual basis, they’re predicting that home prices will rise 3.5% in the year ahead, which is only slightly higher than the 3.2% forecast in their last report and still lower than most forecasts out there.

 

A Note on Rent Prices

The Apartment List rental index showed that rents went up 1.9% in April. Note this is not a year-over-year comparison to April of 2020 but a monthly increase from March of this year. March also saw a monthly rise in prices of 1.4%.

Rents are rising swiftly and this can be important to note as it relates to inflation. Rents make up a significant part of two consumer inflation reports, the Consumer Price Index and Personal Consumption Expenditures, so rising rent prices could impact inflation readings in the months to come. And inflation on a year over year basis is already expected to rise this spring as the readings for the more current months replace the readings from 2020 when much of the economy was shut down due to the pandemic.

Remember, rising inflation is always important to monitor. Inflation is the arch enemy of fixed investments like Mortgage Bonds because it reduces their value. Home loan rates are inversely tied to Mortgage Bonds. Rising inflation can cause Bonds to worsen or move lower, which means home loan rates can rise. Though many factors influence the markets, I’ll be keeping a close eye on inflation headlines since they can have such an impact on Mortgage Bonds and home loan rates.

 

Family Hack of the Week

This Saturday, May 15 is National Chocolate Chip Day. And this recipe for chocolate chip muffins from our friends at Delish is a perfect way to celebrate the occasion.

Preheat oven to 350 degrees Fahrenheit. Line muffin tins with liners or spray with baking spray.

In a large bowl, whisk 2 cups all-purpose flour, 1 teaspoon Kosher salt, 1 teaspoon baking powder and 1/2 teaspoon baking soda. In another large bowl, beat 1/2 cup (1 stick) softened butter, 1/2 cup granulated sugar and 1/4 cup packed brown sugar with a hand mixer until light and fluffy. Add 1 egg and beat until combined, then add 1 teaspoon vanilla extract.

Next, add half of the dry ingredients to wet ingredients and mix until just combined, then add 1 cup of milk and mix until combined. Add the remaining dry ingredients and mix until combined, then fold in 1 cup of chocolate chips.

Divide batter evenly between muffin liners and bake until a toothpick inserted in the middle comes out clean, approximately 20 to 23 minutes.

 

What to Look for This Week

Inflation will be the main headline maker in an otherwise relatively quiet week of reports.

On Tuesday, we’ll get a read on how small businesses are feeling with the National Federation of Independent Business Small Business Optimism Index for April.

Inflation reports start on Wednesday with April’s Consumer Price Index. News on wholesale inflation follows Thursday with the Producer Price Index for April.

Also on Thursday, the latest Jobless Claims figures will be reported. Ending the week on Friday, we’ll get an update on Retail Sales for April.

There are also two important auctions to note that could move the markets: Wednesday’s 10-year Note and Thursday’s 30-year Bond auctions.

 

Technical Picture

Mortgage Bonds are in the middle of a wide range between support at the 103.752 Fibonacci level and a ceiling of resistance at the 100-day Moving Average. They ended the week around 30bp above this Fibonacci support level, which means there is significant downside risk and not a lot of upside.

The 10-year ended the week at 1.58% after briefly touching 1.49% immediately following the Jobs Report on Friday morning. The 10-year candle pattern is a hammer, which follows a downtrend in yield, and would point to higher yields in the coming days. Thankfully, there is a triple ceiling of resistance nearby, but I’ll be watching all of this closely.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 5-3-2021

By Todd Abelson NMLS #180858 on .

Week of April 26, 2021 in Review

The last week of April showered us with a plethora of economic data across a wide spectrum of the economy.

Inflation at the consumer level is warming this spring, as the Fed’s favored inflation measure, Personal Consumption Expenditures, rose even more than expected in March. Rising inflation can impact both Mortgage Bonds and home loan rates, which are tied to them. Read on to learn more about this important dynamic, and what may be ahead this spring.

Home price gains remain strong nationwide. The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 12% year over year in February – a 15-year high! The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Prices for these homes were also up 12.2% in February when compared to the same time last year.

Demand for homes remains strong as well. Pending Home Sales, which measure signed contracts on existing homes, increased by 1.9% in March, snapping two consecutive months of declines. The real story here remains low inventory, which is down 28% year over year, making the increase in March even more impressive.

The latest Jobless Claims figures showed that the number of people filing for unemployment benefits for the first time declined by 13,000 in the latest week, bringing the total to 553,000. However, the previous week’s total was revised higher, which essentially negated the improvement. When factoring in the number of people continuing to receive both regular and pandemic-related benefits, there are still 16.5 million people receiving benefits throughout all programs.

However, there are signs that our economy is improving, as the first reading for first quarter Gross Domestic Product came in at 6.4%, which was in line with estimates and a strong number. The $900 billion stimulus plan that passed in December certainly contributed to the strong reading. We should expect second quarter GDP to be even stronger after the $1.9 trillion stimulus plan that was passed at the end of March.

Lastly, the Fed held its regularly scheduled Federal Open Market Committee meeting. They left the pace of their purchases of Mortgage-Backed Securities and Treasuries unchanged each month. They also left the Fed Funds Rate (the benchmark rate at which banks lend money to each other overnight) unchanged. The Fed also reiterated that they believe any increase in inflation this spring will be transitory.

 

Consumer Inflation Creeping Up

Personal Consumption Expenditures (PCE), the Fed’s favored measure of inflation, showed that headline inflation was up 0.5% in March, which was hotter than the 0.3% expected. Year over year the index increased from 1.5% to 2.3%, which was also much higher than the 1.9% expected.

Core PCE, which strips out food and energy prices and is the Fed’s real focus, was up 0.4%, also higher than the consensus of 0.3%. Year over year, Core PCE increased from 1.4% to 1.8%.

Part of the reason for the increase in the annual comparisons is that readings for the more current months are replacing the readings from 2020 when much of the economy was shut down due to the pandemic. It’s expected that April’s inflation reading will also move higher. In fact, if we saw another 0.4% increase for April Core PCE, which will be reported next month, it will be replacing a -0.4% reading from last year. This would cause the year over year Core reading to go to 2.6%!

The Fed has repeatedly stated that they expect rising inflation will be transitory, which they once again reiterated following their meeting last week.

This is important to note because higher inflation typically drives home loan rates higher. Inflation is the arch enemy of interest rates, since it erodes the buying power of the fixed return that a mortgage holder receives. While many factors influence the markets, I will be keeping a close eye on all the latest inflation data, and its impact on Mortgage Bonds and the home loan rates tied to them.

Also of note, Personal Income was up 21% in March while Personal Spending was up 4.2%. Expect next month’s numbers to spike higher due to the $1.9 trillion stimulus bill that was passed at the end of March. Savings and investment rates are higher, which is part of the reason why Stock prices are up.

 

Low Inventory Helping Home Prices Appreciate

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 12% year over year nationwide in February. This is a 15-year high and even stronger than the 11.2% appreciation seen in the previous report for January.

The 20-city index rose from 11.1% to 11.9% year over year, with almost all of the cities showing strong gains. Phoenix (+17.4%), San Diego (+17%), and Seattle (+15.4%) once again reported the highest annual gains among the 20 cities.

The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Note that while you can have a million-dollar home with a conforming loan amount, the report most likely represents lower-priced homes, where supply is tightest, and demand is strongest.

Appreciation was also strong for these homes, as prices rose 0.9% from January to February and they are up 12.2% when compared to February of 2020. This is little changed from the 12% annual appreciation in the previous report.

