Builder Confidence hits levels not seen since the housing boom of 2005:
Builder confidence in the market for newly constructed single-family homes rose three points in October to a level of 64 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This month’s reading is a return to HMI levels seen at the end of the housing boom in late 2005.
“The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor.”
“With October’s three-point uptick, builder confidence has been holding steady or increasing for five straight months. This upward momentum shows that our industry is strengthening at a gradual but consistent pace,” said NAHB Chief Economist David Crowe. “With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015.”
Two of the three HMI components posted gains in October. The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70. Meanwhile, the index charting buyer traffic held steady at 47.
Looking at the three-month moving averages for regional HMI scores, all four regions posted gains. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) gained +12 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.
We had a lot of big economic releases that showed mixed results and as a result, MBS moved in a very constrained range for the week.
Retail Sales: Definitely disappointed. The headline September reading fell short of estimates (0.1% vs 0.2%)…not a huge miss but August was revised lower down from 0.2% to 0.0%. Ex-Autos (-0.3% vs est of -0.1%) and August was revised from positive territory, +0.1% down into negative territory -0.1%. But we need to look behind the headline data. Gasoline sales ( a big component of the Retail Sales number) fell 3.2% for the month. This report is not all bad. There are plenty of tangible positives in the data including a third straight solid gain for motor vehicles, at plus 1.7 percent in September, and a second straight outsized gain of 0.9 percent for restaurants. Both of these are discretionary categories and point to underlying consumer strength. Clothing stores are also posting strong gains, up 0.9 percent despite negative price effects from lower import prices.
Jobs, Jobs, Jobs: The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) continues to show an extremely high number of unfilled job openings with 5.370M. This is a report that Yellen has said she watches closely. Initial Weekly Jobless Claims were very low with a reading of 255K vs est of 270K. The more closely watched 4 week moving average dropped to 265K. This is a very attractive trend line for jobs data and signals very tight conditions in the job market.
Consumer Sentiment: The October (preliminary) number was a stunner coming in at 92.1 vs est of 89.5. This will be revised by the end of this month but its a strong reading and negative for bonds.
Fed’s Beige Book: You can read the official report here from the Federal Reserve here:http://www.
Overall, U.S. economic activity continued to expand modestly from mid-August through early October, the Fed said in its Beige Book report of anecdotal information on business activity collected from contacts nationwide. “A number of districts cite the strong dollar as restraining manufacturing activity as well as tourism spending,” the report said. In particular, the steel sector remained weak, as the dollar’s appreciation increased import competition, especially from China. The Fed said labor markets tightened in most districts with some reports of labor shortages, particularly for skilled workers. Overall…this report seem to take a step back from prior reports that showed a rosier picture and support the Fed’s concerns over tightening too soon.
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|19-Oct||10:00 AM||NAHB Housing Market Index||–||62||62|
|20-Oct||8:30 AM||Building Permits||–||NA||1170K|
|20-Oct||8:30 AM||Housing Starts||–||1150K||1126K|
|20-Oct||8:30 AM||Building Permits||–||1170K||1170K|
|21-Oct||7:00 AM||MBA Mortgage Index||–||NA||-27.60%|
|21-Oct||10:30 AM||Crude Inventories||–||NA||7.562M|
|22-Oct||8:30 AM||Initial Claims||–||265K||NA|
|22-Oct||8:30 AM||Continuing Claims||–||2185K||NA|
|22-Oct||9:00 AM||FHFA Housing Price Index||–||NA||0.60%|
|22-Oct||10:00 AM||Existing Home Sales||–||5.38M||5.31M|
|22-Oct||10:00 AM||Leading Indicators||–||-0.10%||0.10%|
|22-Oct||10:30 AM||Natural Gas Inventories||–||NA||100 bcf|