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Walden Mortgage Weekly Newsletter: July 31, 2012

Rental Vacancy Rates Fall to Lowest in Decade: 

The share of empty homes for rent fell to its lowest level in a decade during the second quarter.  This is very important for the housing market, as this type of trend is always a pre-curser for stronger housing demand. The residential rental vacancy rate declined to 8.6 percent from 8.8 percent in the January-March period, the Commerce Department said on Friday. The second-quarter reading was the lowest since 2002. In a positive sign for the housing market, the homeownership rate edged up to 65.5 percent in the second quarter from 65.4 percent in the prior period, the Commerce Department said. The homeowner vacancy rate dropped to 2.1 percent, the lowest since the first quarter of 2006, from 2.2 percent in the first quarter. The homeownership rate peaked at 69.4 percent in 2004 at the height of a housing market boom fueled by cheap credit.

What Happened to Rates Last Week?

   Mortgage backed securities (MBS) lost -38 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move higher. Mortgage backed securities set a new all-time record on Tuesday. Mortgage rates move in the opposite direction of MBS, so mortgage rates set a new record for an all time low on Tuesday. We had our highest mortgage rates on Friday and our lowest on Tuesday. We started the week with a rally in Mortgage Backed Securities on concerns over Spain and Italy needing a big time bailout to survive. But MBS reversed course and started to sell off after the European Central Bank's President stated that he would do whatever it takes to save the Euro.  While no new action has been announced yet, the market responded sharply to his support. As a result, the DOW climbed back above 13,000 and Mortgage Backed securities sold off as many investors that had been parking their money in our safe and boring bonds, moved their money back out and put it back to work.

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.
Date Time (ET) Economic Release Actual Market Expects Prior
31-Jul 8:30 AM Personal Income - 0.40% 0.20%
31-Jul 8:30 AM Personal Spending - 0.10% 0.00%
31-Jul 8:30 AM PCE Prices - Core - 0.10% 0.10%
31-Jul 8:30 AM Employment Cost Index - 0.50% 0.40%
31-Jul 9:00 AM Case-Shiller 20-city Index - -1.80% -1.90%
31-Jul 9:45 AM Chicago PMI - 52.5 52.9
31-Jul 10:00 AM Consumer Confidence - 61 62
1-Aug 7:00 AM MBA Mortgage Index - NA 0.90%
1-Aug 8:15 AM ADP Employment Change - 125K 179K
1-Aug 10:00 AM ISM Index - 49.9 49.7
1-Aug 10:00 AM Construction Spending - 0.50% 0.90%
1-Aug 10:30 AM Crude Inventories - NA 2.717M
1-Aug 2:00 PM Auto Sales - NA 4.9M
1-Aug 2:00 PM Truck Sales - NA 6.1M
1-Aug 2:15 PM FOMC Rate Decision - 0.25% 0.25%
2-Aug 7:30 AM Challenger Job Cuts - NA -9.50%
2-Aug 8:30 AM Initial Claims - 365K 353K
2-Aug 8:30 AM Continuing Claims - 3298K 3287K
2-Aug 10:00 AM Factory Orders - 0.60% 0.70%
3-Aug 8:30 AM Nonfarm Payrolls - 100K 80K
3-Aug 8:30 AM Nonfarm Private Payrolls - 105K 84K
3-Aug 8:30 AM Unemployment Rate - 8.20% 8.20%
3-Aug 8:30 AM Hourly Earnings - 0.20% 0.30%
3-Aug 8:30 AM Average Workweek - 34.5 34.5
3-Aug 10:00 AM ISM Services - 52.2 52.1

  We 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 us, we monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon. 

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