Record low levels of supply continue to help prices appreciate, as demand for homes remains strong across the country. At these levels of appreciation, someone who bought a $300,000 home last year would have gained $36,000 in appreciation.

 

Jobless Claims Remain Elevated

 The number of people filing for unemployment benefits for the first time declined in the latest week, as Initial Jobless Claims decreased by 13,000 to 553,000. However, the previous week’s total was revised higher, which in essence negated the improvement. California (+75K), Virginia (+43K) and New York (+40K) reported the largest number of claims.

The number of people continuing to receive regular benefits, as measured by Continuing Claims, remained around 3.7 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) and Pandemic Emergency Claims (which extends benefits after regular benefits expire) decreased by a combined 750,000.

All in all, 16.5 million people are still receiving benefits throughout all programs. While this is down 850,000 from the previous week, these levels still remain extremely elevated.

 

Family Hack of the Week

This recipe for homemade salsa from Allrecipes is perfect for Cinco de Mayo, or any day of the year.

Chop tomatoes until you have 2 cups’ worth, then chop both a red and yellow onion until you have 1/4 cup of each.

Combine tomatoes, red and yellow onion, 2 tablespoons canned green chilies, 2 tablespoons fresh lime juice, 2 tablespoons fresh chopped cilantro, 2 cloves of garlic (peeled), 1 teaspoon ground cumin, and 1/4 teaspoon salt in a food processor.

Pulse processor until mixture is combined, yet remains chunky. Transfer to a bowl, cover with plastic wrap, and refrigerate at least 1 hour.

Enjoy with your favorite tortilla chips or quesadillas!

 

What to Look for This Week

Manufacturing news kicks off the week on Monday when the ISM Index for April is reported. The ISM Services Index follows Wednesday.

Then news from the labor sector dominates the rest of the week’s calendar, beginning Wednesday with the ADP Employment Report, which will give us an update on April’s private payrolls. Look for the latest weekly Jobless Claims figures as usual on Thursday. Ending the week on Friday we will see the highly anticipated Bureau of Labor Statistics Jobs Report for April, which includes Non-farm Payrolls and the Unemployment Rate.

 

Technical Picture

Mortgage Bonds tested overhead resistance at the 103.752 Fibonacci level, but remain just beneath it. Bonds are still in a wide range so we have to be on guard for price swings to the downside, as the next floor of support is at the 50-day Moving Average, roughly 50bp beneath present levels.

The 10-year ended Friday almost dead on the 25-day Moving Average. If yields break higher, there is a risk they could retest 1.76%. If they move under it, there is a dual floor of support nearby that will be difficult to break beneath.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 4-26-2021

By Todd Abelson NMLS #180858 on .

Week of April 19, 2021 in Review

The economic calendar was relatively quiet, but key housing reports showed that demand for homes remains strong around the country.

Sales of existing homes did decline from February to March, but the decline was due to a lack of inventory rather than a lack of demand. There were just 1.07 million homes for sale at the end of March, which was slightly higher than the amount of available homes in February – though still 28.2% lower on an annual basis. The amount equates to just a 2.1 months’ supply of homes.

Meanwhile New Home Sales surged in March, coming in nearly 21% higher than February, while February’s sales figure was also revised higher. Inventory of new homes was tight as well, with just a 3.6 months’ supply of homes for sale at the end of March.

In other news, Initial Jobless Claim declined by 39,000 to 547,000 in the latest week, marking the second week in a row that the number people filing for benefits for the first time declined. When we also factor in people who continue to receive both regular and pandemic-specific benefits, 17.5 million people are still receiving benefits throughout all programs – up 500,000 from the previous week. While it’s encouraging to see the improvement in Initial Jobless Claims, the bottom line is that our recovery still has a way to go.

Lastly, investors were closely watching Wednesday’s 20-year Bond auction. Learn more about the results below.

 

Existing Home Sales Hindered by Low Inventory

Existing Home Sales, which measures closings on existing homes, were down 3.7% in from February to March. However, sales were up 12.3% when compared to March of last year.

The decline in the monthly sales reading was not due to a lack of demand, but to a lack of inventory. There were just 1.07 million homes for sale at the end of March, which was slightly higher than the amount of available homes in February, but 28.2% lower on an annual basis. The amount equates to just a 2.1 months’ supply of homes.

As a result of this tight level of inventory, homes were only on the market for 18 days on average, which is a record low and down from the previous record low of 20 set in February.

The median home price was $329,100, which is a record high and up 17.2% compared to March of last year. Note, this is not the same as appreciation. It simply means half the homes sold were above that price and half were below it. Sales on the low end were down 25%, while sales of homes above $1 million were sharply higher. This dragged the median home price higher.

First-time home buyers increased from 31% in February to 32% in March, which is a decent level considering the stiff competition for homes on the lower end. Investors purchased 15% of homes in March, which was down from 17% in February, while cash buyers increased from 22% to 23% over that same period.

 

New Home Sales Surge in March

New Home Sales, which measures signed contracts on new homes, surged nearly 21% higher in March. February’s sales figure was also revised higher and without that revision, sales in March would have been 32% higher than February’s original number. In addition, sales were also almost 67% higher on a year over year basis, but that is likely skewed due to the economy being shut down in March of last year.

Looking at inventory levels, there were only 307,000 new homes for sale in March, which is down 7% from last year. There were also 14% less homes for sale under $300,000 compared to March of last year.

The median home price was reported at $330,800, up not even 1% from last year. Again, this is not the same as appreciation. It simply means half the homes sold were above that price and half were below it.

 

Initial Jobless Claims Fall for Second Straight Week

The number of people filing for unemployment benefits for the first time fell for the second week in a row, as Initial Jobless Claim declined by 39,000 to 547,000. This is the lowest level since the pandemic began. California (+72K), Texas (+43K) and New York (+41K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, dropped slightly but remain elevated at around 3.7 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) and Pandemic Emergency Claims (which extends benefits after regular benefits expire) increased by a combined 700,000.

All in all, 17.5 million individuals are still receiving benefits throughout all programs, which is up 500,000 from the previous week. While it’s encouraging to see the improvement in Initial Jobless Claims, our recovery still has a way to go.

 

Update on 20-year Bond Auction

Investors were anticipating the 20-year Bond auction held on Wednesday to see the level of demand. High demand, which is reflected in the purchasing of Bonds and Treasuries, can push prices higher and yields or rates lower. Weak demand, on the other hand, can signal that investors think yields will continue to move higher, which can have a negative effect on rates.

The 20-year Bond auction was met with above-average demand. The bid to cover of 2.42 was above the average of 2.37. Direct and indirect bidders took 78.9% of the auction compared to 75.9% in the previous auctions. Mortgage Bonds moved higher after the release.

 

Family Hack of the Week

As the weather warms, berries are coming in season. This Blueberry Crisp recipe from the Food Network is one your family will love all spring and summer long!

Preheat oven to 375 degrees Fahrenheit. In a medium bowl, toss 6 cups blueberries, 1 tablespoon cornstarch, 1 tablespoon lemon juice, 1/4 cup sugar and a pinch of salt.

In a separate bowl, combine 1/2 cup all-purpose flour, 1/2 cup oats, 1/4 cup packed light brown sugar, 1/4 cup white sugar, 1/4 teaspoon cinnamon, 1/4 teaspoon nutmeg and 3/4 cup chopped walnuts. Add 1/2 stick unsalted cubed butter and mix into pea-size crumbles.

