Weak Data Moves Mortgage Rates Lower

Weak data moves mortgage rates lower after several weeks of focus on Fed actions and events in foreign markets. Domestic economic data was the primary influence on mortgage markets this week, and weaker than expected results from the data helped mortgage rates, which ended the week lower.

While it is rarely a big market mover, this week's Consumer Confidence report shocked investors. The index declined to 46.0, far below the consensus forecast of 55.0, and the lowest level in nine months. Consumers are clearly worried

Home resales plunged in January for a second straight time despite extended government tax relief, raising doubt about the housing sector recovery.

Separately, U.S. economic growth accelerated to the strongest pace in over six years late last year, with the Commerce Department Friday revising up its fourth-quarter estimate as businesses slowed inventory reduction and boosted spending, but consumers spent less than first thought.

Sales of used homes decreased by 7.2%, to a 5.05 million annual rate, the National Association of Realtors said Friday. Economists surveyed by Dow Jones Newswires expected sales to increase 0.9%, to a rate of 5.50 million.

The surprise decline followed a revised 16.2% drop in December to 5.44 million. NAR originally estimated December sales fell 16.7%, to 5.45 million.

The first government tax credit, oddly, was behind the twin declines. Buyers had rushed into the market before the incentive expired Nov. 30, inflating sales during the autumn and leading to the big upsets. Tax relief has since been extended through April and expanded.

"It's certainly not good news," NAR economist Lawrence Yun said of January's drop. "It's raising concern about the strength of the housing market recovery. Year-over-year, sales were up 11.5%.

This week, the government reported new-home sales plummeted 11.2% to a record low during January.

The NAR said January inventories fell slightly and prices were unchanged.

The median price for an existing home was $164,700 in January, the same as January 2009.

Of the 5.05 million overall U.S. resales, 38% were considered distressed sales, a category that includes foreclosures. That's down from late 2008 and early 2009 when distressed sales accounted for 45% to 50% of resales.

Realtors expect another tax-driven sales surge in the spring. The new tax break includes sales through April 30 that close before July 1.

Under the first credit, included in a $787 billion economic stimulus package signed a year ago by President Barack Obama, qualifying first-time buyers could receive up to $8,000 in tax relief. The latest credit, enacted on Nov. 6, provides qualifying repeat buyers with tax credits of up to $6,500 and allows more higher-income individuals and couples to qualify for such relief.

Tax incentives have prodded demand. Before the big drops in December and January, sales climbed three straight times. Also driving sales have been low interest rates and declining prices. Once the latest tax credit expires, other factors, particularly joblessness in the U.S., will influence whether sales stabilize or slump.

The average 30-year mortgage rate was 5.03% in January, up from 4.93% in December, Freddie Mac data showed.

Regionally, January sales fell 10.9% in the Northeast, 6.9% in the Midwest, 7.4% in the South, and 5.2% in the West.

Also this week:

• Weekly Jobless Claims unexpectedly jumped to a three-month high
• January New Home Sales dropped 11% from December to a record low
• Bernanke said he doesn't anticipate any MBS sales by the Fed in the near
  term

 Next Week  

NEW Sandhills Voices! What's Your Favorite Community in the Sandhills?

NEW Featured Locals! Featured Locals Professionals and Neighbors

Kelly Wolfe Integrity Mortgage

Jim Leach State Farm Insurance

Scott Riggsbee Carolina Property Sales

Frank Thigpen Thigpen & Jenkins Attorney at Law

Cypress Creek Townhomes Southern Pines