Housing Starts Hit 6 1/2 Year High
U.S. housing starts rose more than expected in December as groundbreaking for single-family homes hit its highest level in more than 6-1/2 years, in a hopeful sign for the sluggish housing market recovery.
Starts increased 4.4 percent to a seasonally adjusted annual pace of 1.09 million units, the Commerce Department said.
November’s starts were revised up to a 1.04 million-unit pace. For all of 2014, groundbreaking increased 8.8 percent to 1.01 million units, the highest since 2007.
Single-family homes starts, the largest part of the market, jumped 7.2 percent to a 728,000-unit pace, the highest level since March 2008. Groundbreaking on single-family projects in the West hit a seven-year high, while starts in the Midwest were the highest since December 2011.
Groundbreaking in the volatile multi-family homes segment fell 0.8 percent to a 361,000-unit pace.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +25 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to improve slightly from the prior week. We traded in a fairly narrow range and hugged our 10 day moving average for the holiday-shortened week.
We had a very light week for domestic economic data that had no impact on rates as demand for our bonds was driven once again by overseas events.
We did get some housing data as Existing Home Sales improved by 2.4% and Housing Starts were stronger than expected as the Home Builder’s Index came in with a strong reading of 57.
The biggest event last week was the European Central Bank’s QE announcement that finally hit after hinting about it for over a year. The 60 billion euro per month action was in line with well-telegraphed and leaked proposals and largely met with market expectations. It wont start until March and will end in September of 2016. But they also left themselves a loop hole to extended it event longer if inflation and growth don’t meet their goals.
While this move by the ECB may provide stability and eventual growth in the Eurozone, traders are skeptical that it is enough and that it is too late in the cycle to have as much impact as it could have if it were started last year. Also, there are big concerns over the Greek election and the potential that it could lead to Greece leaving the Eurozone and causing political instability across Europe.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|27-Jan||8:30 AM||Durable Orders||–||0.50%||-0.90%|
|27-Jan||8:30 AM||Durable Goods -ex transportation||–||0.70%||-0.70%|
|27-Jan||9:00 AM||Case-Shiller 20-city Index||–||4.30%||4.50%|
|27-Jan||10:00 AM||Consumer Confidence||–||95.5||92.6|
|27-Jan||10:00 AM||New Home Sales||–||450K||438K|
|28-Jan||7:00 AM||MBA Mortgage Index||–||NA||14.20%|
|28-Jan||10:30 AM||Crude Inventories||–||NA||10.071M|
|28-Jan||2:00 PM||FOMC Rate Decision||–||0.25%||0.25%|
|29-Jan||8:30 AM||Initial Claims||–||301K||307K|
|29-Jan||8:30 AM||Continuing Claims||–||2430K||2443K|
|29-Jan||10:00 AM||Pending Home Sales||–||0.60%||0.80%|
|29-Jan||10:30 AM||Natural Gas Inventories||–||NA||-216 bcf|
|30-Jan||8:30 AM||Chain Deflator-Adv.||–||1.00%||1.40%|
|30-Jan||8:30 AM||Employment Cost Index||–||0.50%||0.70%|
|30-Jan||9:45 AM||Chicago PMI||–||58||58.3|
|30-Jan||9:55 AM||Michigan Sentiment – Final||–||98.2||98.2|
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.