Add blueberry mixture into a 2-quart baking dish. Top with crumb mixture. Bake for 40 minutes or until topping is golden brown and fruit is bubbling.

Serve warm ala mode with your favorite ice cream.

 

What to Look for This Week

The last week of April will shower us with economic reports across a wide spectrum of the economy, beginning Monday with March’s Durable Goods Orders.

On Tuesday, we’ll get an update on home price appreciation when both the Case-Shiller Home Price Index and the Federal Housing Finance Agency House Price Index for February are reported. More housing news follows Thursday with March’s Pending Home Sales.

Also on Thursday, we’ll get the latest Jobless Claims figures and a look at Gross Domestic Product for the first quarter of the year.

Ending the week on Friday, we’ll get an update on the Fed’s favored inflation measure, Personal Consumption Expenditures, along with Personal Income and Spending for March.

And speaking of the Fed, their two-day meeting begins Tuesday, with their Monetary Policy Statement following on Wednesday. This always has the potential to be a market-mover.

 

Technical Picture

Mortgage Bonds remain just below a tough ceiling of resistance at the 103.752 Fibonacci level, which they have been unable to break above. There is 36bp of room to the downside before the next floor of support at the 50-day Moving Average.

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 4-19-2021

By Todd Abelson NMLS #180858 on .

Week of April 12, 2021 in Review

The weather isn’t the only thing warming this spring, as home construction is on the rise while consumer inflation is heating up.

March brought some good news for homebuyers struggling with limited inventory. Housing Starts (which measure the beginning of construction on homes) were up almost 20% from February, when bad weather hindered construction. Building Permits (which measure future construction) also ticked higher in March. Even more importantly, Housing Starts and Building Permits for single-family homes, which are in such high demand, also rose in March.

The high demand for homes has builders feeling confident, per the National Association of Home Builders Housing Market Index. This real-time read on builder confidence rose by 1 point to 83 in April. Any reading over 50 indicates that more builders view conditions as good than poor.

Consumer inflation was also on the rise, as the Consumer Price Index (CPI) jumped by 0.6% from February to March. The year over year reading also increased from 1.7% to 2.6%, which was a larger increase than expected. Read on to learn why inflation is expected to rise even further this spring – and why that matters for Mortgage Bonds and the home loan rates tie to them.

Though Initial Jobless Claims remain elevated, there was a nice improvement in the latest week, as the number of people filing for unemployment for the first time fell by nearly 200,000 to 576,000. The number of people continuing to receive benefits held steady at 3.73 million while Pandemic Assistance and Emergency Claims both declined. All in all, 17 million people are receiving benefits throughout all programs, which is down 1.2 million from the previous week.

There was also positive news from the manufacturing sector as the Empire State Index, which measures the health of activity in the New York region, came in above expectations at 26.3 for April. The Philadelphia Fed Index also beat expectations in April, rising to 50.2. In addition, Retail Sales were almost 10% higher from February to March, which was almost double expectations though the increase does make sense, given the recent stimulus payments. The question is, how long will these gains last once stimulus payments subside?

Lastly, read on to learn about the demand at the 10-year Treasury and 30-Year Bond auctions – and why this also matters for Mortgage Bonds and home loan rates.

 

Housing Starts Stronger Than Expected

There was some good news for homebuyers struggling with limited inventory, as Housing Starts (which measure the beginning of construction on homes) were up almost 20% in March after building in February was hindered in part by bad weather. This was much stronger than expectations. Housing Starts were also 37% higher than compared to March of 2020, though this figure is skewed as builders were not building this time last year due to the pandemic.

Even more importantly, Housing Starts for single-family homes, which are in such high demand, were up 15.3% from February to March and nearly 41% compared to March of last year.

Building Permits, which measure future construction, rose 2.7% in March and 30.2% year over year; again the annual reading is skewed due to the lack of building in March of last year. Permits for single-family homes were also on the rise, up 4.6% from February to March and almost 36% year over year.

Housing units that are authorized but not yet started for single-family homes were also nearly 40% higher year over year.

Builder confidence remains strong due to the strong demand for houses around the country. The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, rose by 1 point from March’s revised figure of 82 to 83 in April. Any reading over 50 indicates that more builders view conditions as good than poor.

Of the three components in the index, current sales increased by 1 point to 88 while future sales expectations decreased by 2 points to 81. Buyer traffic increased by 3 points to 75, which is the highest level since November. This speaks to the high level of demand for houses, given that home loan rates have ticked higher since last fall.

 

Consumer Inflation Heating Up

Consumer inflation moved higher in March, as the Consumer Price Index (CPI) rose by 0.6% from February. The year over year reading also increased from 1.7% to 2.6%, which was a larger jump than expected.

Core CPI, which strips out volatile food and energy prices, was up 0.3% in March and 1.6% year over year.

Of note in the report, rents are rising 1.8% across the country, which is down from 2% in the previous report. This overall reading is being weighed down by New York and San Francisco, as many markets are experiencing much higher rent gains. And it’s likely rents will start rising again in upcoming reports.

Part of the reason for the increase in the annual comparisons is that readings for the more current months are replacing the readings from 2020 when much of the economy was shut down due to the pandemic. While it’s expected that April’s inflation reading will also move higher, the Fed has stated that they expect rising inflation will be transitory.

Why is rising inflation significant?

Higher inflation typically drives home loan rates higher. That’s because inflation is the arch enemy of interest rates, since it erodes the buying power of the fixed return that a mortgage holder receives. While many factors influence the markets, I will be keeping a close eye on all the latest inflation data, and its impact on Mortgage Bonds and the home loan rates tied to them.

 

Improvement in Initial Jobless Claims

 Initial Jobless Claims decreased by nearly 200,000 in the latest week, as another 576,000 people filed for benefits for the first time. While this number is still elevated, the strong improvement from the previous week was nice to see. California (+70K), Texas (+65K) and New York (+57K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, remained steady at 3.73 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) decreased by 500,000, while Pandemic Emergency Claims (which extend benefits after regular benefits expire) decreased by 475,000.

The number of people receiving benefits throughout all programs is now at 17 million, which is down 1.2 million from the previous week and still higher than the 8 million people receiving benefits in all programs in the comparable week last year. We will see last year’s comparison figures move higher in the coming weeks, as we move into the timeframe of last year’s large shutdowns at the start of the pandemic.

 

Update on Auctions

Investors were closely monitoring the 10-year Treasury and 30-Year Bond auctions held on Monday and Tuesday, respectively, to see the level of demand. High demand, which is reflected in the purchasing of Bonds and Treasuries, can push prices higher and yields or rates lower. Weak demand, on the other hand, can signal that investors think yields will continue to move higher, which can have a negative effect on rates.

While the 10-year Treasury Note auction was slightly weak, it was better than feared and yields did not react much to the results. The 30-year Bond Auction was solid, however. The bid to cover of 2.47 was above the one-year average of 2.32. Direct and indirect bidders took 82.9% of the auction compared to 78.9% in the previous twelve. Mortgage Bonds did move higher after the strong auction.

 

Family Hack of the Week

This Friday, April 23 is National Picnic Day. These tips from our friends at The Spruce will help you plan the perfect picnic!

The night before your picnic freeze small bottles of water and then pack them amongst your food the next day. These will serve double duty as ice blocks to keep your food cool, plus the water will still be cold once you reach your picnic spot.

Keep the menu fun but simple so your hamper or cooler isn’t too heavy as you hike or walk to your picnic spot – and so you don’t have too many leftover items to bring back with you at the end of the day.

