Home Builder Sentiment Remains High
Confidence among U.S. home builders held steady in January, giving back very little following a sizeable jump toward the end of 2014.
A monthly index of builder sentiment from the National Association of Home Builders fell just one point in January to 57 from an upwardly-revised December reading. Anything above 50 is considered positive sentiment, and this marks seven straight months above 50.
“Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015,” said the association’s Chief Economist David Crowe in a release.
Of the index’s three components, current sales conditions remained unchanged at 62. Expectations for future sales dropped four points to 60, and traffic of prospective buyers fell two points to 44. Buyer traffic is the only component that seems unable to break into positive territory.
On a three-month moving average, builder confidence in the West rose by four points to 66, in the Midwest gained three points to 57 and in the Northeast was up two points to 47. Confidence among builders in the South dropped two points to 58.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained just +5 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move sideways from the prior week. We did have a new all-time high closeon Thursday but we immediately lost that level on Friday.
It was a very interesting week with global events driving our mortgage rates.
Swiss: The Swiss National Bank (SNB) stunned markets on Thursday, when it scrapped its three-year-old peg of 1.20 Swiss francs per euro. The Swiss central bank introduced the peg in September 2011 in response to investors buying up massive amounts of the Swiss franc as a safer foreign exchange alternative to the euro or the dollar.
Greece: Emergency Liquidity Assistance (ELA) has been requested by two Greek banks (so far) as the run has begun as people are taking what they can out of the banks ahead of the big vote next week. Many are concerned that the election could lead to Greece eventually defaulting on their latest and greatest renegotiated bail out and exiting the Eurozone which could put a damper on plans by ECB President Mario Draghi’s QE.
Domestically, we had low inflationary data with readings well below the 2.00% threshold on a year-over-year basis for both our PPI and CPI readings. We also got a very mixed bag of data in terms of past and future Consumer Spending. The December Retail Sales report was a big disappointment (-0.9% vs est of +0.0%) as both traders and economists alike expected the cheaper gas prices to cause consumers to spend more at the store. However, the January Consumer Sentiment Index was much higher than expected (one of the highest readings in the last 10 years) could mean that consumers will be spending more in January.
Oil continued to play a big role in our mortgage rates as declining prices provided upward pressure on our MBS which in turn kept mortgage rates very low.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|20-Jan||10:00 AM||NAHB Housing Market Index||–||58||57|
|21-Jan||7:00 AM||MBA Mortgage Index||–||NA||49.10%|
|21-Jan||8:30 AM||Housing Starts||–||1040K||1028K|
|21-Jan||8:30 AM||Building Permits||–||1060K||1035K|
|22-Jan||8:30 AM||Initial Claims||–||300K||316K|
|22-Jan||8:30 AM||Continuing Claims||–||2380K||2424K|
|22-Jan||9:00 AM||FHFA Housing Price Index||–||NA||0.60%|
|22-Jan||10:30 AM||Natural Gas Inventories||–||NA||-236 bcf|
|22-Jan||11:00 AM||Crude Inventories||–||NA||5.389M|
|23-Jan||10:00 AM||Existing Home Sales||–||5.10M||4.93K|
|23-Jan||10:00 AM||Leading Indicators||–||0.40%||0.60%|
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.The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.