Posted by: cfigueira | August 25, 2010

Mortgage News

More focus on two favorite market issues: housing – both new home sales and price of existing homes, and demand for industrial goods…

The Mortgage Bankers Association’s index of mortgage applications rose 4.9% last week, mostly due to refinancing applications. The purchase loan index edged up only 0.6%…

8:30: Durable goods orders for July…aircraft, but what else? Our expectation of a surge in durable goods is all due to aircraft, otherwise we expect a falttish number. The median expectation for orders ex transportation is only 0.5%, versus +3% for the headline.
Median forecast (of 75): +3.0%, ranging from +1.2% to +6.8%; last -1.0%.

10:00: New home sales for July…leveling out? Sales bounced in June following a sharp pullback in May, as these sales – reported as of contract rather than closing – reacted sooner than existing home sales to the expiration of the homebuyer tax credit. We look for a small decline. (Remember that a 5% drop at today’s depressed levels is only about 15k units at an annual rate.)
Median forecast (of 60): flat, ranging from -12% to +7.6%; last +23.6%.

10:00: FHFA housing price index for June…another decline? This index rose during the spring during the second round of the homebuyer tax credit. It is likely to give ground again once we start to see post-credit numbers, but analysts think prices held thier ground in June.
Median forecast (of 11): +0.1%, ranging from -0.6% to +3.5%; last +0.5%.

Advice:

A slump outside aircraft
This report is weak and much worse than expected. Orders were roughly flat in July, but only because of a large increase in orders for civilian aircraft. Elsewhere, demand for hard goods fell sharply, with capital goods orders erasing most of the proir two month’s gains. Upward revisions to data for the prior month take a bit of the sting out of this report, and push our estimate for the Q2 GDP revision to 1.2% from 1.1% previously.

Key Numbers:
Durable goods orders +0.3% in July (mom, +8.6% yoy) vs. median forecast +3.0%.

With the news of durable goods coming in lower, and the expected housing market data to come in flat. I expect the market to continue to rally. But watch out for profit taking.

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