Stay safe and comfortable by packing sunblock and bug spray. Store these in a sealable plastic bag and tape it to the inside top of your cooler, so you don’t run the risk of leaving any of these items in your car. Do the same for paper or plastic plates, cutlery and handwipes. Plus be sure to bring trash bags in case there aren’t bins nearby.

 

What to Look for This Week

The economic calendar is quiet to start the week, but key housing reports are ahead later on. On Thursday, Existing Home Sales for March will be reported along with the latest Jobless Claims figures. Friday brings news on March’s New Home Sales.

Also of note, there will be a 20-year Bond auction Wednesday, which has the potential to move the markets.

 

Technical Picture

Mortgage Bonds tested overhead resistance at the 50-day Moving Average but have been unable to break above it. They remain in a wide range and have 60bp of room to fall before reaching the next floor of support at the 25-day Moving Average. Bonds are also in overbought territory and a downward move from here would cause a negative stochastic crossover. This can lead to lower Bond prices ahead so I will be on guard and monitoring for this.

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 4-12-2021

By Todd Abelson NMLS #180858 on .

Week of April 5, 2021 in Review

Hot wholesale inflation numbers and hot home appreciation figures highlighted a fairly quiet week of economic reports.

The Producer Price Index (PPI), which measures wholesale inflation, more than doubled its expected increase, rising 1% from February to March. On an annual basis, PPI surged from an already elevated 2.8% to 4.2%. Core PPI, which strips out volatile food and energy prices, increased as well.

Also of note regarding inflation, the Institute of Supply Management (ISM) Services Index (which gives us a read on the overall health of the non-manufacturing sector) rose from 55 to 64 in March. This was well above estimates and the highest on record. Within the report, the ISM explained how production capacity constraints, material shortages, weather, and challenges in logistics and human resources continue to cause supply chain disruption. This is likely a recipe for continued price pressures, which can lead to higher inflation.

Rising inflation can have a big impact on Mortgage Bonds, and the home loan rates tied to them. Read on to learn more – and what the Fed thinks about inflation forecasts this year.

Inflation wasn’t the only thing that was reported hot last week: Home prices continue to appreciate. CoreLogic’s Home Price Index report showed that home prices increased 1.2% during February. Prices also rose 10.4% compared to February of last year, which is up from the 10% annual gain in January.

And unfortunately, Initial Jobless Claims were also on the rise in the latest week. The number of people filing for unemployment for the first time increased by 16,000, as Initial Jobless Claims reached 744,000. Factoring in continuing and pandemic-related claims, 18.2 million people are still receiving benefits throughout all programs, compared to 3.4 million people who were receiving benefits through all programs in the comparable week last year.

 

Wholesale Inflation Comes in Hot

The Producer Price Index (PPI), which measures wholesale inflation, rose by 1% in March, which was more than double expectations. On a year over year basis, headline PPI increased from an already elevated 2.8% to 4.2%.

Core PPI, which strips out volatile food and energy prices, was up 0.7% for the month, again much higher than the 0.2% increase that was expected. Year over year, Core PPI increased from 2.5% to 3.1%.

Part of the reason for the increase in wholesale inflation, which may continue this spring, is that readings for the more current months are replacing the readings from 2020 when much of the economy was shutdown.

Why does rising inflation matter?

Inflation is the arch enemy of fixed investments like Mortgage Bonds because it reduces their value. Home loan rates are inversely tied to Mortgage Bonds. Rising inflation can cause Bonds to worsen or move lower, which means home loan rates can rise.

The Fed has stated that they will be tolerant of inflation but has also reiterated that they believe rising inflation will be transitory. Though many factors influence the markets, it’s always important to keep an eye on inflation headlines since they can have such an impact on Mortgage Bonds and home loan rates.

 

No Winter Cool Down for Home Appreciation

CoreLogic released their Home Price Index report for February, showing that home prices increased 1.2% during the month. Prices also rose 10.4% on a year over year basis, which is up from the 10% annual gain in January.

Within the report, the hottest markets were Phoenix (+16.2%), San Diego (+12.3%) and Denver (+10.0%).

CoreLogic forecasts that home prices will rise 0.6% in March. However, they have been forecasting minimal gains each month and yet the gains have been higher and closer to 1%. For example, they had previously forecasted we would see a 0.5% rise in February, versus the 1.2% gain that was reported.

CoreLogic predicts home prices will appreciate 3.2% in the year going forward, which is lower than the 3.3% forecast in their previous report and still lower than most forecasts out there. Remember that not that long ago they were expecting a negative 6.6%.

 

Initial Jobless Claims Moving in Wrong Direction

The number of people filing for unemployment for the first time increased by 16,000 in the latest week, as Initial Jobless Claims reached 744,000. This is the second week in a row that Initial Claims moved the wrong way. California (+145K), Texas (+79K) and New York (+67K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, declined by 16,000 to 3.73 million.

Pandemic Unemployment Assistance Claims (which give benefits to people would not usually qualify) increased by 200,000, while Pandemic Emergency Claims (which extend benefits after regular benefits expire) decreased by 120,000.

As a result, 18.2 million people are still receiving benefits throughout all programs, which is pretty stable compared to the previous week – and still significantly higher than the 3.4 million people who were receiving benefits through all programs in the comparable week last year. The bottom line is that we are still not seeing any significant improvement in jobless claims, unfortunately.

 

Family Hack of the Week

This delicious Greek Farro Salad is not just easy to make, it’s perfect for spring picnics, a light lunch or even a healthy snack the whole family will love.

In a medium saucepan, stir together 3 cups of chicken or vegetable stock and 1 cup of farro. Cook according to package instructions until al dente. Once the farro is cooked, remove from heat and drain off any excess stock. Let cool for at least 10 minutes.

In the meantime, dice 1 large English cucumber and half of a red onion. Chop 1 red and 1 yellow pepper, 1/4 cup of both parsley and cilantro, and halve 1 cup of grape tomatoes. Set the vegetables aside.

Next, make a vinaigrette by whisking together 5 tablespoons of olive oil, 1 1/2 tablespoons of lemon juice, 1 1/2 tablespoons of red wine vinegar, 1/4 teaspoon dried oregano and a pinch of Kosher salt and black pepper.

Once the farro has cooled, transfer to a large mixing bowl. Add in the vegetables, 1/2 cup of crumbled Feta cheese and the vinaigrette. Toss until combined and enjoy immediately or keep refrigerated for two days.

 

What to Look for This Week

Two auctions are ahead this week, with the 10-Year Note auction Monday and 30-Year Bond auction set for Tuesday, which will be important to monitor. Plus, key reports across a wide spectrum of the economy could move the markets this week.

On Tuesday, more inflation news will be reported with March’s Consumer Price Index, which can certainly impact the markets especially if inflation comes in hot. We’ll also get a read on how small businesses were feeling in March with the National Federation of Independent Business Small Business Optimism Index.

Thursday brings a plethora of news, including weekly Jobless Claims, March Retail Sales, regional manufacturing data for April from the Empire State Index and Philadelphia Fed Index, and April’s National Association of Home Builders Housing Market Index, which will give us a real-time read on builder confidence.

More housing news end the week on Friday, when Housing Starts and Building Permits for March are reported.

 

Technical Picture

Mortgage Bonds are trading in a wide range between support at the 25-day Moving Average and overhead resistance at the 50-day Moving Average. Although Bonds ended last week with a lot of room to the upside, there is also lot of risk this week with the auctions and Consumer Price Index, so I’ll be keeping a close eye on things.

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 4-5-2021

By Todd Abelson NMLS #180858 on .

