Smart Home Technologies Becoming More Important to Buyers:

As smart homes become more popular among consumers, buyers and sellers are showing greater interest in those homes and smart-home technologies.

A recent survey of home buyers by the National Association of Realtors showed that in terms of smart home devices, 37 percent of Realtors said clients find smart locks to be very important, followed by lights at 29 percent and thermostats at 26 percent. Forty-three percent said clients were neutral about the importance of voice control features and 38 percent for smart appliances and doorbells.

When it comes to the importance of smart home functions to their clients, 80 percent of Realtors see security as very or somewhat important. Nearly half of Realtors view privacy as a very important smart home function to their clients, while 30 percent see it as somewhat important. Four in ten Realtors see both cost savings and energy savings to be very important to their clients and 38 percent see comfort to be a very important smart home function.

According to the report, slightly more than half of Realtors’ clients were not familiar with what’s available for smart home technology. Nearly 40 percent of Realtors discussed security and privacy issues with their clients followed by technology cost at 31 percent and interoperability at 6 percent.

Of the many types of smart home technologies available, 42 percent of Realtors said clients were most interested in smart home devices, followed by whole home technology (22 percent) and smart home technology for specific rooms (13 percent); 41 percent of clients were not interested in any of these technologies.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -25 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher from the prior week.

The biggest economic event was the European Central Bank meeting where they left their key interest rate alone but made changes to their asset purchase program.  Overall, our domestic data was once again fairly strong.

Domestic Flavor:
Productivity:  The headline Non-Farm Productivity grew at a 3.1% in the 3rd QTR which matches the pace of the 2nd QTR but fell short of market expectations of 3.3%.  The reason for the miss vs estimates?  Labor.  Unit Labor Costs jumped 0.7% which was more than double the market estimates of 0.3%.

International Trade: AKA Trade Balance for October was very close to market expectations ($-42.6B vs est of $-41.8B). Our trade deficit widened from September’s level of $-36.2B as our strong dollar slowed down our exports.

Factory Orders:  Following the same trend as strong ISM Manufacturing, U.S. Factory Orders rose 2.7% in October, just edging out estimates of 2.6%.  September was revised upward from 0.3% to 0.6% which is a significant improvement.  Factory Orders is a measure of both durable and non durable orders.  The Durable Goods portion rose by 4.6% which is very strong.

Consumer Sentiment:  The University Michigan’s Consumer Sentiment Index for December (Preliminary, will be revised) came in much stronger than expected with at 98.0 vs est of 94.5 as the sentiment continues to improve after the election.

Across the Pond:
ECB:  The European Central Bank (ECB) meeting sucked all of the oxygen out of the room.
Did they give the markets a “dovish taper” or a “hawkish easing”?
While they left their key interest rate unchanged at 0.0%, their policy statement did shift in terms of their bond purchase program.
They stated that they would keep the current 80B bond buying program in place until March 2017, which is when it was supposed to end.
But then they are extending it out to December 2017 but at a slower pace, dropping from 80B down to 60B per month.
So, we kind of got an extension and we kind of got a taper too.
Also, since they can’t find enough bonds to purchase that meet their current standards, they are simply going to lower their threshold of which types and durations (maturity) of bonds that they can buy.  They can now buy bonds below the deposit rate and even with 1 year left (for example a 10 year bond that has only 1  year left before maturity).
Of note, is that in his(Draghi’s) responses to live questions, he reiterated several times that just because that there is a new December 2017 end date, that it doesn’t mean that the bond program will end then.  He wanted to make sure that the markets understand that it is really “open ended” just like this March 2017 deadline that has been extended.

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.