Mel's Blog

May 25, 2011 Market News

May 25th, 2011 9:15 AM by Mel Samick

It was also a busy week for the markets last week. On Monday, The National Association of Home Builders' housing market index for May remained unchanged at 16. Anything over 50 is considered good for the housing market. The last time the index was over 20 was August, 2007. NAHB saw more interest from prospective buyers; however, buyers still remain cautious. Potential buyers are concerned about being able to sell their current house at a fair price and at a gain. 73% of buyers are also worried about trying to secure financing for that next transaction.
Tuesday was another tough day with a mix of bad news. The Commerce department reported that housing starts declined 60,000 (-11%) from last month and were over 50,000 short of meeting the forecast. In addition, the Federal Reserve reported that U.S. Industrial Production was flat in April. The Fed is blaming the lackluster number on a shortage of auto parts from Japan due to the massive earthquake there last month. Economists had predicted a 0.3% increase. Hewlett-Packard also released somewhat disappointing financial results.
There was some good news this week regarding mortgages. According to the Bureau of Economic Analysis, U.S. mortgage debt has fallen at a record pace. The total mortgage debt has decreased more than $100 billion. Interest payments have gone down $67 billion a year since 2008. A large part of that is due to lower interest rates, refinances, and, of course, defaults. In addition, mortgage delinquencies, while still high, is down again for the fifth consecutive quarter. Florida, Nevada, Arizona, and California were the top 4 states in terms of delinquency rates. The Mortgage Bankers Association also reported that home loan demand increased 7.8%. According to the report, 67% of the total volume was refinance activity.
The big news came on Wednesday when the FOMC minutes were released. The minutes reflected that officials do not intend to continue the quantitative easing policy. They also aim to sell assets to reduce the Fed's balance sheet. This resulted in a rally for stocks and was bad news for bonds. Investors still can't sort through all of the indicators to understand the direction of yields. However, it does appear that the Fed will stop buying bonds. The Fed has purchased $600 billion in U.S. debt since November.
Mel
Information provided by NYCB Capital Markets
Posted in:General
Posted by Mel Samick on May 25th, 2011 9:15 AM

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