Home affordability moved higher last quarter, buoyed by stable mortgage rates and falling home prices nationwide. The National Association of Home Builders reports that Q1 2011 Home Opportunity Index reached an all-time high for the second straight quarter last quarter.

Nearly 3 of 4 homes sold between January-March 2011 were affordable to households earning the national median income of $64,400. It's the 9th straight quarter in which home affordability surpassed 70 percent, and the highest reading in more than 20 years of record-keeping.

Mortgage bond prices closed lower Friday afternoon applying upward pressure on mortgage rates.

In news released at the open, person income rose 0.4% and spending rose 0.4%. The inflation component of the report, core PCE, rose 0.2%. Analysts' estimates were for income to rise 0.4%, outlays up 0.5% and PCE at 0.2%. That data was near estimates and had little effect on trade.

Consumer sentiment as reported by the University of Michigan printed at 74.3, stronger than expectations for a read of 72.4.

The bond market closed at 2:00 pm ET Friday and will be closed Monday in observance of the Memorial Day holiday. Trade Tuesday 5/31 will be driven by headline news out of Europe and the Middle East and consumer confidence.

For the Week

The housing market recovery stalled last month. At least temporarily. According to the National Association of REALTORS®, Existing Home Sales slipped 1 percent in April from the month prior, falling to 5.05 million units on a seasonally-adjusted, annualized basis. The reading is exactly in-line with report's 6-month average which also reads 5.05 million units.

The data may appear "average", but there's another angle to consider. 

Mortgage bonds closed near unchanged in relatively quiet trading this afternoon.

Mortgage bonds were initially slightly positive this morning extending the gains from yesterday afternoon.

There was no data today. It was nice to finish the week holding the recent gains.

Traders focused on stocks, oil prices, and the European debt scene in positioning themselves ahead of the weekend. Stock futures pointed to a negative open and that held true with the DOW down 93 points today. Oil prices bounce around a bit this morning on US dollar volatility and demand concerns. The global markets remain concerned about potential Greek debt restructuring and Spanish elections.

Another day, another piece of evidence that the U.S. economy is expanding. Thursday, the Census Bureau released the April Retail Sales report. Excluding cars and auto parts, retail receipts rose for the 10th straight month and, at $321 billion, reached an all-time high.

Retail sales account for roughly half of consumer spending, and roughly one-third of the economy overall.

Mortgage rates remain near their low point for 2011. Mortgage bond prices closed higher Friday afternoon applying downward pressure to mortgage rates. Rates found support from weak stocks.

In news released at the open, consumer prices rose 0.4% and the core value, which excludes the volatile food and energy costs, rose 0.2%. Analysts' expectations were for CPI to print at +0.4%, +0.1%. The core read was hotter than expected however traders overlooked that data.

Lastly, the University of Michigan consumer sentiment report printed at 72.4 vs. the expected 69.5 read traders were expecting. Again the data was stronger than expected but had little effect on trade.

There is no data set for release Monday.

In an echo of February's Case-Shiller Index report, the government's own home price-tracker - the Home Price Index - showed home values slipping between January and February 2011. The Federal Home Finance Agency data had home values down 1.6 percent nationwide in February, on average, marking the fourth straight month in which prices fell. 

Furthermore, all 9 regions posted losses from the month prior:

Mortgage bonds prices closed above the levels where daily pricing was set applying downward pressure to mortgage rates. Rates found support as stocks fell from their best levels of the day. At the 10:00 am price point the DOW was higher by 126-points, however at the 4:00 pm ET equity close the index was higher by 55-points.

In news released at the open, unemployment came in @ 9%, higher than the expected 8.8% mark. Non-farm payrolls rose 244k, considerably higher than the expected 186k increase. The initial reaction was very negative to the higher than expected payrolls.

Mortgage bond prices rose this week pushing mortgage interest rates lower. We were positive throughout most of the week as stocks struggled and oil prices fell. The ADP employment figure was lower than expected and weekly jobless claims were higher than expected which generally helped mortgage bonds. Unfortunately the payrolls component of the employment report Friday morning surprised to the upside and some of the earlier improvements were erased.

The inflation data will take center stage next week. Any surprises to the upside on the consumer or producer sides will likely put upward pressure on rates. Foreign demand for the auctions next week will also be important.