SUPER-CONFORMING RATES ($417,001 to $625,500 cap* by county) 0 POINT:
30 Year: 4.0% (4.12% APR)
FHA 30 Year: 3.75% (3.87% APR)
5/1 ARM: 3.25% (3.37% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 4.25% (4.37% APR)
10/1 ARM: 3.5% (3.62% APR)
5/1 ARM: 2.625% (2.745% APR)

Better or worse rates apply to specific borrower and property profiles. Better or worse rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.

If you look at the most recent U.S. jobs and manufacturing data summarized below as well as better retail earnings this morning (WSJ, IBD), it’s a picture of modest improvement. Normally this would mean higher rates as investors shift out of safe bets into riskier assets. But the overhang of the Eurozone debt crisis proves to be too much.

It doesn’t help that Bernanke implied the U.S. could be Greece in his testimony this morning. Read the link for why it’s really not, but that doesn’t matter on short-term sentiment. The bond rally continues on this, and of course the week’s hot Eurozone topic: Greece, which is still trying to get private investors to agree on a debt deal.

The deal calls for Greek bond investors to exchange outstanding bonds for new ones with coupons as low as 3.6-3.75%, and take losses of about 70% in the process. If most private investors don’t agree, it could trigger credit default swaps (CDS) on these securities, leading a European bank liquidity issue, which is really a global issue.

That plus the fact that the deal may not save Greece is why investors are seeking refuge in MBS and Treasuries (which are yielding 1.84 right now, also staggeringly low).

And now for the stat/chart rundown…

Jobless Claims
-367,000 for week ended January 28, seasonally adjusted
-Down 12,000 from previous week’s revised 379,000 (was 377k)
-4-week moving average was 375,750, down 2,000
-The 4-week average translates into 1,637,000 Jobless Claims/month
-While this week’s data is modestly better, this is not an indication of a healthy jobs market. It is healthier that it was but still not well. Tomorrow’s BLS Employment Situation Report will give another look.

Challenger Job-Cut Report
-Announced layoffs for January were 53,486 up from previous month’s 41,785

ISM Manufacturing Index (January 2012)
-ISM Manufacturing Index 54.1. Previous was 53.9.
-50 is dividing line between expansion and contraction
-This is the 30th straight month of (albeit modest) expansion
-The data are consistent. The wholesale part of the economy seems unaware that consumer spending had flattened. Either Consumer Spending will increase or manufacturing will decrease. The last GDP report showed significant growth in inventories.

The point is that this is perilous for 1Q2012 GDP. If Consumer Spending is flat and Government Spending is down and the Investment part of GDPis down because inventories are too large then GDP will be flat or even negative.

Here’s a summary of all ISM Manufacturing trends:

Worker Productivity and Costs (4thQ2011)
-Nonfarm productivity – Quarter/Quarter change +0.7%
-Unit labor costs – Quarter/Quarter change (seasonally adjusted, annualized) – +1.2%
-Productivity growth slowed (it was +2.3% in the previous Q/Q comparison) while compensation rose 1.9% after falling 0.3% in 3rdQ2011.

ADP January 2010 Jobs Report
-ADP showed +170,000 new private jobs
-Previous was +325,000, Consensus was +172,000
-These are private sector jobs only: +170,000 private jobs is not an indication of economic growth and just barely keeps pace with population growth.

Mortgage Applications Week Ended January 27
-Purchase Index, Week/Week -1.7%
-Refinance Index, Week/Week -3.6%
-Composite Index, Week/Week -2.9%

- Purchase Index, 4-week Moving Average +4.11%
- Refinance Index, 4-week Moving Average +4.22%
- Composite Index, 4-week Moving Average -2.9%

-Full mortgage app report.

Construction Spending (December 2011)
-Construction Spending, Month/Month +1.5%
-Construction Spending, Year/Year +4.3%
-New single-family construction was 1.5%

by Julian Hebron & Dick Lepre

SUPER-CONFORMING RATES ($417,001 to $625,500 cap* by county) 0 POINT:
30 Year: 4.0% (4.12% APR)
FHA 30 Year: 3.75% (3.87% APR)
5/1 ARM: 3.125% (3.245% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 4.25% (4.37% APR)
10/1 ARM: 3.5% (3.62% APR)
5/1 ARM: 2.625% (2.745% APR)

Better or worse rates apply to specific borrower and property profiles. Better or worse rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.

SUPER-CONFORMING RATES ($417,001 to $625,500* cap by county) 0 POINT:
30 Year: 4.125% (4.245% APR)
FHA 30 Year: 3.75% (3.87% APR)
5/1 ARM: 3.25% (3.37% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 4.375% (4.495% APR)
10/1 ARM: 3.625% (3.745% APR)
5/1 ARM: 2.875% (2.995% APR)

Better or worse rates apply to specific borrower and property profiles. Better or worse rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.

