Home Builder’s Sentiment Jumps Two Points

MBSauthorityHousing

Builder confidence in the market for newly constructed single-family homes  in August rose two points to 60 from a reading of 58 in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Any reading above 50 is positive, a reading below 50 is negative.

“New construction and new home sales are on the rise in most areas of the country, and this is helping to boost builder sentiment,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.

“Builder confidence remains solid in the aftermath of weak GDP reports that were offset by positive job growth in July,” said NAHB Chief Economist Robert Dietz.  “Historically low mortgage rates, increased household formations and a firming labor market will help keep housing on an upward path during the rest of the year.”

Two of the three HMI components posted gains in August. The component gauging current sales conditions rose two points to 65, while the index charting sales expectations in the next six months increased one point to 67.  The component measuring buyer traffic fell one point to 44.

Looking at the three-month moving averages for regional HMI scores, the South registered a two-point uptick to 63, the Northeast rose two points to 41 while the West was unchanged at 69. The Midwest dropped two points to 55.

What Happened to Rates Last Week?

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Mortgage backed securities (FNMA 3.00 MBS) gained just 6 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Our benchmark Fannie Mae 3.00 coupon traded in a fairly tight range that saw terrific support (kept rates from rising) but also very solid resistance (kept rates from falling).

Texas Tea, Black Gold:  Oil has had a larger impact on MBS trades as low oil prices signal no inflation (and no rate hike) while rising prices can pressure inflation and give the Fed an opening to raise rates.  Last week, WTI Oil rose from $41.99 on Monday and closed at $44.69 on Friday. This rise in prices provided some significant headwinds for our MBS trades.

Retail Sales: The biggest report of the week was a mixed bag at best.  Certainly the July readings were weaker than expected with the Headline MOM reading flat vs expectations for a nice 0.4% gain.  But June was revised from 0.6% to 0.8%..so if it were not for the upward revisions to the baseline, Retail Sales would have been in the +0.2% range…still half of expectations.  When you strip out Autos, then you really see where the weakness is.  Ex-Autos, the July reading was -0.3% vs expectations of +0.2%.  But its another case where the prior month (June) was revised upward 0.7% to 0.9%.  So, if June wasn’t revised upward, this might have come in around -0.1%…still falling shy of expectations but not as bad as the printed reading would suggest.

Jobs, Jobs, Jobs: The June Job Openings and Labor Turnover Survey (JOLTS) was a little better than expected (5.6M vs est of 5.52M), with that many unfilled jobs, there is plenty of room for more NFP gains of close to 200K without any problem.

Small Business Optimism: The NFIB Index for July improved to 94.6 which was higher than forecasts calling for 93.2 and was the fourth straight monthly increase.  Plans to add more employees rose 1 point to 12 and expectations that the economy will improve increased by 4 points.

The IBD/TIPP Economic Optimism reading for August was stronger than expected, hitting 48.4 vs est of 46.2 and a big improvement over June’s 45.5 reading.

Across the Pond:
China:  While the U.S. is posting 0.0% gain in Retail Sales, China’s reading hit 10.2%, but this was a little lighter than forecasts calling for 10.5%
Germany: Their 2nd QTR GDP was double market expectations (0.4% vs of 0.2%) and on  YOY basis, their GDP was 3.1% vs est of 1.5%.  Very strong data.
Eurozone: Their 2nd QTR GDP matched expectations of 0.3% and on a YOY basis it was -0.7% but that is twice as good as the market expectations of -1.5%

What to Watch Out For This Week:

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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.

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.

Brought to you by:
Taff Weinstein

Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Pending Home Sales 2nd Best in Last 12 Months

MBSauthorityHousing

Pending home sales, based on signed contracts but not yet closed, rose 0.2 percent in June compared to May and is 1 percent higher than June 2015, according to the National Association of Realtors (NAR).

The improvement puts sales at the second-highest level of the last 12 months.

“Until inventory conditions markedly improve, far too many prospective buyers are likely to run into situations of either being priced out of the market or outbid on the very few properties available for sale,” said Lawrence Yun, the NAR’s chief economist, in a release.

Housing inventory was almost 6 percent lower at the end of June compared to a year ago, and home prices, while easing up slightly, are still rising at a faster pace than wage and income growth.

Realtors say the one positive development in the first half of this year was a decline in investor sales activity, from a high of 18 percent in February to a low of 11 percent in June. That is the smallest share since July 2009 and likely due to the drop in the number of distressed homes for sale.

“Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy,” wrote Yun. “This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn.”

What Happened to Rates Last Week?

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Mortgage backed securities (FNMA 3.00 MBS) lost -21 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.

We had a very choppy session with MBS selling off Monday through Wednesday on very strong domestic economic data (ISM Manufacturing and Non-Manufacturing) and then sharp gains on Thursday due to the Bank of England action only to be reversed with a sharp selloff on Friday due to strong jobs data.

Domestic Flavor:
ISM Manufacturing:  Just like Friday’s robust Chicago PMI data, the July national ISM Manufacturing reading was very strong, coming in at 52.6 vs est of 53.0. It was the second highest reading since August of 2015.

Services: The July ISM Non Manufacturing index was very strong with a 55.5 reading which was very close to estimates of 55.8.  Anything above 50 shows a month-over-month expansion in the services sector which accounts for 80% of our economy.

Jobs, Jobs, Jobs:  It’s  was BIG Jobs Friday and let’s look at the Tale of the Tape:
Non-Farm Payrolls for July 255K vs est of 180K
Non-Farm Payrolls for June revised upward from 287K to 292K
Non-Farm Payrolls for May revised upward  from 11K to 22K
Non-Farm Payrolls 3 month rolling average is now 190K.
Average Hourly Wages showed strong pressure on labor costs, moving up 0.3% vs June’s level of 0.1%.  YOY Average Hourly Wages are at 2.6%.
The Unemployment Rate remained at June’s level of 4.9%, the market was anticipating a small improvement to 4.8%.
The Participation rate improved from 62.7% in June to 62.8% in July which is why the Unemployment Rate did not decrease.
The Average Hourly Work Week increased to 34.5 hours and overtime increased.  Both are signals that the labor market is tight.
More highlights: Professional and business services added 70,000 jobs in July and has added 550,000 jobs over the past 12 months. Within the industry, employment rose by 37,000 in professional and technical services in July, led by computer systems design and related services (+8,000) and architectural and engineering services (+7,000). Employment in management and technical consulting services continued to trend up (+6,000). In July, health care employment increased by 43,000, with gains in ambulatory health care services (+19,000), hospitals (+17,000), and nursing and residential care facilities (+7,000). Over the past 12 months, health care has added 477,000 jobs. Employment in financial activities rose by 18,000 in July and has risen by 162,000 over the year.

Across the Pond:
Great Brittan: As expected, the Bank of England took action and lowered their key interest rate for the first time since March 2009.  They cut 25 BPS to lower the rate to 0.25%.  The rate move was a unanimous vote.  They also:
– Expanded their QE by 60 billion to bring the total to 435 billion pounds.  The vote was 6-3 on this item and it was a bit of a surprise to the markets.
– Up to 10 billion of the new QE may now be used to purchase corporate bonds which is also a new move. The vote was 8-1 on that item.
– They lowered their outlook (due to the Brexit) from 2.3% GDP in 2017 down to 0.8% but does not see a recession.

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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.

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.

Brought to you by:

Taff Weinstein

Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com