The Fannie Mae Home Purchase Sentiment Index® (HPSI) rose 3.4 points in April to 91.7, marking a new all-time survey high.
Americans expressed an increased sense of job security, with the net share who say they are not concerned about losing their job increasing 5 percentage points this month.
The net share reporting that their income is significantly higher than it was 12 months ago increased 1 percentage point in April.
The net share who said home prices will go up in the next 12 months increased 7 percentage points in April.
The net share who reported that now is a good time to sell a home increased 6 percentage points month over month.
"The latest HPSI reading edged up to a new survey high, showing that consumer attitudes remain resilient going into the spring/summer home buying season," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "High home prices and good economic conditions helped push the share of Americans who think it’s a good time to sell to a fresh record high. However, the upward trend in the good-time-to-sell share seen since last spring has done little to release more for-sale inventory. The tightest supply in decades, combined with rising mortgage rates from historically low levels, will likely remain a hurdle for mobility and a persistent headwind for home sales."
Mortgage backed securities (FNMA 4.00 MBS) gained just +1 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.
Overview: The bond market had a very big week for economic data and events. It started with PCE hitting 2% (the Fed's "trigger") rate but then was followed by the Fed meeting where they stressed that they wont react to inflation hitting 2% just once, they want to see a trend line. We also got very strong manufacturing and services data as well as a very solid jobs report.
Fed's Target Rate met? Yes....but there is a catch. While the Fed's official measure of inflation is the Personal Consumption Expenditures (PCE), there are several key reports that are all at 2.00% or above, lets take a look (all reports have been released in the last 30 days):
PCE YOY - 2%
Average Hourly Earnings - 2.7%
GDP - 2.3%
CPI YOY - 2.4%
PPI YOY - 3.0%
WTI Oil - $68.89 now vs $48.84 1 year ago, 36.36% increase.
PCE: The March YOY Headline PCE showed an increase from 1.7% in Feb to 2.0% in March. The Core (Ex food and Energy) reading moved from 1.6% in Feb to 1.9% in March. Both of these data points matched the market expectations.
The Talking Fed: The FOMC voted unanimously to keep their key federal funds rate in the range of 1.5% to 1.75% which was widely expected with markets only giving them a 25% to 30% of raising rates at this meeting.
Here are some key highlights:
• They removed the line about "monitoring inflation developments closely"
• They also removed the prior statement that "the economic outlook has strengthened in recent months."
• Change in inflation language: "On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent"
• FOMC statement now twice uses the word `symmetric' to describe its inflation objective, emphasizing they view a persistent overshoot the same way that they view a persistent undershoot
• Removal of the following language in its entirety: "The economic outlook has strengthened in recent months"
• "Risks to the economic outlook appear roughly balanced" instead of "Near-term risks"
Manufacturing: April ISM Manufacturing hit 57.3 vs est of 58.3, anything above 50 is expansionary and a reading near 60 is very very strong. ISM Prices Paid (another key measure of inflation) jumped to 79.3 vs est of 78.0
Services: The national ISM Non-Manufacturing Services report (2/3 of our economy) was lighter than expected (56.8 vs est of 58.1) but still at a very moderate and expansionary pace.
Jobs, Jobs, Jobs: Its Big Jobs Friday!!
April Non-Farm Payrolls 164K vs est of 190K
March NFP revised upward from 103K to 135K
February NFP revised downward from 326K to 324K
The rolling three month average is now 208K, so the bottom line is the trend is still above 200K.
The headline Unemployment Rate (U3) dropped from 4.1% down to 3.9%, the market was expecting 4.0%. And is the lowest since 2000.
The Participation Rate dropped to 62.8% from 62.9%
The U6 Unemployment Rate (which includes part time workers for economic reasons and discouraged workers) dropped to 7.8% which is the lowest since 2001.
Average Hourly Earnings increased again, this time by 67 cents to get to YOY level of $26.84 which is a 2.6% gain which matches March's pace of 2.6% (downwardly revised).
On a MOM basis, Average Hourly Earnings increased by 4 cents for a change of 0.1% vs estimates of 0.2%.
The Average Weekly Hours remained at its longer term trend of 34.5 hours, however Overtime ticked up by 0.1 to 3.7 hours which is normally a precursor to an increase in weekly hours.
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.