Week of March 29, 2021 in Review

Last week may have brought April Fools’ Day, but thankfully the strong job and home appreciation reports were no joke!

Job creations rose sharply in March, as the Bureau of Labor Statistics reported 916,000 new jobs were created, which was even stronger than the 675,000 expected. There were also positive combined revisions to January’s and February’s figures, totaling an additional 156,000 jobs in those months. The Unemployment Rate did tick down from 6.2% to 6%, but the real unemployment rate is actually higher, as explained below.

The private sector also saw strong job gains in March, per the ADP Employment Report, which showed a gain of 517,000 jobs. This was in line with expectations and the best level of hiring in six months.

The latest weekly Jobless Claims report showed that the number of people filing for unemployment benefits for the first time increased in the latest week, though the number of people continuing to receive both regular and pandemic-related benefits did decline. However, the total number of people continuing to receive benefits throughout all programs remains so much higher than a year ago, underscoring that our recovery still has a way to go.

Over in the housing sector, Pending Home Sales, which measure signed contracts on existing homes, fell 10.6% from January to February. The decline was due in large part to inventory of available homes being 30% lower than it was in February of last year. Demand for homes remains strong and, quite simply, if there were more homes available there would have been more sales.

Low inventory has also helped home prices continue to show strong appreciation gains.  The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, accelerated to a 15-year high in January, up 11.2% year over year on the national reading. The Federal Housing Finance Agency (FHFA) House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts, also came in hot, with home prices up 1% from December to January and 12% compared to January of last year.

 

March Job Creations Much Greater Than Expected

The Bureau of Labor Statistics (BLS) reported that there were 916,000 jobs created in March, which was stronger than the 675,000 expected. The leisure and hospitality and construction sectors led the way on job gains. In addition, there were positive combined revisions to January’s and February’s figures, totaling an additional 156,000 jobs in those months.

Note that there are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, and it showed that there were 609,000 jobs created. We did see improvements in the Unemployment Rate, as it decreased from 6.2% to 6%. On the one hand, this decline was for the right reasons. While there were 609,000 job gains, the labor force increased by 347,000. Because there were so many more job gains than people joining the labor force, the unemployment rate moved lower.

However, it’s important to break down the numbers, as the true unemployment rate is actually higher than the headline figure. That’s because people who are not able to look for work due to pandemic reasons, and who are still unemployed, are not counted – and this number is at 3.7 million people. When we add this into the calculations, the real Unemployment Rate is 8.4%.

In addition, there has been a lingering misclassification error where people were classified absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the headline Unemployment Rate would have been 0.4% higher or 6.4%, while the real Unemployment Rate counting those unable to look for work due to pandemic reasons would be closer to 8.75%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, improved from 11.1% to 10.7%.

Average hourly earnings are up 4.2% year over year, which is down from 5.3% in the previous report. Average weekly earnings rose 6.7%, which is an increase from 6% in February’s report. Weekly earnings measure what people actually take home, so the increase represents some nice gains.

 

Private Sector Job Gains Reach 6-Month High

The ADP Employment Report, which measures private sector payrolls, showed that 517,000 jobs were created in March, which was in line with the strong job gains that were expected and the best level of hiring in six months! February’s report was also revised higher by 59,000 jobs, increasing the job gains in that month from 117,000 to 176,000.

The leisure and hospitality sector led the way in March with 169,000 new jobs, while the service sector added 437,000 new jobs in total.

There were also job gains across all sizes of businesses. Small businesses (1-49 employees) gained 174,000 jobs, mid-sized businesses (50-499 employees) gained 188,000 jobs, and large businesses (500 or more employees) gained 155,000 jobs. It was especially encouraging to see the gains among small businesses, which have been so heavily impacted by the pandemic.

 

Jobless Claims Still Elevated

The number of people filing for unemployment benefits increased by 61,000 in the latest week, as Initial Jobless Claims rose to 719,000. California (+105K), Texas (+84K) and Ohio (+54K) reported the largest number of claims.

Continuing Claims, which measure people continuing to receive benefits, did decline by 46,000 but they are still elevated at 3.8 million. Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) and Pandemic Emergency Claims (which extends benefits to people after regular benefits expire) also decreased by 500,000 and 700,000, respectively.

All in all, 18.2 million people are still receiving benefits throughout all programs, and while this is down 1.5 million from the previous week, it is still significantly higher than compared to the 2 million people receiving benefits in all program at this time last year.

 

Low Inventory Limits Pending Home Sales

Pending Home Sales, which measure signed contracts on existing homes, fell 10.6% from January to February and they were essentially flat compared to February of last year. The real story remains low inventory, which is down 30% year over year and the reason sales are lower.

Lawrence Yun, chief economist for the National Association of REALTORS®, explained, “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory.”

Quite simply, if more homes were available, we would see more sales.

 

Home Price Appreciation Reaches 15-Year High

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, accelerated to a 15-year high in January, up 11.2% year over year on the national reading. This is an increase from December’s reading of 10.4%.

The 20-city index rose from 10.2% to 11.1% year over year, with almost all of the cities showing strong gains. Phoenix (+15.8%), Seattle (+14.3%), and San Diego (+14.2%) reported the highest annual gains among the 20 cities.

The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Note that while you can have a million-dollar home with a conforming loan amount, the report most likely represents lower-priced homes, where supply is tightest and demand is strongest.

It should be no surprise that the FHFA appreciation reading was even stronger than Case Shiller’s, as FHFA reported that home prices rose 1% in January and are up 12% year over year. This annual reading was even stronger than December’s annual reading of 11.5% appreciation.

 

Family Hack of the Week

Tax season is in full swing which, unfortunately, means tax scams are as well. These tips from the IRS will help you keep your identity safe all year long.

The IRS will not initiate contact with taxpayers by email to request personal or financial information. If you receive a suspicious IRS, Treasury or tax-related email, do not open any attachments, click on any links, or reply to the sender.

The IRS will also not leave pre-recorded, urgent or threatening messages for taxpayers or threaten to bring in the police to have them arrested or deport them. The IRS will not call to demand immediate payment with a prepaid debit card, gift card or wire transfer, nor will the IRS request checks be sent to third parties.

The IRS also does not demand payment without giving taxpayers the chance to question or appeal the amount owed.

The IRS reminds people that scammers can fake or spoof an IRS office phone number or the numbers of various local, state, federal or tribal government agencies. If you ever receive a suspicious phone call, the IRS advises that you hang up immediately without giving any personal information.

 

What to Look for This Week

The economic calendar is relatively quiet this week, with manufacturing news kicking things off on Monday when the ISM Index for March is released. Wednesday brings the minutes from Fed’s March Federal Open Market Committee meeting, while Thursday we will see the latest Jobless Claims data. Ending the week on Friday, we’ll get an update on wholesale inflation with the Producer Price Index for March.

 

Technical Picture

Mortgage Bonds have fallen beneath the 102.632 Fibonacci Level. It’s likely they would have moved even lower on Friday if the Stock market hadn’t been closed for Good Friday, as Stocks and Bonds often compete for the same investment dollar and strong job data is typically Stock friendly. There is more room to the downside until Mortgage Bonds reach the next floor at 102.281, so it will be important to keep a close eye on them as this week begins.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 3-29-2021

By Todd Abelson NMLS #180858 on .

Week of March 22, 2021 in Review

Low temperatures and low inventory were a double whammy for housing in February, as sales of existing homes fell 6.6% while new home sales plunged 18.2% from January. However, sales of both new and existing homes were higher compared to February of last year. While bad weather certainly put a freeze on sales, the lack of supply was an even greater challenge, especially among existing homes with inventory almost 30% lower than February of last year.

