Treasury Yields Decrease Following Housing Report

[Jul 9, 2007.]

Bond prices rose Monday following a report that indicated May home sales figures were disappointing. The 10-year Treasury note increased 10/32 or $3.12 on a $1,000 note for a yield of 5.09 percent, a decrease from 5.13 percent Friday.

Meanwhile, the 30-year increased 17/32 or $5.31 on a $1,000 note for a yield of 5.21 percent. That's down from 5.25 percent. It should be noted that bond prices and yields shift in opposite directions.

The five-year rose 6/32 to yield 4.97 percent, while the two-year increased to yield 4.88 percent. This news comes on the heels of a housing slump which shows no sign of stopping. In May, housing sales dropped to a four-year low, with the median price of a home dropping for the 10th month in a row.

The National Association of Realtors reported that homes sold at 5.99 million in May, just under the 6.01 million rate for April. Economists had been predicting a rate of 6.0 million sales. That means that even forecasters may be surprised by the latest figures coming out of the real estate industry.

Forecasters have been saying that the housing crisis is likely to continue in the short-term, which may be bad news for prospective buyers and sellers alike. It appears that housing inventory is quite large now. Still, buyers appear to be wary of making housing purchases now. One reason might be the apparent volatility of the economy. But another apparent reason is the fact that lenders are tightening their requirements for loans, making it more difficult for 1st-time buyers in particular.

When the Federal Reserve issues its decision on interest rates, trading could once again become tumultuous. All eyes, then, are looking to the Fed to help shed some light on what appears to be a muddy economic situation nationwide.

Julie Ann Amos
Recent Housing News

• Home Sales Dip to a Four-Year Low
  New statistics show that sales of existing houses dropped to the lowest level in four years in May. Meanwhile, the median home price has slipped for the 10 th month in a row—a new record. [July 7th 2007]


• Worries About Interest Rates Decline on Wall Street
  Wall Street is apparently not as worried about rising interest rates as it was earlier this year—judging from a recent rise in the Dow. [July 7th 2007]


• Homeowners Opting for Fixed-Rate Mortgages
  The end of the nation's housing boom has also meant a decline in the number of people opting for so-called "balloon mortgages." [July 6th 2007]


• Demand for Second Homes Increases
  Rising mortgage rates, waning interest in subprime mortgages, and bigger-than-needed inventories have combined to give rise to disappointing news on the housing front. However, there is one sector of the housing market that appears to be doing well—the secondary home market. [July 5th 2007]


• Home Sales Take a Hit
  Confidence among American home builders appears to be eroding. That's because house sales are apparently suffering from the one-two punch of stricter lending practices and increasing mortgage rates. [July 5th 2007]