Applications for U.S. home mortgages edged up last week, boosted by stronger demand for purchases for the second week in a row.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 0.1 percent in the week ended April 27.

The MBA’s seasonally adjusted index of loan requests for home purchases gained 2.9 percent, but the gauge of refinancing applications slipped 0.7 percent.

The refinance share of total mortgage activity eased to 72.6 percent of applications from 73.4 percent the previous week.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to the MBA.

This two week trend of stronger applications for a mortgage to purchase a home mirrors the much better than expected Pending Home Sales report last week.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +50 basis points from last Friday to the prior Friday which caused mortgage rates to move lower.

The highest rates of the week were on Tuesday and the lowest rates of the week were on Friday.

MBS traded in a very narrow range all week as we had a mixed bag of economic news.

But MBS moved sharply higher (causing lower mortgage rates which move in an inverse direction) on the much weaker than expected Unemployment data.  Yes, the Unemployment Rate dropped from 8.2% to 8.1% - on the surface that would appear to positive for the job picture.  But the Unemployment Rate is an outdated and highly manipulated calculation based upon very old technology (phone surveys), the vast majority of economists and traders put little stock in that number.

Instead, they focus on the Non-Farm Payroll data.  This is calculated using peoples paychecks and is considered to be much more accurate.  And with this latest Non-Farm Payroll data, the market received a big disappointment.  The market was expecting a gain of approximately 165K jobs.  But instead, we only saw a gain of 119K.  This miss to the down side caused bonds to rally (they generally react well to poor economic news).

What to Watch Out For This Week:

The following 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.

Contracts to purchase previously owned homes increased solidly to a near two-year high in March, suggesting the spring selling season got off to a firmer start and offering hopes of a pickup in housing.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed in March, jumped 4.1 percent to 101.4, the highest level since April 2010.

March’s strong rise in signed contracts pointed to a pick up in home resales after they stumbled in the past two months.

“First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” said Lawrence Yun, chief NAR economist.

Signed contracts were up 12.8 percent in the 12 months to March.

Contracts rose strongly in the South and West, but fell in the Northeast and Midwest.

What Happened to Rates Last Week:

 Mortgage backed securities (MBS) lost just -1 basis point from last Friday to the prior Friday which caused mortgage rates to move sideways.

The highest rates of the week were on Wednesday and the lowest rates of the week were on Monday.

MBS traded in a very narrow range all week as we had a mixed bag of economic news.

Durable Goods Orders, New Home Sales, Initial Jobless Claims and the 1st quarter GDP were all worse than expected and provided some support for bonds.  But Consumer Sentiment,

Pending Home Sales and Fed action were negative for bonds and kept a cap on any material gains.

The Federal Reserve Open Market Committee (FOMC, aka “The Fed”) left their key interest rate alone and basically made a carbon copy of their last policy statement.  They basically told the market that there was no need for any additional stimulative measures at this time, nor do their projections show that further easing would be needed in the future. 

However, if the economy did turn from its current positive direction they are prepared to step in.

What to Watch Out For This Week:

The following 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.

In the latest release of the National Association of Realtors’ Existing Home Sales report, there were some very interesting facts.  Even though they reported a month-over-month decrease of 2.6% in existing home sales, they revised February’s data upward. The NAR said even with March’s decline, the pace of sales in the first three months of the year marked the strongest first quarter since 2007.

But the real gem is the inventory data.  The nation’s glut of unsold homes is easing, as inventories fell to 2.37 million. Realtors in some markets have even reported shortages of housing stock. A decrease in the amount of homes on the market is always good for housing as it stabilizes and even drives prices upward.  Nationwide, the median price for a home resale rose to $163,800 in March, up 2.5 percent from a year earlier.

An improving labor market has realtors upbeat about sales prospects for the rest of the year.

Distressed home sales accounted for only 29 percent of resales, down from 34 percent in February, which is also a very positive trend

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +15 basis points from last Friday to the prior Friday which caused mortgage rates to move sideways.
The highest rates of the week were on Tuesday and the lowest rates of the week were on Friday.

MBS traded in a very narrow range all week as we had a light week in terms of the economic data that was released.

Retail Sales were much better than expected but Initial Jobless Claims and Existing Home Sales were worse than expected, there were no major Treasury auctions to guide the market last week.

What to Watch Out For This Week:

The following 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.

Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.

Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers.

Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.

And many people seem to have concluded that prices won’t drop much further. In some areas, prices have begun to tick up.

“The biggest challenge that we’ve had over the past four years is fear — fear that the economy is collapsing, that property values are collapsing, that the world is coming to an end,” says Mark Prather, a broker at ERA Buy America Real Estate in La Palma, Calif. “The fear factor is all but gone.”

The spring buying season got an early lift-off from an uncommonly warm January and February — a winter that was the best for sales of previously occupied homes in five years. Permits to build houses and apartments rose in February to their highest level since 2008.