Inflation was tame in February per the Fed’s favored measure, Personal Consumption Expenditures. However, inflation is expected to rise this spring – and that could impact both Mortgage Bonds and the home loan rates tied to them. Don’t miss the explanation about this below. And of immediate note, a large cargo ship is blocking the Suez Canal, which is impeding global trade and could cause some spikes in inflation.

Over in the labor sector, Initial Jobless Claims fell below 700,000 in the latest week for the first time since the pandemic began, while the number of people continuing to receive regular benefits also declined. Despite the rosy headlines, it’s important to take stock of the entire picture. Pandemic Emergency and Unemployment Assistance claims both increased in the latest week, as did the total number of people receiving benefits from all programs, which is now at 19 million. This is compared to just 2 million people in the comparable week from last year.

The final reading for fourth quarter 2020 Gross Domestic Product came in at 1.9% versus the 2% that was expected. This decline reflects the effects of the stimulus from early last year wearing off. Year-over-year growth was reported at 4.3%, above the 4.1% estimated. However, the Atlanta Fed did cut its estimate for the first quarter 2021 annualized rate from 5.6% to 5.4%.

Lastly, Thursday’s 7-Year Note Auction was met with weak demand, which prompted a selloff in Bonds. However, the auction was not as bad as the one in February which had a much larger negative impact on Mortgage Bonds.

 

The Lowdown on Low Inventory of Existing Homes

Existing Home Sales, which measure closings on existing homes, fell 6.6% from January to February. However, sales were up 9.1% year over year.

Low inventory remains a challenge across the country, as there were just 1.03 million homes for sale at the end of February. This equals a 2-months’ supply of homes, just above the record low of the 1.9-months’ supply that was available at the end of January. Inventory is almost 30% lower than it was in February of last year. With this stiff competition, properties sold in 20 days on average, which is another record low.

The median home price was $313,000, up almost 16% year over year. Note, this is not the same as appreciation. It simply means half the homes sold were above that price and half were below it. Sales on the low end were down 25%, while homes above $1 million were up 81%. This dragged the median home price higher.

Even with the stiff competition for lower-priced homes, first-time homebuyers accounted for 31% of sales in February while cash buyers increased from 20% to 22%. Investors purchased 17% of homes, up from 15%.

Lawrence Yun, chief economist for the National Association of REALTORS, said, “I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy. Many Americans have been saving money and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”

 

Winter Weather Puts a Freeze on New Home Sales

New Home Sales, which measure signed contracts on new homes, were down 18.2% in February, which was much softer than expectations looking for a 6% drop. However, sales are still up 8.2% on a year over year basis.

What caused the sharp decline from January to February? Freezing weather around the country certainly played a role, as did low inventory, as there was just a 4.8 months’ supply of homes available for sale at the end of February. Quite simply, if there were more homes available, we would have seen more sales.

The median home price was reported at $349,400, up 5.3% from last year. Again, this is not the same as appreciation. It simply means half the homes sold were above that price and half were below it.

 

Inflation Remains Tame … For Now

Inflation rose 0.2% in February, which was lower than the 0.3% expected, per the Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE). Year over year, the index increased from 1.4% to 1.6%.

The Fed’s real focus is Core PCE, which strips out volatile food and energy prices, and that was up 0.1% in February, as anticipated. On an annual basis, the Core rate decreased from 1.5% to 1.4%, just below expectations of 1.5%.

While inflation remains tame for now, we expect annual inflation to rise above 2% in May, June, and July as the readings for the more current months replace the older readings from 2020, where inflation was low due to the pandemic and economy shutting down.

This is significant because inflation is the arch enemy of Mortgage Bonds and home loan rates, which are tied to them. Inflation reduces the value of fixed investments, like Mortgage Bonds so rising inflation can cause Mortgage Bonds to worsen or move lower. Home loan rates are inversely tied to Mortgage Bonds, so when Bonds worsen home loan rates can rise. I will be closely monitoring this dynamic throughout the spring and summer.

Also of note within the report, Personal Income was down 7% in February after a 10% rise in January, while Personal Spending fell 1% after a rise of 3.4% over that same period. The increases in January correlate with December’s $900 billion stimulus package, with the declines in February showing the effects of that stimulus starting to wear off.

Historically, we usually see the effects of stimulus plans completely start to wear off after six months. With the most recent $1.9 trillion stimulus plan, the benefits will likely be gone by October…unless additional stimulus is passed such as the $3 trillion infrastructure plan that is being discussed.

 

Seeing the Whole Picture on Jobless Claims

The number of people filing for unemployment for the first time decreased by 97,000 as Initial Jobless Claims fell to 684,000 in the latest week. This was the first time the number of Initial Claims fell below 700,000 since the pandemic began. California (+96K), Texas (+80K) and Ohio (+69K) reported the largest number of claims.

Continuing Claims, which measures people who continue to receive benefits, also dropped by 264,000 to 3.9 million.

While these declines sound positive at first glance, it’s important to view them in context.

Pandemic Unemployment Assistance Claims, which provide benefits to people who would not usually qualify, increased by 120,000. Pandemic Emergency Claims, which extend claims after regular benefits expire, also increased by 735,000.

As a result, 19 million people are still receiving benefits throughout all programs, which is actually an increase of 734,000 from the previous week – and still significantly higher than the 2 million people who were receiving benefits through all programs in the comparable week last year. The bottom line is that we still have a long way to go before the labor sector reaches pre-pandemic levels of employment.

 

Family Hack of the Week

This year April 1 is more than just April Fool’s Day, it also marks opening day for Major League Baseball. If you’re not able to enjoy a hot dog at the stadium on the occasion, here are some tips from Good Housekeeping for grilling the perfect hot dog at home.

Heat part of your grill to medium. Add hot dogs over heated portion and turn continuously to get grill marks all around. Keep close watch on the hot dogs. Once they start to expand – but before they start sputtering – they’re done. Roll them onto the unheated portion of the grill, then toast the buns over the burners for about one minute.

Be sure to avoid high heat when cooking hot dogs, as that can result in hot dogs that are charred on the outside but cold and uncooked on the inside. High heat can also cause hot dogs to split and release their juices, making them tough to eat.

Once the hot dogs are cooked and buns toasted, top with your favorite condiments and enjoy opening day!

 

What to Look for This Week

Reports on the housing, manufacturing and labor sectors fill a busy week ahead!

We’ll get an update on home price appreciation when both the Case-Shiller Home Price Index and Federal Housing Finance Agency House Price Index for January are released on Tuesday. February’s Pending Home Sales follow on Wednesday.

Manufacturing news will also be released on Wednesday with March’s Chicago PMI while Thursday brings the ISM Index for March.

News on the labor sector also kicks off on Wednesday with the ADP Employment Report, which will give us an update on March’s private payrolls. The latest weekly Jobless Claims figures will be reported as usual on Thursday while Friday brings the highly anticipated Bureau of Labor Statistics Jobs Report for March, which includes Non-farm Payrolls and the Unemployment Rate.

 

Technical Picture

Mortgage Bonds are trading just above an important floor of support at 102.632. If this level holds, there is plenty of upside potential. The 10-year does have room to move higher until reaching 1.75%, so we have to be cautious.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 3-22-2021

By Todd Abelson NMLS #180858 on .

Week of March 15, 2021 in Review

Housing, manufacturing and unemployment news all made headlines, as did the Fed meeting and its impact on the markets.

