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Sentiment and Housing Prices Take Center Stage

David Becker
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Sentiment and Housing Prices Take Center Stage

April Consumer Confidence will be released during the US morning session and is expected to rise to 83.0 from 82.3 in March. This compares to a recent low of 25.3 in February of 2009. The Forecast risk is a stronger than expected number given the rebound in the Michigan Sentiment for the month. Along with confidence, the Case Shiller Housing Price index, this will add to both existing home sales and new home sales, which has helped take the wind out of housing stocks.

Ahead of the Case Shiller Home price index, mortgage lending declined to the lowest level in 14 years in the first quarter as homeowners pulled back sharply from refinancing and house hunters showed little appetite for new loans, the latest sign of how rising interest rates have dented the housing recovery.

Lenders originated $235 billion in mortgage loans during the January-March quarter, down 58% from the same period a year ago and down 23% from the fourth quarter of 2013, according to industry newsletter Inside Mortgage Finance.

The climb in mortgage rates has also hindered new home sales. Over the past 12-months, the 30-year fixed mortgage has climbed 1%. In 2014, rates have increased 0.25%, and currently stand near 4.3%.

Recent data on new home sales has shown that consumers are waiting for prices to fall. Sales of new single-family homes dropped sharply in March, falling 14.5% to their weakest level since mid-2013, according to the Commerce Department. The annual sales rate was 384,000, down from February’s revised pace of 449,000. Economists had expected an annual rate of 450,000 for March.

The housing stocks ETF (XHB) has tumbled nearly 13% in the past two months and is hovering near the 200-day moving average at 31.17. The next level of target support is seen near $29.5, while resistance is seen near the 50-day moving average near $32.50.

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