U.S. Housing Starts Climb in March
The Commerce Department reported that groundbreaking increased 2.8 percent to a seasonally adjusted annual rate of 946,000.
Plus, February’s data was actually better than first released. As February’s starts were revised to show a 1.9 percent rise rather than the previously reported 0.2 percent fall.
Gaines in home building has been difficult as a brutally cold winter weighed on home building in December and January. Activity has also been hampered by shortages of building lots and skilled labor as well as rising prices for materials.
Groundbreaking for single-family homes, the largest segment of the market, surged 6.0 percent to a 635,000-unit pace last month. Starts for the volatile multi-family homes segment fell 3.1 percent to a 311,000-unit rate.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost – 67 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move higher from the prior week. The market saw the lowest rates on Tuesday and the highest rates on Thursday. For the month of April, MBS are down -7BPS.
For the fourth straight week, we had domestic economic data that under normal circumstances would have caused MBS pricing to deteriorate. Retail Sales were much stronger than expected as were Industrial Production, Capacity Utilization, Initial Jobless Claims and the Philly Fed survey. New Fed Chair Janet Yellen spoke twice. Her comments had some impact on the stock markets but the long-bond market was not impacted.
Over the prior three weeks, we have been reporting that our domestic economic data has been showing growth. And growth always pressures bonds and causes rates to rise. But rates had not risen during that period. Why? Its because bonds were the beneficiary of a huge international “flight to safety”. Essentially, bonds prices were propped up (which means lower rates) due to a spike in demand from investors wanting to put their cash into nice, safe and low return yields of U.S. bonds.
There are several reasons why international demand for safety in our bonds spiked but the primary reason has been the ongoing conflict between Ukraine and Russia. So, when it was announced on Thursday that a peace accord had been agreed to by Ukraine, Russia, the U.S., and the European Union, concern over that conflict escalating was reduced and therefore the need for safety in our bonds was reduced. Investors sold out of their boring and low-yield bond holdings and put that money back to work in other areas. This caused a big sell off in mortgage backed securities on Thursday and led to the highest rates of the week.
Date Time (ET) Economic Release Actual Market Expects Prior 21-Apr 10:00 AM Leading Indicators – 0.80% 0.50% 22-Apr 9:00 AM FHFA Housing Price Index – NA 0.50% 22-Apr 10:00 AM Existing Home Sales – 4.60M 4.60M 23-Apr 7:00 AM MBA Mortgage Index – NA 4.30% 23-Apr 10:00 AM New Home Sales – 455K 440K 23-Apr 10:30 AM Crude Inventories – NA 10.013M 24-Apr 8:30 AM Initial Claims – 312K 304K 24-Apr 8:30 AM Continuing Claims – 2750K 2739K 24-Apr 8:30 AM Durable Orders – 2.00% 2.20% 24-Apr 8:30 AM Durable Goods -ex transportation – 0.50% 0.10% 24-Apr 10:30 AM Natural Gas Inventories – NA 24 bcf 25-Apr 9:55 AM Michigan Sentiment – Final – 82.6 82.6
I 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 me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.