Despite rising lumber prices, homebuilders remain confident per the National Association of Home Builders Housing Market Index, which provides a real-time read on builder confidence. While the index fell 2 points in March to 82, any reading above 50 signals expansion, meaning builder sentiment remains well above that level and still near the highest levels on record.

Housing Starts and Building Permits (a sign of future construction) for single-family homes both declined from January to February, but this was likely due to inclement weather across the country. Single-family Permits are up 15% when compared to February of last year, which is a good sign that hope is on the horizon for buyers struggling with limited inventory.

There was also some good news from the manufacturing sector, as the Empire State Index (which measures the health of manufacturing in the New York region) and the Philadelphia Fed Index both came in above expectations in March – with the Philadelphia Fed Index more than doubling expectations. Meanwhile, Retail Sales did fall more than expected in February, but inclement weather likely also had an impact on sales and a rebound is anticipated as more people receive stimulus payments.

Unfortunately, however, the unemployment situation remains dire a year into the pandemic. The number of people filing for unemployment for the first time rose in the latest week to 770,000. And overall, 18 million people are still receiving benefits throughout all programs, compared to just 2 million this time last year.

Last but certainly not least, market volatility continues, impacting Mortgage Bonds and the home loan rates tied to them. While Tuesday’s 20-Year Bond Auction was met with above average demand, Mortgage Bonds sold off despite this strong auction, showing underlying weakness in the market. Plus, the Fed held its regularly scheduled meeting of the Federal Open Market Committee, with their Monetary Policy Statement released on Wednesday. More on what they said – and how the markets reacted – below.

 

Housing Starts Decline But Help Is On the Way

Housing Starts, which measure the start of construction on homes, fell 10.3% in February and 9.3% year over year. Starts on single-family homes were also down almost 9% from January to February and were pretty flat compared to February of last year. Bad weather across the US is the likely culprit for the decline.

Building Permits, which measure future construction, dropped nearly 11% from January to February but they were 17% higher year over year. Permits on single-family homes likewise fell 10% in February but they are up 15% year over year, signaling that help is on the way for the low inventory many buyers are facing.

Also of note, housing units that are authorized but not yet started for single-family homes are up 36% year over year.

 

Homebuilders Remain Confident Despite Rising Lumber Prices

The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, dropped 2 points in March to 82, coming in slightly lower than expectations. However, any reading above 50 signals expansion, meaning builder sentiment remains well above that level and still near the highest levels on record. The main reason for the drop in confidence this month was costs, as rising lumber prices are adding approximately $24,000 to the cost of building a new home.

Breaking down the three components of the index, current sales conditions decreased by 3 points to 87, but given that they were coming off a flaming hot reading of 90, a pullback was expected. Future sales expectations increased by 3 points to 83, and buyer traffic remained stable at 72.

Remember that not long ago the reading for buyer traffic was below 50, so putting the numbers in perspective, future expectations and buyer traffic remain very strong even with the record low levels of inventory and rising rates we are seeing.

 

Unemployment Levels Remain Worrying

The number of people filing for unemployment benefits for the first time increased in the latest week, as Initial Jobless Claims reached 770,000. Ohio (+113K), California (+109K) and Illinois (+75K) reported the largest gains.

Continuing Claims, which measures people who continue to receive benefits, was little changed at 4.12 million.

Pandemic Unemployment Assistance Claims (which provides benefits to people who would not usually qualify) decreased by 773,000, while the Pandemic Emergency Claims (which extends claims after regular benefits expire), decreased by 640,000. These figures are volatile each week.

The bottom line, unfortunately, is that new claims are not improving and 18 million people are still receiving benefits throughout all programs, compared to just 2 million this time last year.

 

Fed Stays the Course

The Fed held their regularly-scheduled Federal Open Market Committee meeting and, despite the volatility in the markets, recent decline in Mortgage Bonds and forecasts for higher inflation, announced that they would not make any changes to their purchases of Mortgage-Backed Securities and Treasuries each month. The Fed noted that they will continue their current pace until seeing actual progress and could use the full extent of their tools should they need to.

The Fed was dovish on the economy, raising their forecasts for growth and inflation for 2021. They believe GDP will reach 6.5%, upgraded from 4.2%, while unemployment will drop to 4.5% by year’s end instead of 5%. They see inflation reaching 2.4%, with Core inflation (which strips out volatile food and energy prices) reaching 2.2%.

Why is higher inflation significant?

Remember, inflation is the arch enemy of Mortgage Bonds and home loan rates, which are tied to them. This is because inflation reduces the value of fixed investments, like Mortgage Bonds. Rising inflation (or even the fear of rising inflation) can cause Mortgage Bonds to worsen or move lower.

Home loan rates are inversely tied to Mortgage Bonds, so when Bonds worsen home loan rates can rise, which has been the dynamic we’ve seen in the markets recently.

Though many factors influence the markets, inflation news is something I will be closely monitoring this spring.

 

Home Hack of the Week

Spring is officially here! As the weather starts to warm, here are a few seasonal home maintenance items to cross off your list.

Conduct a visual inspection of your entire property so you can note any repairs that may be needed. Check your driveways and pathways for any cracks in need of repair and use binoculars to see if any shingles have come loose on your roof.

Make note if your gutters need clearing and make sure window screens and screen doors are free of holes or tears to keep bugs outside where they belong. And don’t forget to check your outside faucets, hoses and sprinklers for frost damage to ensure they will work properly.

Keep your yard safe for friends, family and pets by inspecting your fence or deck for any loose or warped boards. Remove any debris that may have become stuck and add protective stain based on the manufacturer’s recommendation. Check your patio furniture for any signs of rust or tears and wash outdoor cushions using the manufacturer’s recommended method.

And last but certainly not least, schedule a service for your air conditioner so you know it’s in working order before you really need it!

 

What to Look for This Week

Housing news kicks off the week on Monday when Existing Home Sales for February are reported. February’s New Home Sales follows on Tuesday.

On Wednesday, look for news on February’s Durable Goods Orders. Thursday brings the latest on fourth quarter 2020 Gross Domestic Product, plus Jobless Claims data.

Ending the week on Friday, we’ll get an update on the Fed’s favorite inflation measure when February’s Personal Consumption Expenditures is reported, along with Personal Income and Spending.

 

Technical Picture

Mortgage Bonds ended the week just beneath the important floor of support at 102.281. While this is not a convincing break lower yet, if one does occur the next floor of support is 101.727, which is almost 60bp lower. Given that Mortgage Bonds have been trending lower and rates trending higher, this is a critical juncture to monitor.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 3-15-2021

By Todd Abelson NMLS #180858 on .

Week of March 8, 2021 in Review

Last week was filled with important news as key inflation reports were released, two auctions made headlines and more stimulus is on the way!

Consumer inflation remains tame for now, with the headline Consumer Price Index (CPI) increasing from 1.4% to 1.7% annually, as expected. Core CPI, which strips out volatile food and energy prices, fell from 1.4% to 1.3% year over year, which was slightly cooler than expected. However, inflation is expected to heat up in the coming months – which could impact both Mortgage Bonds and the home loan rates tied to them. Don’t miss the explanation below.

Inflation at the wholesale level has already started to rise, with the Producer Price Index (PPI) for February up 0.5% monthly and jumping from 1.7% to 2.8% year over year. Core PPI, which again strips out volatile food and energy prices, also moved higher on both a monthly and annual basis.

