Consumer Confidence in Housing Hits All Time High

Consumer Confidence in Housing Hits All Time High:

Consumer confidence in housing is at an all-time high, with millennials posting strong increases in confidence, according to new data from Fannie Mae.

The Fannie Mae Home Purchase Sentiment Index (HSPI) spiked by 5.6 percentage points last month to 88.3, the highest it’s been since Fannie started keeping records. Five of the HPSI’s six components were up, with three hitting all-time highs.

The net share of Americans who believe that now is a good time to buy a home spiked by 11 percentage points, while the share who believe it’s a good time to sell rose seven percentage points. The share of Americans who report a significant increase in their household income rose by four percentage points. Consumers were also more confident about keeping their jobs, according to Fannie Mae.

More Americans also expect their homes’ prices to go up, with the net share rising three percentage points. The percentage of people who think mortgage rates will go down, however, held steady for the third consecutive month.

“The latest post-election surge in optimism puts the HPSI at its highest level since its starting point in 2011. Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Preliminary research results from our team find that millennials are accelerating the rate at which they move out of their parents’ homes and form new households. However, continued slow supply growth implies continued strong price appreciation and affordability constraints facing millennials and first-time buyers in many markets.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -71 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.  Over the past two weeks, MBS have lost -161 basis points which have driven mortgage rates to their highest levels in four years.

The bond market (which controls mortgage rates) continued to shift risk from a 50% probability of a rate hike by the Federal Reserve in March three weeks ago, to a 75% probability two weeks ago, to almost 100% last week.  That shift in sentiment among long bond traders is the primary factor in rates right now.

Last week, the focus of the markets were on two major events.  The European Central Bank (ECB) and our Jobs data.
Jobs, Jobs, Jobs: Friday’s jobs data was strong enough to solidify market bias towards a March rate hike.
The following is the Tale of the Tape:
February Non-Farm Payrolls (NFP) 235K vs est of 190K.
January NFP revised upward from 227K to 238K.
December NFP revised lower from 157K to 155K.
Three month rolling average increased to 209K.
Average Hourly Wages increased on MOM basis by 0.2% vs est of 0.3%.  However January was revised upward from 0.1% to 0.2%, so the baseline changed which means Average Hourly Wages matched expectations.  On a YOY basis, wages jumped from January’s reading of 2.5% to 2.8% this reading.
The Unemployment Rate dropped from 4.8% to 4.7% which matched expectations.  But it did so with the Participation Rate Rising (which is usually not the case).  It rose from 62.9% to 63.0%.

European Central Bank:  Left their key interest rate unchanged and did not change the level of their bond purchasing program. ECB President Draghi said the “balance of risks to growth has improved” and noted that The ECB had “removed reference to signal a sense of urgency.” This combined with the removal of references to the use of all instruments has sparked EUR strength and Bund weakness.

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.

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Taff Weinstein

Office: 832-794-2136
Cell: 832-794-2136

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