Banks and non-bank mortgage companies aren’t enemies, but plenty of non-bank lenders are envious of the ability of banks to offer HELOCs and other portfolio products, especially as banks try to capitalize on rising housing values and potentially falling refinancing demand. "Banks extended $156B in HELOCs in '15, up 24% Y/Y and the most since '07."

We are entering in the "home building" season in many parts of the nation. (We are also entering the kitten season, but that is a different story.) What is going on with the home builders out there, and what are the trends that impact lenders?

First of all, keep in mind that the housing industry is not immune to immigration - legal or otherwise. Many immigrants are employed in the construction industry and have helped maintain costs low and new homes affordable for many first time homeowners. Yet the number of immigrants entering the U.S. illegally has declined since the recession and the share of undocumented Mexican immigrants in the U.S. has dropped twenty percent since 2007. If the lack of undocumented workers in the construction industry continues, we may experience a rise in constructions costs and a focus towards building higher end homes, according to the Q1 Zillow Home Price Expectation Survey. Results from the survey indicate that more than two-thirds of panelists said construction costs would rise if current trends continue and 43 percent said that the decline in immigrant workers would result in more construction jobs for U.S.-born workers.

If there is a shortage of construction labor, forty percent of builders said they would focus on more high-end construction, which has a higher profit margin. Finally, more than 30 percent predicted that the number of new homes built will be below historic norms. The inventory of homes nationwide has been declining, and is currently down 7.7 percent from the end of 2014. To keep costs down, builders have been making expensive homes on smaller lots all the while the median price of a new home sold in December was about 7 percent above pre-recession peaks. The survey respondents also said they expect growth to decline to a 3.3 percent annual growth rate through 2020.

Zelman and Associates published its Land Development Survey for the fourth quarter of 2015, discovering that acquisition demand index has increased for the third consecutive quarter. Both the finished lot and raw land indices have indicated to sequential and YoY improvement, suggesting that builders maintain a favorable view of long-term demand. Zelman and Associates predict that public builders will spend $18.5 billion on land this year, up 15 percent from last year. Half of survey respondents have reported that builders and developers increased their focus on the entry-level price point in the second half of 2015, with 61 percent expecting to see this trend continue well into 2016. Lot supply is anticipated to increase and finished lot prices increased 2 percent sequentially in the last quarter of 2015. Finished lot prices were up 9 percent YoY and certain markets like Columbus, Indianapolis and Raleigh-Durham are seeing the greatest lot price inflation. For more information on the survey contact Ivy.

Construction spending inched up 0.1% in December, pushing 2015 activity to highest level since in 8 years.  The December increase was driven by gains in home construction and spending on government projects. That offset declines in spending on private construction of shopping centers, office buildings and hotels. For all of 2015, construction jumped 10.5 percent to $1.1 trillion, the highest total since 2007. A home construction boom peaked in 2006 before falling for the next five years. Construction spending has been climbing since 2012. Economists believe building activity, fueled by home construction, will bolster the overall economy this year.

Zelman & Associates published its Preliminary Homebuilding Survey suggesting that orders in December has accelerated, leading to the strongest sequential improvement since the survey began tracking that data. Order growth grew 18 percent from 12 percent in November and net order prices increased 6.6 percent YoY and 68 percent of contacts held net prices flat in December. The majority of builders (73 percent) said they were "cautiously optimistic" about the upcoming selling season and only 5 percent said they were "extremely optimistic".

The research firm also published its December Homebuilding Survey revealing that order growth has accelerated 4 percent, which is the strongest December improvement in the survey's history. Order growth totaled 18 percent YoY, with contacts reportedly surprised by the level of orders during the month. Net prices were up 6.6 percent, which was the strongest level of appreciation since May 2014. The incentive index was lower than last December and above November's level and net order prices for the month increased 6.6 percent YoY. The pace of labor cost inflation declined, reaching the lowest level in nine months and 76 percent of contacts reported flat-to-improving margins on a YoY basis.

NAR Pending Home Sales Index Up 0.1% In December to a reading of 106.8 in December.  An index of 100 is equal to the average level of contract activity during 2001, which the NAR considers a "normal," or balanced, market for the current U.S. population. Lawrence Yun, the NAR's chief economist, said "Warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month," he said. "Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas. With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren't going away any time soon."

NAHB Housing Market Index 60 in Jan.  A gauge of home-builder sentiment held steady in January at December's revised lower reading, a sign of modest growth in a key sector of the economy.  The National Association of Home Builders housing market index stayed at 60 this month, the trade group said on Tuesday. A reading over 50 means most builders generally see conditions in the single-family housing market as positive.

But the following month the NAHB/Wells Fargo housing market index fell 3 points to 58, from an upwardly-revised 61 in January. "Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market," said NAHB Chairman Ed Brady.  Economists surveyed had expected a reading of 59 (any reading over 50 signals improvement).   The index touched a 10-year high in October, and averaged 59 throughout 2015. Builders are responding to recent consumer worries about the economy, NAHB Chief Economist said.

