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Huge Home Buying Activity
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Despite stronger than expected housing data and a nice rally
in the stock market, investors showed significant demand for bonds, including
mortgage backed securities (MBS). As a
result, prices for MBS improved, causing mortgage rates to end the week a
little lower.
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The housing data released this week showed that home buyers
were busy in April signing contracts to purchase homes. The market for both previously owned homes
and newly built homes saw their best activity in years. Improved labor market conditions and low
mortgage rates are a great combination to support a very active housing market.
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The Pending Home Sales Index, which measures the number of contracts
signed to buy previously owned homes, jumped in April by 5% over March, to the highest
level of activity since February 2006.
Similarly, the New Home Sales report, which measures the number of contracts
signed to buy newly built homes, surged by 17% over March, to its best level
since January 2008.
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The Fed has stated that the decision on when to next hike
the federal funds rate will depend on the incoming economic data. This week's data certainly increases the
chance of a rate hike in the near term.
Besides the strong housing data, Durable Goods orders rose in April by
much more than expected. Orders jumped 3.4% from March when an increase of only 0.5% was expected. March orders were
revised higher as well. Although the
durable orders data is volatile from month to month, the April data does show
that demand for big ticket items is high and that there is confidence in
improved future economic activity.
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Looking ahead, the important monthly
Employment report will be released on Friday. As usual, this data on the number
of jobs, the Unemployment Rate, and wage inflation will be the most highly
anticipated economic data of the month. Before that, the core PCE price index,
an inflation indicator favored by the Fed, will come out on Tuesday. The ISM
national manufacturing index will be released on Wednesday, and the ISM
national services index will come out on Friday. Mortgage markets will be
closed on Monday in observance of Memorial Day.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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