House Prices Fall For Third Straight Month

Home prices fell in October for the third month in a row and it appears the housing market is headed for a double dip, according to the Standard & Poor's/Case-Shiller house price index.

Best time to make an offer on a house:

January.

Home buyers face minimal competition during this month because house hunting is no fun when the weather is at its worst. Less competition means greater odds that a seller will accept a low-ball bid. The weather is no better in February, but by then sellers are more likely to hold out until temperatures and the housing market begin to heat up in March.

The first Tuesday of January can be the perfect day to make an offer. Home owners will have recently made a month-end mortgage payment, a reminder of the high cost of holding onto an unneeded home. Tuesday also is a great day to make offers in slow housing markets because by then, home owners realize it's unlikely that other house hunters from the weekend's showings intend to make offers.

Alternate strategy: Make an offer on Christmas Day. Sellers are happy to receive an offer -- even on a holiday -- and people are in a good mood on Christmas, leaving them psychologically predisposed to be flexible and generous in their negotiations. Add a message to your offer explaining that the home would be the perfect place to raise your family -- we tend to become very family-oriented on Christmas. You will need a real estate agent who is willing to work on Christmas to do this.

Market Update

FNMA 30-YR 4.0%

Previous close 98.970
Opened Down 0.09bp @ 98.875

Key Economic Data:

EUR / USD 1.3063 Down 0.0037
USD / JPY 83.1385 Down 0.4330
GBP / USD 1.5407 Up 0.0021

OIL 90.53 Up 0.05
Gold 1,378.20 Down 9.20

Key Economic News:

Three constructive reports for growth
Consumer spending was firm in November atop upward revisions to October, solidifying the case for 4%-plus real growth for this component of GDP in Q4. (overall GDP expected to be 3%.) Although income was slightly better than expected, the composition was soft with only a 0.1% increase in wages and salaries. Core PCE inflation reached a new year-to-year low of 0.8%.

Meanwhile, durable goods orders were much better than suggested by the drop in total bookings, as those declines were concentrated in aircraft and back data were revised up. Unemployment claims continue to suggest labor markets improvement with initial claims in line with expectations and continuing claims dropping further.

Key Numbers:
Durable goods orders -1.3% in Nov (mom, +10.4% yoy) vs. median forecat -0.5%.
Ex transportation +2.4% in Nov (mom, +12.7% yoy) vs. median forecast +1.8%.
Personal spending +0.4% in Nov (mom, +3.8% yoy) vs. median forecast +0.5%.
Personal income +0.3% in Nov (mom, +3.4% yoy) vs. median forecast +0.2%.
PCE core index +0.08% in Nov (mom, +0.8% yoy) vs. median forecast +0.1%.
Initial claims -3k to 420k in week ended Dec 18 vs. median forecast 420k.
Continuing claims -103k to 4.064 million in week ended Dec 11 vs. median forecast 4.105 million.

10:00: Reuters/University of Michigan consumer sentiment for Dec (fianl)...edging higher? The median forecast for this index is slightly higher than the preliminary figure reported nearly two week ago. The median expectation for inflation five to ten years ahead edged back down to 2.7%, the low end of an extremely tight range in which this indicator has fluctuated over the past year.

Median forecast (of 67): 74.5, ranging from 71 to 76.7; last 74.2 (Nov final).

10:00: New home sales for NOv...a bounce off the low? Sales of new homes fell to 238k in October, just 1k above the all-time low reached in May. We expect a small increase. but not one that would move sales outside the 282k-310k range.

Median forecast (of 69): +6.0%, ranging from +0.7% to +13.1%; last -8.1%.

16:30: Federal Reserve balance sheet...The balance sheet now shows a clear break-out from the $2.3 trillion that had prevailed during most of 2010. Today's data will continue that trend.

Advice:

With this information I expect the market to sell off today.

Short term lock, long term float.

Market Update

FNMA 30-YR 4.0%

Previous close 98.750
opened Up 0.41bp @ 99.156

Key Economic Data:

EUR / USD 1.3157 Down 0.0032
USD / JPY 83.6950 Down 0.2873
GBP / USD 1.5554 Up 0.0022

OIL 88.40 Up 0.38
Gold 1,366.00 Up 6.80

Key Economic News:

No news items

Advice:

Short term lock, long term float.

Weekly Market Preview

This Week; Christmas week generally is quiet with little going on and very few players in the markets. No economic releases until Wednesday and Thursday, the markets will be closed on Friday. By 11:00 Thursday the only ones left will be the ones that are charged with turning off the lights. The rate markets are finally rebounding from the swift and deep selling. Last week by the time the bell rang mortgage markets and the 10 yr treasury note were unchanged on the week. Monday should see more improvements but we remain with our view that the path for rates is up, so use the rebound to your advantage.

The data this week includes existing and new home sales for Nov, personal income and spending for Nov and Nov durable goods orders. The outlook for 2011 remains solid in the minds of investors. We are not completely in that camp however; consumers are not as likely to spend as markets presently believe now.

Market Update

FNMA 30-YR 4.0%

Previous close 98.030
Opened Up 0.22bp @ 98.250

Key Economic Data:

EUR / USD 1.3230 Down 0.0014
USD / JPY 84.0690 Up 0.1565
GBP / USD 1.5518 Down 0.0155

OIL 87.53 Down 0.17
Gold 1,72.90 Up 1.90

Key Economic News:

Just the leading index today, hardly worth notice as it mostly repackages old news...

10:00: Index of leading indicators for Nov...a large gain. The big driver this month is the index of supplier deliveries; it should contribute 43bp to the increase. Other notable positives: the yield curve (+27), initial claims (+19), followed by real M2 (+11), stock prices and consumer expectations (+9 apiece), the workweek (+7), and probably small presumed increases in real orders (the Conference Board estimates these on the first round). The only clear negative comes from housing permits (-11).
Median forecast (of 59): +1.1%, ranging from +0.3% to +1.3%; last +0.5%.

Advice:

This news if anything will help to suggest that the economy is still improving and help the market sell today. As we get closer to the holidays we will also see less Traders around and the market could become more volatile. I would recommend locking today.

U.S. Senate passes sweeping tax-cut (really not an increase) compromise.