Existing Home Sales better but tax credit helped

Nov Existing Home Sales totaled 6.54mm annualized and were above expectati=
ons of 6.25mm. This reflects contract signings that were likely done in Au=
g and Sept as many buyers took advantage of the home buying tax credit whi=
ch was expected to expire on Nov 30th at the time. The gain from Oct was=
solely led by the single family home category as condos/co-ops were flat.=
Months supply fell to 6.5 from 7 and is at the lowest level since Dec ’06=
and is approaching its long term average, a definite plus within the data=
. The median price fell 4.3% y/o/y but rose a touch m/o/m. Sales data in=
the next few months should drop off to reflect the hangover from the tax=
credit lift which was extended into the Spring. Also looking out to 2010=
is the recent rise in mortgage rates which if holds, are at the highest=
since August at the same time that the Fed is tapering off their purchase=
s of MBS.

Coincident with the selloff in treasuries, MBS are also lower with the 30=
yr FNMA coupon today above 4.5% for the first time since Aug 21st. It’s=
up 10 bps on the day and is up 60 bps this month. So far in ’09, the aver=
age 30 yr fixed mortgage rate according to Bankrate.com has averaged about=
90 bps above the 30 yr FNMA coupon. As of last night, Bankrate had the av=
erage 30 yr fixed rate at 5.11% so there is potential for a jump in mortga=
ge rates if the action in MBS holds into early 2010.

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