"Existing-home sales - including single-family, townhomes, condominiums and co-ops - rose 2.4 percent to a seasonally adjusted annual rate 1 of 4.77 million units in May from a downwardly revised level of 4.66 million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008."

May's increase was the first back-to-back monthly gain since September 2005. Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions and a first-time buyer tax credit, according to the National Association of Realtors®.

Lawrence Yun, NAR chief economist said this:

"First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan."

Yun said the appraisal problem is serious. "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales," he said. "In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."

TOOK LONG ENOUGH....are we not yelling this loud enough?

Plain and Simple: HVCC sucks. Please explain why readers...share your horror stories.

And by the way I am not big fan of the verbiage "using"...would have liked it to read "BEING FORCED TO USE"....besides that...good job Lawrence. From a micro point of view I cant tell you how many emails I have received from borrowers asking if there are any ways around HVCC. My reply: Email Andrew Cuomo.

Off my soapbox now (HVCC is brutal). Moving on...

After the data release, the S&P reflected the "weaker than expected" data and the street's evolving economic outlook. It appears that the marketplace is coming to grips with the fact that WITHOUT A HOUSING RECOVERY U.S ECONOMIC ACTIVITY WILL STAGNATE!!! (I think I am angry today). UGH.

Tests of the S&P's 200 day moving average failed repeatedly...even before the data release weakness was evident as the S&P failed to hold gains over 897 twice (200DMA)...

After early session profit taking weakened TSY prices and increased yields....the worse than expected economic data brought out overseas accounts which helped fuel a rally across the yield curve. The benchmark 2 yr note fell from 1.15 to 1.12 and the yield curve flattened out a few bps as the 10 yr note rallied from 3.69 to 3.63 (which is a key technical resistance/ profit taking level...hint hint)

Prices of "rate sheet influential" mortgage-backs had a slow start to the day. As MG pointed out this AM, prices were down 8 ticks (8/32) and yield spreads were noticeably wider after overnight profit taking on the yield curve forced selling in negatively convex "current coupons" (4.5/5.0 blend). Since 9AM, when TSY yields began to inch lower...MBS bids have incrementally improved. Thank the Fed for this rally people...they are moderating "cheapness" and "richness". As relative value of MBS coupons cheapens (and TSYs start to rally), the Fed makes a noticeable effort to "correct" any MBS weakness. That strategy has led other non-Fed funded MBS buyers to take advantage of bargain basement relative values (kind of..depends on your metric)...adding momentum to any mortgage-backed rallies.

It does indeed appear that the street is skeptical of the perception of a "recovery"...so bullish sentiment in the bond will likely improve heading forward...oh wait...that is totally dependent on the FOMC statement tomorrow! Today's housing data adds some steam to that stance though. We are hopeful that the Fed is aware of housing "issues" (readers please expand upon these issues for the Fed) and that the FOMC statement verbiage will indicate further weakness in housing is expected as mortgage rates have risen.....and HVCC is killing values which is forcing many buyers to reconsider the decision whether or not to buy now or rent (cheaper) while waiting for home prices to stabilize.

Yeh...its official. I am angry this morning. But feeling better as more and more talking heads are discussing housing weakness.


Rate sheets are pretty much unchanged.Some are worse. Some better. Those that are better are only slightly improved. No huge gains.