Wednesday, January 27, 2010

Earlier this morning the Commerce Department reported newly built single-family homes fell by a larger-than-expected 7.6% in December. Bad weather may have played a role in the December new home sales data. Last month was the 14th coldest December and 11th wettest in 115 years of record keeping according to the National Climatic Data Center.


Bad weather or good -- the housing market recovery is showing some signs of fatigue after a mid-year surge in sales as first-time homebuyers rushed to take advantage of a popular tax credit, which had been scheduled to expire in November. Most analysts expect home sales to pick up as a result, though most don't expect the pace to be quite as strong as it was under the initial program. Mortgage investors essentially shrugged this data off this morning and remain far more focused on the upcoming Treasury auctions, Fed meeting, and the last minute political wrangling surrounding the likely reappointment of Fed Chairman Bernanke.



Next up for mortgage investors is this afternoon's $42 billion 5-year note auction (concludes at 1:00 p.m. ET) followed within an hour or so by the release of the much anticipated post-meeting statement from the Federal Open Market Committee.



Yesterday's $44 billion two-year note auction attracted solid demand, with the total number of bids strongly higher than the average for the 12 auctions of two-year debt that took place last year. It's a decent start to this week's three-part Treasury auction and let's hope the momentum is sustained. Aggressive bidding and solid foreign investor participation at today's 5-year note auction will tend to be supportive of the prospects for steady to slightly lower mortgage interest rates. In the unlikely event today's 5-year note sale is a bust - look for mortgage interest rates to finish the day higher.



It is Wednesday morning which means the Mortgage Bankers of America have released their mortgage application survey for the previous week. During the week ended January 22nd the MBA said overall mortgage loan demand dropped 10.9% from the previous week. The purchase index fell 3.3% while the requests for refinance loans fell 15.1%. Refinance applications accounted for 67.6% of all applications - down slightly from last week, when they were 71.1% of the total.