All cash transactions were 31% of the market. The issue may be that many foreclosures are in condition not up the FNMA lending standards. Distressed sales were 32% of the market. 21% of the sales were to investors.

This trend is healthy because it is only investors buying homes they will fix and rent who can provide the buying capacity to absorb the present supply (which was down to 6.2 months from 7.2 months at the end of November) as well as the shadow inventory of distressed sales which will be created by foreclosures this year. The folks who buy, repair and rent out these homes are helping stabilize values and also creating cash flow for themselves which will be a plus for the economy.

I do not see this as a story indicating that the housing market is in significant recovery. It is, however, a necessary step to recovery. It also shows that recovery is accomplished by letting the market work rather that by taxpayer funded incentives which add to an already massive national debt.

Also notable: 33% of Realtors reported cancelled deals in December, same as November and up from 9% in December 2010. This is a very high number that the NAR says is:

caused largely by declined mortgage applications and failures in loan underwriting from appraised values coming in below the negotiated price.

That and jittery buyers. Here’s an on-the-ground perspective of why this is happening.

And finally, a reminder that last month, the NAR cut 2007-2010 existing home sales by 14.3%.

Below are revisions for each year, and here’s the full revisions report.

___
Further Reference:
-NAR December Existing Home Sales Report
-33% Of Existing Home Sales Not Closing. True From Where I Sit
-NAR Cuts 2007-2010 Existing Home Sales 14.3%

by Dick Lepre & Julian Hebron

Jobless Claims
-352,000 for week ended January 14, seasonally adjusted
-Down 50,000 from previous week’s 402,000 (was 399k)
-4-week moving average was 379,000, down 3,500
-Biggest weekly drop since September 24, 2005
-Lowest jobless claims since April 2008
-But job market still not adding jobs fast enough
-More analysis/charts from Bespoke

Housing Starts & Building Permits (December 2011)

Housing Starts (December)
-Housing Starts 657k seasonally adjusted, annualized. Below previous (685k) & consensus (678k)
-Construction (measured by Starts) down 4.1% in December
-Single family starts up from 450k to 470k, highest since April 2010 when homebuyer tax credit boosted production
-Multifamily home constructions down from 13% from 215k (Nov) to 187k (Dec)
-Single family starts ended 2011 at 428,600, worst year on record.

Building Permits (November)
-Building Permits 679,000, seasonally adjusted, annualized
-Permits are a measure of future construction
-Up 0.1% from November
-Flat month

There should be 1,500,000 annual Housing Starts to keep pace with population growth and scrappage. Relaxed mortgage underwriting led to increased supply and the recession has created more supply (foreclosures) and lower demand leading to still decreasing home prices. The housing market is not going to return to normal until the foreclosure inventory is cleared and values stop falling.

-Starts/permits releases: Commerce Dept | NAHB
-Table and chart below. Click images for more.

CPI: Consumer Inflation (December 2011)
-CPI, Month/Month unchanged from previous month
-CPI, Year/Year change +3.0%
-CPI core (less food & energy) Month/Month change, +0.1%. Previous +0.2%. Consensus +0.1%.
-CPI core (less food & energy) Year/Year change, +2.2%
-Consumer inflation is flat, and not a threat near-term

Philadelphia Fed Manufacturing (January 2012)
-Index of manufacturing activity in Philly region rose to 7.3 for January
-Region is: Eastern Pennsylvania, Southern New Jersey, Deleware
-This is down from a from a revised 6.8 in December (was 10.3)
-Zero is the dividing line between expansion and contraction
-Fourth straight monthly gain even with revision down for December
-Full report

by Dick Lepre & Julian Hebron

Stocks are up on the week (S&P 500 now at 1303) on better-but-still-weak homebuilder confidence (below), better Goldman Sachs earnings, and optimism that Greece will reach a debt deal with private investors as talks resume today.

Mortgage bonds—namely the 3.5% coupon most lenders use to price rates—are slightly off nosebleed levels, down 11 basis points to 103.02 as MBS investors try to hold line in this headline driven market. Rates rise when mortgage bonds sell, but we’d need this selloff to expand 10 or more basis before lenders hike rates.

This Greek debt talks will be the first big test to see if 2012 will officially continue the same slog we saw throughout 2011 with stocks rallying (and bonds selling) on the least bit of good U.S. economic data and/or optimism on EU debt crisis resolution, then reversing. The definition of a passed test is if there’s a definitive agreement on who will take (and commit to) losses.

