WeeklyBasis 2/20/2011: Home Sales & Price Preview

Last week, rates were steady a second straight week following a .375% rate spike the first two weeks of February. This despite lots of data showing manufacturers are facing significant price inflation which may soon be passed onto consumers. Rates would normally rise on inflation data, but consumer inflation came in flat and rate markets held steady.

Monday is a market holiday. Below is a preview of home price, home sales, and GDP data beginning Tuesday. Daily volatility aside, rates should remain level after the recent rise.

Tuesday we’ll get December’s S&P Case Shiller report, the most watched and traded U.S. home price data. It will likely be the same or worse than last month’s reading which showed U.S. home prices declined 1.6% from a year earlier. It was the sixth consecutive month of weaker data, home prices were down 30.3% from their July 2006 peak, and were at similar levels to what they were in late-2003.

Wednesday and Thursday we’ll get January’s Existing and New Home Sales respectively. Last month, rates rose on favorable reports that existing home sales were up 12.3% and new home sales were up 17.5%. But one month doesn’t make a trend, so rates will trade just as wildly on this week’s reports—rates up if home sales are better, down if home sales are worse.

Friday we’ll get the second of three 4Q2010 GDP readings to show us overall economic growth and the strength of the recovery. The first reading last month showed the economy grew 3.2% in 4Q2010, a nice improvement over 3Q2010’s 2.6% reading. It also showed consumer spending increased 4.4%, the fastest since early-2006 and double the 2010 average for the first three quarters.

Rate markets also must contend with $99b in new Treasury supply being auctioned into markets as follows: $35b in 2yr notes Tuesday, $35b in 5yr notes Wednesday, and $29b in 7yr notes Thursday. This new supply from Treasury can disrupt demand for mortgage bonds as investors use uptake of new Treasury debt to gauge demand for bonds overall. If mortgage traders don’t like auction results and sell, rates rise.

Have a wonderful Monday off!

CONFORMING RATES ($200,000 to $417,000) 0 POINT
30 Year: 5.125% (5.24% APR)
FHA 30 Year: 4.875% (4.99% APR)
5/1 ARM: 3.75% (3.87% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) 0 POINT
30 Year: 5.25% (5.37% APR)
FHA 30 Year: 5.0% (5.12% APR)
5/1 ARM: 4.0% (4.12% APR)

JUMBO RATES ($729,751 to $2,00,000) 1 POINT
30 Year: 5.375% (5.49% APR)
5/1 ARM: 4.125% (4.24% APR)