Home Builders’ Confidence Hits 12 Year High

U.S. homebuilders are feeling more optimistic about their sales prospects than they have been since the high-flying days of the housing boom.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday jumped to 71 this month. That’s up six points from 65 in February and the highest reading since June 2005.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.

The March number exceeded analyst predictions. They expected the index to hold steady at 65, according to FactSet.

Builders’ view of sales now and over the next six months also surged, as did a gauge of traffic by prospective buyers.

The increased confidence reflects heightened expectations as the spring home-selling season, which typically sets the pattern for residential hiring and building construction in the ensuing months, gets underway.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +50 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

Mortgage backed securities (which control mortgage rates) continued to shift risk going into Wednesday’s Fed meeting which caused mortgage rates to continue the two week trend of moving higher.  But after the markets received a very “dovish” rate hike, MBS moved off of their lowest levels and regained a small portion of their losses which caused mortgage rates to level off.

The Talking Fed: The biggest event of the week was the FOMC (Federal Open Market Committee) decision to raise their key interest rate but at same time, moved to dampen market expectations over the frequency and timing of future rate hikes via Fed Chair Janet Yellen’s “dovish” stance.
Read the FOMC statement here
Read their Economic Projections and Rate Hike Chart here
The Federal Reserve Open Market Committee decided to raise their Fed Funds rate by 25 basis points which was widely expected.
Here are some key points from their policy statement:
– Minneapolis Fed President Kashkari (new voting member in 2017) voted AGAINST the rate hike but he was the only one.
– Deleted the word “only” from expectation that U.S. economy to evolve in way that warrants “only gradual increases” in rates.
– Keeps reference to fed funds rates as likely to remain below long-run levels “for some time”
– Monetary policy will support “some further strengthening” in labor market, inflation’s return to 2%
– Now says that inflation will “stabilize around” 2 percent over medium term vs prior description that it would rise to 2%, now says inflation’s moving close to 2% objective.
– Fed continues to say economic activity expanded at “moderate pace,”
– U.S. labor market has continued to strengthen, and job gains are “solid”
– FOMC keeps previous assessment that near-term risks to outlook appear “roughly balanced”; continues to say it’s “closely” monitoring inflation indicators and global economic/financial developments
– Fed continues to say it will keep existing reinvestment policy in place until normalization of fed funds rate “is well under way”;
– FOMC’s holdings of longer-term securities to stay “at sizable levels”

What did the “dot plot chart” say?
– Median target for end-2017 is 1.375%, unchanged
– Median target for end-2018 is 2.125%, unchanged
– Median target for end-2019 is 3% vs 2.875% in December
– Long-run target is 3%, unchanged

During her live Press Conference, Fed Chair Janet Yellen said:
– Three rate hikes in 2017 is what she calls “gradual”
– Says the simple message is “that the economy is doing well”
– She said in her opening remarks that this “is not a reassessment” of their stance in policy or trajectory of the economy.  This is perceived as a very “dovish” statement by her.

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.

Brought to you by:

Taff Weinstein

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

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
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