President-elect Trump has officially nominated Dr. Ben Carson to head up the Department of Housing and Urban Development.
“I am thrilled to nominate Dr. Ben Carson as our next Secretary of the U.S. Department of Housing and Urban Development,” Trump said in a statement released today. “Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities.”
The selection is considered to be very interesting as Dr. Carson (who grew up in Detroit) does not share the classical views of prior HUD secretaries. Last year, Carson publicly criticized an Obama policy requiring that cities publicly report racial bias in their housing patterns, the Post reported.
“These government engineered attempts to legislate racial equality create consequences that often make matters worse,” Carson wrote in the Washington Times. “There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous.”
Separately, Trump selected Steve Mnuchin, the former Goldman Sachs executive tapped for the Treasury job. He said that one of the things at the top of the Trump administration’s agenda will be “getting Fannie and Freddie out of government ownership.”
The news sent Fannie and Freddie stocks skyrocketing to 45% above their opening price, to levels not seen since June of 2014. Both stocks closed near $4.40.
With these two appointees, the housing market is in store for many policy and structural changes in the coming years.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.00 MBS) gained +9 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways during a very choppy week.
The biggest domestic economic event was Friday’s jobs data which was largely shrugged off by the bond market, but international events such as the OPEC production freezes and concern over the Italian referendum vote caused big intraday swings in rates.
Jobs, Jobs, Jobs: Big Jobs Friday and it was a mixed bag with the three month rolling average for Non-Farm Payrolls remaining at 176K but Average Hourly Wages took a dip.
Tale of the Tape:
November Non-Farm Payrolls (NFP) were higher than expected 178K vs est of 174K.
October NFP revised lower from 161K down to 142K.
September NFP was revised from 191K to 208K.
The last NFP report was 11/04 and in that report, the 3 month rolling average was 176K. This new report released today, has our 3 month rolling average at 176K still.
The Unemployment Rate dropped to 4.6% which is the lowest since September 2007 and was significantly less than the forecasts of 4.9%.
The Participation Rate dropped down to 62.7% as another 446K workers left the work force. That means that now there are 95.1M people that are not in the work force which is an all time high.
Average Hourly Wages on a MOM basis dropped -0.1% which was lower than the market expectations of 0.2%. On a YOY basis, there were up +2.5% which is strong but at a lower pace than November’s reading of 2.8%.
Manufacturing: The November ISM Manufacturing was much stronger than expected (53.2 vs est of 52.2), any reading above 50 is expansionary. Prices Paid were also higher than expected (54.5 vs est of 54.0)The November Chicago PMI blew the doors off any estimates, coming in at a very robust 57.6 vs est of 51.8. Its the strongest reading for this bell-weather indicator since January 2015.
Texas Tea, Black Gold: OPEC agreed to a 1.2M barrel production cut and non-OPEC members like Russia also agreed to production cuts which sent oil prices higher and pressured MBS on the potential impact of future commodity inflation.
What to Watch Out For This Week:
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.