Zelman & Associates published its Homebuilding Survey indicating that orders have increased 26 percent sequentially in January, and YoY order growth remains solid at 12 percent, representing the 16th consecutive month of double-digit growth. Roughly 22 percent of survey respondents reported raising net order prices compared to 7 percent that lowered net pricing, while YoY price growth slightly declined to 6.4 percent. Houston experienced a 4 percent YoY increase in orders, while the second home market has cited a downturn. Overall cost inflation lowered to 2.8 percent YoY in January, and the majority of survey respondents reported flat-to-improving margins on a YoY basis. For more information regarding the survey, contact Ivy at ivy@zelmanassociates. com.

Zelman & Associates published its February Homebuilding Survey citing an 18 percent sequential increase in order growth, with February marking the 17th consecutive month of double-digit growth. Order growth was most dominant in the South (up 28 percent), followed by the East (up 20 percent) and Midwest (up 18 percent). The entry-level segment has reached the strongest ranked price point for the first time since February 2012, with a score of 63.9, while the second home market remains slow. The top ranked markets in February included the Bay Area, Orlando and Denver, with Sacramento, Tampa and Phoenix ranked as the most improved markets. Net order prices increased 6.3 percent YoY and prices are expected to grow 4 to 5 percent in 2016. February new home sales are projected to be up 2 percent sequentially, but down 7 percent YoY and single-family housing starts are forecasted to be up 3 percent sequentially and up 25 percent YoY. The cost of inflation dropped to 2.7 percent YoY last month and the majority of survey respondents reported flat-to-improving margins on a YoY basis.

Turning to interest rates, bond and other traders are returning to work today after a day off Friday and a half day Thursday. They, and everyone else, are facing a slew of numbers this week. Today we've already had February Personal Income and Spending (+.2%, +.1%, respectively), February PCE Prices (unchanged at 1.7%), and some trade figures (showing a deficit of $62.9 billion - wider than expected); later are February Pending Home Sales (10AM EDT) and a $26 billion 2-year note auction. Tomorrow is the January Case-Shiller 20-city Index at 6AM EDT, March Consumer Confidence (10:00 ET), a couple Fed speakers including Fed Chair Yellen, and a $34 billion 5-year note auction.

On Hump Day are the MBA Mortgage Index, March ADP Employment Change, and a $28 billion 7-year note auction. On the Day Before Friday are March Challenger Job Cuts, Initial Jobless Claims, and the Chicago Purchasing Manager's numbers. TGIF holds all the March employment data along with the March ISM Index, March Construction Spending, and March Michigan Sentiment.

Jobs and Announcements

CrossCountry Mortgage, Inc. is looking for an Encompass Administrator. Licensed in 49 states the Company is a FNMA, FHLMC & GNMA Seller/Servicer and offers a wide portfolio of home purchase, refinance, and home equity products. "We have been recognized on the Inc. 5000 List of America's Fastest Growing Private Companies four years in a row (2012-2015), as well as the Weatherhead 100 list of Northeast Ohio's Fastest Growing Companies." The Encompass Administrator will be dedicated to the overall administration and configuration for all features of the Ellie Mae Encompass LOS and will serve as the 2nd and 3rd level support for the questions, issue resolution and enhancement of Encompass. In addition, this position will be responsible for work flows, edits, creating new screens, business rules, reports and improving process and other system administration functions. The position can be remote.  Please send inquires & resumes to Carmen Scalise, Director of Talent Acquisition (440-262-3290).

Speaking of IT roles, Ellie Mae is continuing to expand is and is looking for a Product Support Analyst-Compliance in Omaha, NE or Pleasanton, CA. The Product Support Analyst acts as a mortgage industry specialist relevant to the use and application of Ellie Mae products and services.  The Industry Product Support Analyst delivers complete resolutions, in a timely manner, and consistently, to address clients' questions and concerns with the user interface, documents, and tools available in the Ellie Mae product. The ideal candidate will have three or more year's mortgage processing, funding, document drawing or underwriting experience, experience using desktop loan origination software applications. Communicate effectively via written and spoken language; comprehends problems, urgency, and desired outcome in the absence of perfect information; conscientious listener & analytical; proactive; creative problem solver.

Paramount Residential Mortgage Group, Inc. recently announced the hiring of 8 new Regional Managers to handle the recent expansion of its retail division in several regions. The new Retail Regional Managers include Brian Mader (Northeast), Buddy White (Northwest / Northern Mountain), Ed Roberts (Central States), John Seib (Pacific Northwest), Frank Castanos (Southern CA Region & Las Vegas), David Haynes (Northern CA), Byron Enriquez (Southern CA), and Mike Mitchem (Florida). In addition to maintaining production and service levels, the new team of Retail Regional Managers will be responsible for actively developing a strong presence in their respective territories while working to support their Branch Managers with fulfillment, recruitment and meeting production goals. Chris Sorensen, S.V.P. National Director of Retail Production stated, "We've been growing, but now we're preparing to explode! With the new Regional Management Team in place, we are confident that we will be successful in communicating the PRMG culture and benefits with incoming recruits." PRMG is a national leading lender, voted No. 1 of the 50 Best Companies to Work for in America. To learn more about PRMG and/or questions about other markets, please email you@prmg.netFor a list of all of the Retail Division Regions, please click here.