Vacancy Rates Drop over 9%:

Out of nearly 85 million residential properties (1 to 4 units) nationwide, more than 1.3 million (1.6 percent) were vacant at the beginning of February 2016, down 9.3 percent from the last residential property vacancy analysis in the third quarter of 2015.President’s Day marks the beginning of the important Spring Home Buying Season has the Sellers sitting pretty.

The analysis used RealtyTrac’s vacancy rates are publicly recorded real estate data — including foreclosure status (zombie foreclosures), owner-occupancy status, and equity — matched against monthly updated vacancy data from the U.S. Postal Service.

“With several notable exceptions, the challenge facing most U.S. real estate markets is not too many vacant homes but too few,” said Daren Blomquist, vice president at RealtyTrac. “The razor-thin vacancy rates in many markets are placing upward pressure on home prices and rents. While that may be good news for sellers and landlords, it is bad news for buyers and renters and could be bad news for all if prices and rents are inflated above tolerable affordability thresholds.”

Metro areas with the lowest share of vacant properties were San Jose, California (0.2 percent), Fort Collins, Colorado (0.2 percent), Manchester, New Hampshire (0.3 percent), Provo, Utah (0.3 percent), Lancaster, Pennsylvania (0.3 percent), and San Francisco (0.3 percent).

Other major metro areas with vacancy rates below the national average included San Francisco (0.3 percent), Los Angeles (0.4 percent), Boston (0.5 percent), Denver (0.5 percent), and Washington, D.C. (0.5 percent).

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +18 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had a holiday-shortened week (President’s Day) and moved in a fairly narrow range as Oil was relatively stable.

Texas Tea, Black Gold:  We started out with news that Russia and Saudi Arabia have agreed to “freeze” output at current levels.  But at current levels we still have over 1M barrels in new surplus each and every day.  So this really doesn’t accomplish anything from the supply side.  But it has (so far) provided a bottom in Oil prices and more importantly, it may set the stage for more involvement from other countries.  This has kept oil in fairly narrow range last week compared to some of the huge swings that we have seen recently.  And that was the number one factor in MBS pricing and rates last week.

Housing: The NAHB Home Builders Sentiment Index was a nice 58.  Anything above 50 is positive. The Feb reading was lighter than the projected 60 level but Jan was revised upward from 60 to 61. Housing Starts were a tad lighter than expectations (1.099M vs est of 1.171M), the more closely watched SFR segment was down 3.8% to an annualized rate of 731K.  Building Permits were a smidge better than expected (1.202M vs est of 1.200M). SFR permits rose 1.6% to 720K.

The Talking Fed: We got to peek at the minutes from the last FOMC meeting.  You can read them here:http://www.federalreserve.gov/monetarypolicy/fomcminutes20160127.htm
The minutes made it clear that several of the voting members are very concerned about oil prices and a global slowdown but agree (as of Jan) that it is still too early to determine if they will be prolonged enough to impact our economy on more than a short term basis.  Several discussed the possibility of oil stabilizing and moving back towards higher levels later in the year. Overall, they expected other central banks to continue to tighten.

Basically MBS had little reaction to this release.  The reason why is that we have heard from Janet Yellen this month (twice) and she pretty much already addressed this concerns while testifying before Congressional committees.  We have also heard from numerous other “talking feds” that have spewed the same concerns that are the minutes.