Stay tuned, and here’s your data and chart rundown…

PPI: Wholesale Inflation (December 2011)
-PPI, Month/Month change -0.1%
-PPI, Year/Year change +4.8%
-Core PPI (less food & energy), Month/Month change +0.3%
-Core PPI (less food & energy), Year/Year change +3.0%

-The overall data shows that food and energy prices have been volatile. From a macroeconomic point-of-view core is more important and core, while a bit too high for the present state of the economy (and versus expectations of 0.1% monthly), is fairly tame. Mortgages selling a bit this morning on the news, which will push rates up if it holds.

MBA Mortgage Applications (week ended 1/13/2012)
-Purchase Index, Week/Week Change +10.3%
-Refinance Index, Week/Week Change +26.4%
-Composite Index, Week/Week Change +23.1%
-The gigantic gain is a data fabrication due to the fact that the previous week contained New Year’s Day.

National Assn of Homebuilders (NAHB) Confidence Index (January 2012)
-Homebuilder Confidence Index value was 25. Previous was 21.
-4 straight monthly gain, highest since June 2007
-But still way off from 50+ that’s considered to be a healthy market
-Last 50+ reading was April 2006
-Here’s a table showing builder confidence from 1985-PRESENT

Industrial Production/Capacity Utilization (December 2011)
-This is a measure of the strength of the manufacturing sector
-Industrial Production, Month/Month +0.4%
-Manufacturing, Month/Month +0.9%
-Capacity Utilization Rate 78.1%
-The manufacturing sector has been growing for about two years.
-The gain in Industrial Production for December was after a November loss.

Retail Chain Store Reports (week ended 1/14/2012)
-Redbook Year/Year +2.8%. Previous was +3.3%.

-ICSC-Goldman Store Sales, Week/Week +0.1%. Previous was -5.4%
-ICSC-Goldman Store Sales, Year/Year +3.0%. Previous was +2.8%

-Post-Christmas retail sales have been slow.

Empire State Manufacturing Survey
-NOTE: this was released Tuesday 1/17
-Index of business conditions in NY region rose to 13.48 for January, from 9.53 in December
-Zero is the dividing line between expansion and contraction
-This is the third consecutive monthly gain
-Highest level since hitting 11.88 in May 2011 then plummeting to -7.79 in June 2011
-Full report

by Dick Lepre & Julian Hebron

SUPER-CONFORMING RATES ($417,001 to $625,500 cap* by county) 0 POINT:
30 Year: 4.0% (4.12% APR)
FHA 30 Year: 3.75% (3.87% APR)
5/1 ARM: 3.125% (3.245% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 4.375% (4.495% APR)
10/1 ARM: 3.5% (3.62% APR)
5/1 ARM: 2.75% (2.87% APR)

Better or worse rates apply to specific borrower and property profiles. Better or worse rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.

-Up 24,000 from previous week’s revised 375,000 (was 381k)

-4-week moving average was 381,750, up 7,750

-Initial claims now at highest level since end of November on a seasonally adjusted basis, but still under 400k, a key threshold.

-There were a lot of post-Christmas layoffs presumably from employers such as UPS but this data is seasonally adjusted.

-The Bespoke chart below shows claims on a non-seasonally adjusted basis, and they report that “Even after this week’s reportedly big jump, for the first week of January (red dots), initial claims have not been this low since January 2008.”

-The reality is that the jobs market is still weak despite a decent run for claims before this week.

Retail Sales (December 2011)
-Retail Sales, Month/Month 0.1%

-Retail Sales less autos, Month/Month -0.2%

-Less Autos & Gas, Month/Month 0.0%

-Retail sales were up 7.7% in 2011 vs. 2010

-Full report from Commerce Dept.

Business Inventories (November 2011)
-Inventories, Month/Month +0.3%.
-This is more or less in line with consumer demand.

Outlook
This new year is starting poorly. Recent fundamentals are pointing to reduced GDP growth. We have not yet recovered from the mortgage mess induced recession and now the EU is about to start a lengthy period of recession or flat growth. Japan is going nowhere and China will lower GDP growth. Our national fiscal policy is unsustainable. What we have is a formula for lengthy, worldwide recession.

If this is in fact the outcome, the upside is sustained low rates for consumers who qualify for credit.

by Dick Lepre & Julian Hebron

SUPER-CONFORMING RATES ($417,001 to $625,500 cap* by county) 0 POINT:
30 Year: 4.25% (4.37% APR)
FHA 30 Year: 3.875% (3.995% APR)
5/1 ARM: 3.5% (3.67% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 4.5% (4.62% APR)
10/1 ARM: 3.625% (3.745% APR)
5/1 ARM: 2.875% (2.995% APR)

Better or worse rates apply to specific borrower and property profiles. Better or worse rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.