Mortgage Blog - March 20, 2017

Housing Starts increased 3.0% in February to a 1.288 million unit annual rate, 6.2% ahead of where they were a year ago. The monthly gain was led by a hike in single family starts, which surged to their highest level since before the recession. Single Family Building Permits hit the highest level since 2007, gaining 3.1% for the month. Yes, permits fell a bit overall but this was only from a dip in the volatile multifamily sector. Observers expect single family home building to grow at a steady pace into the future.

The pickup in home building is encouraging since we still have some ground to cover to reach the 1.5 million unit annual rate economists see as complete recovery. Hope abounds as the National Association of Home Builders confidence index shot up this month to its highest reading in 12 years. Consumers are feeling better too. The latest National Association of Realtors survey reveals that 62% of households polled believes the economy is improving, the highest share in the last five quarters. Lenders haven't been left out either. The Mortgage Bankers Association reports mortgage applications on the rise three weeks in a row.

Review of Last Week

The Fed pushed short-term interest rates up by a quarter point to 0.75%-1.0%. The good news is they did it because they see the economy heading up. Fed Chair Janet Yellen said in her presser, "I think people can feel pretty good about the economic outlook." It's important to remember the Fed Funds Rate is not directly tied to mortgage rates, although they do tend to go up as the economy improves. Investors anticipated this Fed move so they focused instead on the positive economic data and sent all three major stock indexes back up for the week after their drop the week before.

There was in fact no shortage of decent data. Philly Fed and New York Empire State indexes of manufacturing in those regions both dipped in March but still posted their second highest reads since 2014. Retail Sales? Up 0.1% in February and up 5.7% over a year ago. Housing Starts are up, as reported above. The Consumer Price Index (CPI) was up 0.1% in February which the Fed sees as a positive sign. University of Michigan Consumer Sentiment shot up to 97.6 in March from 96.3 in February and the Conference Board Leading Economic Index (LEI) went up 0.6% in February to it's highest level in more than ten years.

The week ended with the Dow UP 0.1%, to 20915; the S&P 500 UP 0.2%, to 2378; and the Nasdaq UP 0.7%, to 5901.

Bond prices ended the week up too as financial stocks sank, while utilities (a bond surrogate) gained. The 30YR FNMA 4.0% bond we watch finished the week up .47, at $104.41. National average 30-year fixed mortgage rates rose for the second week in a row in Freddie Mac's Primary Mortgage Market Survey for the week ending March 16th. This came from the positive February jobs report pushing bond prices down and loan rates up.

Where are interest rates headed?

This Week’s Forecast

February closings are projected to come in at a slightly lower annual rate for Existing Home Sales and a slightly higher one for New Home Sales. Levels for both remain in good territory. We'll also watch Initial Unemployment Claims, which are expected to recede for another week.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of March 20th – March 24th

Mar 22     10:00     Existing Home Sales
Mar 22     10:30     Crude Inventories
Mar 23     08:30     Initial Unemployment Claims 
Mar 23     08:30     Continuing Unemployment Claims
Mar 23     10:00     New Home Sales
Mar 24     08:30     Durable Goods Orders
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

After last week's hike, the Fed said there would likely be two more this year. A slight majority of economists expect the next rate rise as early as June.

Note: In the lower chart, a 6% probability of change is a 94% certainty the rate will stay the same.

Current Fed Funds Rate: 0.75%-1.0%

After FOMC meeting on:   

May 3     0.75%-1.0%
Jun 14     1.0%-1.25%
Jul 26     1.0%-1.25%

Probability of change from current policy:

After FOMC meeting on: 

May 3             6%
Jun 14           58%
Jul 26           66%

Where are interest rates headed?

Call me now, 303.668.3350 or click here to apply!

Apply Now!
Get the Insider Track on Interest Rates!

Cheers!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert
www.scottsynovic.com
303.668.3350 Direct

NMLS: 253799 / NRL NMLS: 181407
Regulated by the Division of Real Estate

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial
services and other professionals only. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

---