The National Federation of Independent Business released its Small Business Optimism Index, which increased 0.8 points in February to 95.8. Of significant note within the report, those looking to raise prices rose 8 points to 25% (the highest since August 2008), while positions not able to fill jumped 7 points to 40% (the highest since 1980). Both of these data points can lead to inflation.

Meanwhile, the latest Jobless Claims data showed that the number of people filing for unemployment for the first time declined by 42,000 in the latest week, as Initial Jobless Claims were reported at 712,000. Continuing Claims, which measure people who continue to receive benefits, also decreased by 193,000 to 4.144 million. While these declines appear like good news on the surface, there is more to the story as noted below.

Lastly, investors were closely watching the 10-year Treasury and 30-year Bond Auctions held on Wednesday and Thursday, respectively, while President Biden signed the $1.9 trillion relief plan into law. Read on for a breakdown of the critical details on these items.

 

Consumer Inflation Remains Tame … For Now

The Consumer Price Index (CPI), which measures inflation on the consumer level, rose by 0.4% in February while the year over year reading increased from 1.4% to 1.7%, as expected.

Core CPI, which strips out volatile food and energy prices, was up 0.1% in February but fell from 1.4% to 1.3% year over year, which was slightly cooler than expected.

The report also showed that rents are rising 2.0% across the country, which is down from 2.1% in the previous report. However, many markets are actually experiencing much higher rent gains, as the data is being weighed down by the pandemic’s impact on rent in larger cities like New York and San Francisco.

While consumer inflation is tame at the moment, it’s important to dig deeper and understand why inflation may rise in the coming months – and why that’s significant.

Higher inflation typically drives home loan rates higher. That’s because inflation is the arch enemy of interest rates, since it erodes the buying power of the fixed return that a mortgage holder receives.

As noted above, the current year over year rate of inflation, as measured by the Core Consumer Price Index, is at 1.3%. This inflation reading was just released for the period of March 2020 to February of 2021.

However, in the coming months, this rate is expected to rise significantly, as the readings for the more current months replace the older readings from 2020. It’s quite possible to see the rate of inflation rise towards 2.5%. It’s likely that this will influence higher interest rates.

While inflation may then cool off later this year, rest assured I will be keeping a close eye on the news to keep you informed of all the latest inflation data, and its impact on Mortgage Bonds and the home loan rates tied to them.

 

Wholesale Inflation Jumps in February

This potential for higher inflation has already started at the wholesale level, as the Producer Price Index (PPI) rose by 0.5% in February and jumped from 1.7% to 2.8% year over year.

Core PPI, which again strips out volatile food and energy prices, was up 0.2% for the month and increased from 2.0% to 2.5% year over year.

Part of the increase in the headline reading was due to the monthly rise in energy prices (+6%) and food prices (+1.3%). Transportation costs rose significantly as well.

We may see further increases in wholesale inflation as the readings for the more current months replace the readings from 2020.

 

Looking Past the Headlines on Jobless Claims

The number of people filing for unemployment for the first time declined by 42,000 in the latest week, as Initial Jobless Claims were reported at 712,000. However, there were revisions to the previous week that made this decline look bigger than it really was. Ohio (+127K), California (+106K) and Illinois (+62K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, also decreased by 193,000 to 4.144 million.

While this decline seems like good news on the surface, it’s important to dig deeper into the data. Pandemic Unemployment Assistance Claims, which provide benefits to people who would not usually qualify, increased by 1.1 million, while Pandemic Emergency Claims, which extends claims by 13 weeks after regular benefits expire, also increased by 1 million. Both of these numbers are at pandemic highs.

The total number of continued benefits in all programs is now at 20.1 million, an increase of 2.1 million from the previous week. There were just 2.1 million weekly claims filed for benefits in all programs in the comparable week in 2020.

The bottom line is that while the headline figures appear better and are near pandemic lows, much of the decline in Continuing Claims is due to the expiration of benefits and people moving into Pandemic Unemployment and Emergency Claims.

 

Auctions in the News

Investors were closely watching the 10-year Treasury and 30-year Bond Auctions that were held last week on Wednesday and Thursday, respectively. Demand, which is reflected in the purchasing of Bonds and Treasuries, can push prices higher and yields or rates lower. Weak demand can signal that investors think yields will continue to move higher, which can cause turbulence in the Bond market and have a negative effect on rates.

While the 10-year auction on Wednesday was mediocre, the market did not react negatively, probably due to some relief that it was not as bad as the 7-year auction that was held a few weeks ago. Thursday’s 30-year Bond auction was soft with a yield of 2.295%, a touch above the when-issued yield. However, one positive was that direct and indirect bidders bought 81% of the auction versus the 12-month average of 79%.

 

Update on Stimulus

President Biden signed the $1.9 trillion relief package into law, which includes direct payments of $1,400 to individuals who meet the income requirements. The additional $300 per week in unemployment benefits has also been extended until September 6.

Pandemic Unemployment and Emergency Claims that were set to expire March 14 have also been extended to September 6.

In addition, the package also waives federal taxes on an individual’s first $10,200 of unemployment benefits collected last year. Married couples who file a joint tax return wouldn’t be taxed on the first $20,400 of unemployment income. However, note that states may not waive the tax, as more than half currently levy a state income tax on unemployment benefits.

 

Family Hack of the Week

This delicious Irish Tea Cake from our friends at Allrecipes is not only easy to make, but your family will enjoy it for St. Patrick’s Day and any day of the year.

Preheat oven to 350 degrees Fahrenheit. Grease and flour a 9-inch round pan. Cream together 1/2 cup softened butter and 1 cup sugar in a medium bowl until light and fluffy. Beat in two eggs, one at a time, and mix until fully incorporated, then stir in 1 1/2 teaspoons vanilla.

Combine 1 3/4 cups of flour, 2 teaspoons of baking powder and 1/2 teaspoon of salt. Stir the flour mixture into the batter alternately with 1/2 cup of milk. If the batter is too stiff, add a tablespoon or two of milk. Spread the batter evenly into the prepared pan.

Bake for 30 to 35 minutes until a toothpick inserted into the center comes out clean. Cool in the pan on a wire rack, then turn out onto a serving plate. Dust with confectioners’ sugar right before serving and enjoy with a cup of coffee or tea.

 

What to Look for This Week

A full slate of reports across a wide spectrum of the economy are ahead this week, beginning with news on manufacturing in the New York region when March’s Empire State Index is reported on Monday.

On Tuesday we’ll get an update on Retail Sales for February. Plus, the National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, will also be reported on Tuesday.

Housing news continues Wednesday with February’s Housing Starts and Building Permits, while more manufacturing news follows Thursday with the Philadelphia Fed Index. The latest Jobless Claims figures will also be reported as usual on Thursday.

But perhaps the biggest and most important event will be the Fed’s 2-day meeting of the Federal Open Market Committee which starts on Tuesday, with their Monetary Policy Statement released on Wednesday. This always has the potential to move the markets and of note, there has been chatter that the Fed may start to perform Operation Twist (where they sell shorter term maturity holdings on their balance sheet and buy more longer maturity Bonds). They may also do something like the European Central Bank and say they are going to ramp up their buying of Mortgage Backed Securities and Treasuries when the see an interest rate they don’t like, which is a form of Yield Curve Control.

 

Technical Picture

Mortgage Bonds ended last week right at the 100.133 support level. This is an important threshold because if Bonds break beneath it convincingly, the next floor of support is 99.50. The 10-year is also trying to hang on at the 1.61% ceiling. If yields break to the upside, they will likely test 1.67%.

 

Todd Abelson - Tucson Mortgages