“People feel much more confident,” said Steve Brown, co-owner of real estate company Irongate Inc. of Dayton, Ohio, who says sales jumped more than 16 percent for the first two months of 2012 over the same period last year. “There’s no question there’s a good feeling in the marketplace.”

Some analysts detected a slight uptick in prices for February and March. CoreLogic, a real estate data firm, says prices for homes not at risk of foreclosure — about two thirds of the market — rose 0.7 percent in February. It was the first increase in four years. Price gains occurred both in some hard-hit areas, such as Phoenix, and some still-thriving areas like New York and Washington.

Also fueling interest are signs that home values are finally stabilizing. One factor that had slowed purchases after the housing boom ended in late 2006 was fear that a home would lose value soon after its purchase.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained just +3 basis points from last Friday to the prior Friday which caused mortgage rates to move sideways.
The highest rates of the week were on Wednesday and the lowest rates of the week were on Tuesday. The difference between our best and worst pricing for the week was a whopping 109 basis points which shows a lot of volatility.

Mortgage rates dipped Tuesday afternoon in reaction to global concern over Spain and Italy’s debt woes. Mortgage rates then reversed course and increased both Wednesday and Thursday in reaction to the release of the Fed’s Beige Book (named for the color of its cover). The Beige Book contains the economic data that the Fed will use to base their next policy move. In this report, the economic conditions in most districts were improving which led investors to believe that there would be a reduced chance for the Fed to have another round of quantitative easing.

Mortgage rates then reversed course again, and improved on Friday in reaction to a weak stock market and milder than expected University of Michigan Consumer Sentiment reading.

What to Watch Out For This Week:

The following 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.

Businesses ordered more machinery and equipment from U.S. factories in February, a signal that many are investing in their companies despite the expiration of a tax credit.

This is positive news for the housing market as increased demand for manufacturing signals stronger consumer sentiment.

Orders to U.S. factories increased 1.3 percent in February, the Commerce Department said. That offset a similar decline in January.

U.S. factories stepped up hiring and production in March, based on a report Monday from the Institute for Supply Management.

The trade group of purchasing managers said its index of manufacturing activity rose to 53.4 in March, up from a February reading of 52.4. Readings above 50 indicate manufacturing is expanding.

Manufacturing has been a key source of economic growth since the recession ended in June 2009.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained  +70 basis points from last Friday to the prior Friday which helped mortgage rates to decrease (Mortgage rates have an inverse relationship to mortgage backed security prices).

The highest rates of the week were on Tuesday and the lowest rates of the week were on Friday.
Mortgage rates shot up Tuesday afternoon after the release of the minuets from the last Fed meeting.

As traders deciphered the minutes, it became clear to them that a third round of quantitative easing would not be in the cards.  This caused MBS to sell off and forced mortgage rates higher.

But everything changed on Friday.

The MBS market reacted sharply to the disappointing employment data.
The headline Unemployment Rate dropped from 8.3% to 8.2% but traders largely ignore this data as it is the results of a verbal phone survey.

Traders focus instead on the Non-Farm Payroll data which did show that the economy added 120,000 jobs.  While job growth is good, this was a big decrease from the prior month where the economy added 240,000 jobs.  This disappointing employment news caused traders to speculate that further Fed action may be needed (a complete reversal in thought from Tuesday afternoon) and made MBS attractive again.  This new demand for MBS helped to push mortgage rates lower.

What to Watch Out For This Week:

The following 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.

U.S. consumer confidence rebounded to its highest level in more than a year in March as optimism about jobs and income overcame higher prices at the gasoline pump, said a survey released on Friday.

The Thomson Reuters/University of Michigan’s final March reading for the overall consumer sentiment index rose to 76.2, the highest since February 2011, from 75.3 in February.

The final March figure rose from a preliminary reading of 74.3 and was above economists’ median forecasts of 74.7.

“Consumer confidence edged upward as more favorable income and job trends offset rising gas prices,” survey director Richard Curtin said in a statement.

The barometer of current economic conditions ended at 86.0 in March, also the highest level since February 2011. This improved on the preliminary reading of 84.2 and February’s 83.0. Analysts had predicted a reading of 84.5.

This is particulary good news for the housing market as we all know that consumers are more likely to put in an offer on a home if they feel more secure about the economy and their own prospects.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +35 basis points from last Friday to the prior Friday which helped mortgage rates to decrease (Mortgage rates have an inverse relationship to mortgage backed security prices).

The highest rates of the week were on Monday and the lowest rates of the week were on Tuesday.

MBS and other bonds saw an increase in demand amid concerns about Spain’s debt and new budget proposal which pushed money into the safe-haven of U.S. bonds.

But we sold off on Friday (causing mortgage rates to rise from their lows during the week) on a much stronger than expected Consumer Sentiment reading.

Both the 5 and 7 year Treasury auctions saw a slight pull-back in demand compared to recent averages.

From a technical perspective, we tested our ceiling of resistance 4 times and sold off each time that we hit the top of the trading channel. This clearly signals the top end of the market (meaning the potential for lower rates are limited).

What to Watch Out For This Week:

The following 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.

