It's getting better all the time!! BETTER, BETTER!!

“It's getting better all the time” is the key refrain to the Beatles' song Getting Better. That sentiment would have been foolish if it had been sung this time last year. Today, though, it appears to hold true, particularly now that we have finally received the break we have all been anticipating – a drop in unemployment.
On that front, the nation’s employers have stopped eliminating jobs en mass. The unemployment rate dipped to 10% in November. Many forecasters – and forecasting is a perilous endeavor, to be sure – believe hiring will hit stride late in the first quarter of 2010. If they are right, the employment recovery will come quicker compared to the previous two recessions (1991 and 2001) despite the greater severity of the current downturn.
More jobs, in turn, will help reduce the number of homeowners on the brink of foreclosure, which, by the way, has dropped for a fourth-straight month. One in every 417 homes received a foreclosure-related notice in November, but that is down 8% from October, according to numbers released by RealtyTrac.
We are not out of the woods yet. RealtyTrac expects foreclosure filings will post a second-consecutive record in 2009, with 3.9 million notices sent to homeowners in default, compared to 2008's 3.2 million. However, if employment continues to improve, chances are good we will see a substantial reversal of that trend in 2010.
The drop in home values is another trend we expect to see reversed in 2010. According to real estate Web site Zillow, total home values in the U.S. declined by $489 billion in the first 11 months of 2009. That sounds like an astronomical figure, but it is actually an 87% improvement over the $3.6 trillion in lost homeowner value suffered in 2008.
More jobs could also reverse the trend in mortgage rates, pressuring rates to rise as loan demand increases. Though not showing signs of rising yet, mortgage rates have been at a plateau. Bankrate.com's recent lender surveys suggest the downtrend is abating, with its most recent survey posting marginally higher rates than the previous week's survey.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Producer Price Index(November)
Tues, Dec. 15,8:30 am, et
Finished Goods: 0.7% (Increase)Core: 0.2% (Increase)
Important. Rising producer prices will raise inflation concerns.
Industrial Production(November)
Tues, Dec. 15,9:15 am, et
0.3% (Increase)
Moderately Important. Production is increasing to meet renewed consumer demand.
Housing Market Index (December)
Tues, Dec. 15,1:00 pm, et
19 Index
Important. Confidence is expected to receive a boost from extension of the homebuyer's tax credit.
Mortgage Applications
Wed, Dec. 16,7:00 am, et
None
Important. Purchase and refinance applications rise as the decrease in rates slows.
Consumer Price Index(November)
Wed, Dec. 16,8:30 am, et
Finished Goods: 0.3% (Increase)Core: 0.1% (Increase)
Important. Consumer prices remain subdued but could be pushed higher on rising producer prices.
Housing Starts(November)
Wed, Dec. 16,8:30 am, et
560,000 (Annualized)
Important. Starts should rebound strongly after October's decline.
Federal Reserve FOMC Meeting
Wed, Dec. 16,2:15 pm, et
Federal Funds Rate: 0.0% to 0.25%
Very Important. The Fed is expected to hold short-term rates steady through the first quarter of 2010.
Leading Indicators(November)
Thurs, Dec. 17,8:30 am, et
0.6% (Increase)
Moderately Important. The indicators suggest the recovery remains on track.
Are We There Yet?
We cannot say for sure, but we think we are darn close. Of course, we are speaking of the bottom in mortgage rates. Last week we explained how the Federal Reserve has influenced the market with its massive purchases of mortgage-backed securities. This week we offer statistical support for our contention that rates are at least close to bottoming, if not likely to reverse soon.
Calculated Risk, an insightful Web site that tracks the comings and goings of the housing and mortgage markets, supplied the evidence. Calculated Risk has noted (as have we) the close relationship between the 30-year conventional fixed-rate mortgage and the yield on the 10-year Treasury note. Based on statistical analysis reprinted on Calculated Risk's Web site, the 30-year conventional fixed-rate mortgage is expected to rise to 5.4% based on the current 10-year Treasury yield of 3.45%.
We must be careful; statistics imply a certitude that does not always exist, but it is worth noting that the aforementioned model has a determination coefficient (statistic-speak for predictive value) of 0.97, which is very high. Today's 30-year fixed-rate loan is lower than 5.4%, but Calculated Risk opines that the difference is due to prepayment speed and randomness and to the Federal Reserve's purchases of mortgage-backed securities, which we expect to taper off considerably in coming months – and that's key. When the Fed starts throttling back on theses purchases, look for mortgage rates to throttle higher.

Credit to Brian Brinkley for this posting, www.brinkleycommercialcapital.com