Continued troubles in Egypt and the Middle East have once again triggered the “flight to safety” trade in the bond market, helping move mortgage rates slightly lower last week. In fact, on Friday, stocks improved, the dollar rallied and Treasuries improved – events that do not normally occur all in the same day. For the week, mortgage-backed securities (MBS) prices improved nearly one point!
Economic data last week was focused on the housing market, and the results were generally mixed. The S&P/Case-Shiller Home Price Index was down 4.1% versus one year ago. 18 of the 20 cities surveyed were down compared to December 2009. Home prices increased in San Diego and Washington DC, up 1.7% and 4.1% respectively. Existing Home Sales were up 2.7% in January. Foreclosures and short sales, which typically occur below market value, accounted for 37% of the transactions. As a result, the median home price fell 3.7% from a year ago to $158,800, the lowest since April 2002. New Home Sales dropped 12.6% last month to a seasonally-adjusted annual rate of 284,000. Data outside of the housing sector continues to show significant improvement with Initial Jobless Claims dropping by 22,000, Durable Goods increasing 2.7% in January and Consumer Confidence increasing in February to the highest level in three years. The sentiment survey showed that for the first time in six years, households this month said they had heard more optimistic than pessimistic news on the economy.
Currently, the 30 Year Fixed is 4.625% (4.755% APR) and the 15 Year Fixed is 3.750% (3.976% APR). There is a lot of economic news to digest this week with Pending Home Sales, Construction Spending, manufacturing data, and the Fed Beige Book. On Friday, we’ll see the latest employment reports, with Non-Farm Payrolls expected to be up 180,000 and the Unemployment Rate expected to move to 9.1%.