After a two day losing streak, mortgage rates found stable footing yesterday afternoon as a rally in the benchmark Treasury market helped move mortgage-backed security prices higher which allowed lenders to reprice mortgage rates for the bette.
Our busy week of economic data and influential events comes to an today with two more reports.First, the Department of Commerce released monthly Housing Starts and Building Permits data.
Housing Starts data estimates how much new residential real estate construction occurred in the previous month. New construction means digging has begun. Adding rooms or renovating old ones does not count, the builder must be constructing a new home (can be on old foundation if re-building). Although the report offers up single family housing, 2-4 unit housing, and 5 unit and above housing data...single family housing is by far the most important data as it accounts for the majority of total home building.
Building Permits data provides an estimate on the number of homes planned on being built. The number of permits issued gauges how much construction activity we can expect to take place in the future. This data is a part of Conference Board's Index of Leading Economic Indicators.
Today’s released indicated both housing starts and permits were better than expected in March.
Housing starts moved higher by 1.6% to an annualized pace of 626,000, beating estimates of only 610,000. This was the best level seen since November 2008. Building permits came in at an annualized pace of 685,000 which also beat estimates for a read of 625,000. This is the highest level of permits recorded since October 2008.
A couple factors can be attributed to the better results. Bad weather in February delayed the start of many homes plus we have many people rushing to beat the deadline for the home buyer tax credit. To qualify for the tax credit you must be under contract by the end of this month and close by the end of June. With a glut of housing available for sale and foreclosures aplenty, I do not see this as a positive sign for housing. More new homes just adds more supply to an already struggling sector of our economy. FOR MORE DISCUSSION AND CHARTS: READ MORE
The final report of the week provides the market with a measure of how consumers are feeling: Consumer Sentiment. The Reuter’s/University of Michigan’s Consumer Survey Center surveys 500 households on their personal financial conditions and attitudes about the economy. Market participants track consumer attitudes to get a gauge at future economic momentum. An optimistic consumer is more likely to spend which benefits stocks. A pessimistic consumer is more likely to save, which supports the bond market. This report is released twice per month. Economists surveyed prior to the release expected sentiment to continue to improve with a reading of 75.0. The actual report indicated consumer sentiment fell unexpectedly to 69.5 in the first half of April. The surprise fall is being blamed on continued weakness in the labor market. READ MY POST FROM YESTERDAY FOR MORE COLOR ON THE LABOR MARKET
We had a choppy start to the day. Mortgage rates opened up marginally better vs, yesterday but mostly the same. However, in the lunch hour, breaking news was released which had a big affect on the bond market. The SEC today filed civil charges against Goldman Sachs for essentially selling a mortgage investment that was designed to fail. HERE are the details of the SEC's case.
This event caught the market off-guard. The resulting trade reflected panicked sentiments as stocks positions were sold in favor of risk-averse assets like Treasury notes. This "reallocation" of funds into Treasuries helped push benchmark yields lower which led mortgage-backed security prices higher and allowed lenders to reprice mortgage rates for the better.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved vs. yesterday. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers. There are a couple aggressive lenders that are offering 4.75% but the majority are not. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in costs but you will have to accept a higher interest rate.
I am leaning toward a lock bias again. This outlook is mostly based on our model to "lock at the price highs and float the price lows" because mortgage rates are once again near their best prices of 2010. Now. With that in mind, a speculator might find reason to want to float into Monday. It is really dependent on how this whole Goldman Sachs situation plays out. Because Asian markets were unable to react to today's news, there is a chance the bond market could further benefit from a "flight to safety" rally on Monday morning. This move is risky because the opposite could occur almost as easily. Remember, mortgage rates rise much faster than they fall. The safe move is to take the improvements we've enjoyed this week and lock.
Have a great weekend, be back to you on Monday.