After the false starts of 2010 and 2011, the U.S. economy may finally be on the path toward a strong recovery, Lawrence Summers, former Treasury secretary and currently Charles W. Eliot University Professor at Harvard, wrote in an opinion piece in the Financial Times on Monday.

In the springs of 2010 and 2011, many observers who thought they detected evidence that the economy had decisively turned around were disappointed a few months later, Summers wrote.

“Several considerations suggest that this time may be different,” he said.

Among them, he listed employment growth that has been running “well ahead” of population growth for some time, a higher U.S. stock market, and the fact that expected market volatility is “lower than at any time since 2007.”

He also cited pent-up demand from consumers who have long put off purchases of new cars and other durable goods, and signs that the housing market is beginning to stabilize.

“For years now, the rate of new families setting up households has been well below normal as more and more young people have moved in with their parents,” Summers wrote. “At some point they will set out on their own, creating a virtuous circle of a stronger housing markets, more ‘family formation’ that boosts demand, further improvement in housing conditions and so on.”

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained a very modest +8 basis points from last Friday to the prior Friday which helped mortgage rates to pull back from their highs (Mortgage rates have an inverse relationship to mortgage backed security prices).

We saw our highest mortgage rates of 2012 on Tuesday.

This was primarily due do the continued sell off of Treasuries and mortgage backed securities by banks that were no longer forced to hold them after passing the latest “stress test” by the Fed.

We had a mixed bag of housing data as there was a pickup in  Housing Starts and Building Permits but Existing Home Sales came in lighter than market expectations..

What to Watch Out For This Week:

The following 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.

Mortgage rates have seen historic lows due to a long-running bull market in bonds.  Specifically, mortgage backed securities. Demand has far exceeded supply which has driven down mortgage rates.  As demand starts to pull back, mortgage rates will begin to move upward.

Say goodbye to the longest bull market for bonds in history. The market is at a turning point, say portfolio managers—some of whom are running the nation’s largest bond funds. The reason: growing worries about inflation . While it is not a problem right now, there are several strong economic factors that typically lead to higher prices down the road.

Rates are already starting to rise, even without the Fed. This week, Treasuries and Mortgage Backed Securities saw a sharp sell-off, bringing yields—which move opposite to prices—to their highest level since October.

Rising yields, when coupled with inflation, are a double-whammy to the value of bonds.

With job growth comes purchasing power and pricing pressure on businesses and consumers. Yigal Jhirad, portfolio manager for Cohen & Steers, thinks this pressure is already underway.

While significant inflation and higher mortgage rates are still far down the road, it is clear that they are on the horizon.  This is actually a good thing for housing.  The housing market has always performed better in the “sweet spot” of mortgage rates which is in that 5.50% to 7.00% range.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -93 basis points from last Friday to the prior Friday which pushed mortgage rates significantly higher from the prior week and marks the second straight week of higher mortgage rates.

We have received month after month of positive economic news which would normally pressure mortgage rates upward but due to global instability, mortgage rates have benefitted from strong demand in MBS which have offset the positive economic news.

But bonds started to sell off in a big way last week which pushed mortgage rates higher.

Why?  Because banks started to dump their vast holdings of Treasuries and MBS.

Banks had to hold on to capital while they were undergoing the Fed’s “stress test”.  The “stress test” results were released last week and as a result, each bank definitively knew how much excess capital they had.

This meant that they could finally liquidate their holdings of their very low yielding mortgage backed securities….this caused demand for MBS to fall off which pushed mortgage rates upward.

What to Watch Out For This Week:

The following 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.

The U.S. economy scored its third straight month of more than 200,000 jobs created with 227,000 in February as measured by the Non Farm Payroll data.  It is widely believed by economists that the economy needs to add at least 150,000 jobs each month in order to continue our growth out of the last recession.

The Unemployment Rate was unchanged at 8.3% from the prior month, however that rate is based upon a phone survey and economists put much greater value and weight on the Non Farm Payroll data which is based upon real data and statistics.

This three month positive trend in job creation is very important for housing as this trend comes at the perfect time before the busy home buying season.  Obviously, consumers that feel better about their job security or have recently returned to work will help to bolster demand for housing.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -24 basis points from last Friday to the prior Friday which pushed mortgage rates higher from the prior week.
We saw our highest mortgage rates on Friday morning.
This was the result of a powerful one-two punch:

Bonds sold off on the stronger than expected Non-Farm Payroll data.The prior month’s data was also revised upward which painted a much better jobs picture in the United States.
Next was the news that Greece was able to get enough of their private bond holders to agree to their bond swap. This was key, if they didn’t agree to the bond swap Greece would have defaulted and caused a massive event in Europe.

Rates have been artificially too low for some time due to concerns over a Greek default, so we lost some of our low rates when they didn’t default.
100 day moving average to the rescue: Look at the above chart. The last three times that MBS sold off and touched our 100 day moving average (blue line) we saw a nice bounce upward which helped to move mortgage rates off of our highest levels.

What to Watch Out For This Week:

The following 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.