Rates rallied yesterday following a strong 5 year note auction. This helped pave the way for higher MBS prices and lower mortgage rates. By day's end MBS were testing historic price highs and lenders were repricing for the better. To remind readers, as MBS prices move higher, lenders are able to pass along lower mortgage rates. 

While the economic calendar is very busy today, this will be last the session of the week in which economic data is released as markets will be closed on Thursday and open for a half day on Friday.  

Because there was so much to absorb this morning, I am going to do a quick run through of all the data.

This morning the Mortgage Bankers’ Association released their weekly applications index which tracks the weekly change in the amount of loan applications at major lenders for purchase and refinance transaction.   Today’s report indicated a surge in purchase applications as the index jumped 9.6%. Meanwhile, the refinance index declined 9.5%. The overall applications index moved 4.5% lower on the week. READ MORE

The U.S. Department of Labor released weekly jobless claims data this morning. This report tracks the number of Americans that filed for first time unemployment benefits in the prior week.  Included within this data is continuing claims which totals the number of Americans who continue to file for unemployment insurance due to an inability to land a new a new job.  This week, both initial claims and continuing claims came in lower than economists’ expectations.   First time claims fell to 466,000,  the lowest level since September 2008 and much better than estimates of 500,000 claims. Continuing claims fell 190,000 to 5.42 million. The number of Americans who are receiving extended benefits declined by 18,000 to 4.18 million. 

Next, the Department of Commerce released monthly Durable Goods Orders data.  Durable goods are items that are expected to last several years such as appliances and electronics.  This data basically tells market participants how busy factories will be in the months ahead.  Today's release indicates that manufacturers will not be as busy as was previously expected.   Durable goods orders for October posted a 0.6% decline, economists were expecting an increase of 0.5% increase.   When you exclude transportation orders, durable orders fell  1.3%, the market was expecting a 0.7% increase.  Offsetting today's weaker than anticipated report was a revision to the previous read from a 1.0% increase to 2.0% increase.

Also coming from the Department of Commerce was the Personal Income and Outlays report which shows us whether consumer income and spending is increasing or decreasing.  Since our economy is driven by consumer spending, this data is closely watched by market participants.   Personal income came in right on expectations with a 0.2% increase following a revised for the better 0.2% gain in September (first reported as 0.0%).   The spending component of the report posted a 0.7% increase, beating economist forecast for a 0.5% rise.   Included within this report is the Fed’s favorite measure for inflation, Personal Consumption Expenditures, which continues to imply that inflation is not a near term concern. 

 Do you plan to spend more, less, or about the same for Christmas this year as compared to prior years?

We got another reading on how the consumer is feeling with the release of the University of Michigan’s Consumer Sentiment Survey. The U of M Survey Center questions 500 households each month on their personal financial conditions and attitudes about the economy. After peaking higher a few months ago, recent reports have indicated that consumers are becoming less optimistic as unemployment continues to rise. Last month’s report dropped 4 points to 66.  Economists surveyed expected a small rebound with a reading of 67, the report came in at 67.4. 

The final piece of data for the week was another reading on the health of the housing sector...New Home Sales.  This report totals the number of newly constructed homes with a committed sale during the prior month.    Last month’s report showed new home sales falling much more than expected to an annualized pace of 402,000.  Economists surveyed prior to this report were expecting a small improvement to an annualized pace of 410,000.   The report shows that new home sales jumped 6.2% to an annualized pace of 430,000...beating estimates.  This is the highest level recorded since September 2008.

At 1 pm eastern, the Department of Treasury will auction $32biilion of 7 year notes.   Monday’s 2 year and yesterday’s 5 year note auction went rather well with strong demand despite a record amount of government borrowing.  Matt and AQ will cover the auction once it is completed on the MBS Commentary blog. 

Reports from fellow mortgage professionals indicate lender rate sheets are once again, slightly improved.  The par 30 year fixed rate mortgage continues to hold in the 4.5% to 4.75% range for well qualified consumers.  To secure the par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  There are a few lenders offering 4.375% for consumers with exceptionally high FICO scores and loan to values under 60%. 

If you are a current homeowner who has been waiting to refinance, now is the time.  We are seeing just about the best rates ever and there is not much more room for them to continue to fall.   At some point, they will start to rise and remember, rates rise much quicker than they fall.   If you are still floating an interest rate, call your loan officer and lock as soon as possible.   Ahead of the holiday, lenders will have itchy trigger fingers to reprice worse. 

My next blog will come to you on Friday.  I hope everyone has a wonderful Thanksgiving with friends and family.   Don’t eat too much!