Europe continued to be the focus of the markets this week. There was finally a deal on a bailout for the Cyprus banks. Though the deal itself was viewed as positive (except I’m sure by the bank customers who can lose up to 80% of their money) concern continuous that the European Community will have a hard time continuing to bail its less fortunate members. Ongoing problems with forming a government in Italy, Europe’s 3rd largest economy, contributed further to concerns of the overall European economy. This negative outlook was a positive for mortgage backed securities and rates improved slightly for the 3rd week in a row.
Here at home one of the brightest spots continue to be the Housing Sector. The housing data over the past two weeks continue to tell the story that has been on the front pages of business publications since late last fall — housing prices are rising, new home starts are increasing and existing housing supply is dwindling. Last month's new housing starts exceeded expectations by 7,000, while existing home sales fell short of expectations by 2,000. The problem for existing home sales is simply a lack of supply as existing homeowners, many still owing more than their homes are worth, are reluctant to place their homes on the market. However, as prices continue to climb this problem is becoming less severe. Estimates suggest that 25% of those whose home values were "underwater" at one time are now in a positive equity situation.
Mortgage rates are just slightly lower than a week ago.
The 10-year US Treasury Note is at 1.84%, down .08 since last time.
Credit Spread (10yr UST vs. FNMA Current Coupon) 1.36, from 1.32 last time. This keeps widening as mortgage backed security yields have not fallen as much US Treasuries.
Current 30-year Fixed 3.625%. Jumbo 5/1 ARM 2. 50%.
Of note, the conforming 5/1 ARM is now at 2.25%, the 7/1 at 2.625%.
I hope the Passover and Easter holidays gave everybody an opportunity to recharge. Busy times ahead in real estate so better be ready.