New Home Construction Data Shows Strong Market

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Published Date 11/20/2017

Realtor Report

New Home Construction Data Shows Strong Market

The National Association of Home Builders (NAHB) has released a report indicating that housing starts increased 13.7% in October, a seasonally-adjusted annual rate of 1.29 million. This is the highest post-recession reading since October 2016, when the reading was 1.33 million.

Single-family starts increased 5.3%, 8.4% above last year’s rate, while multifamily starts jumped 36.8% (413,000 units).

Granger MacDonald, chairman of NAHB, said, “Aligned with our reports of strong builder confidence our members are optimistic about the future of the housing market, even as uncertainties remain and they continue to face supply-side issues.”

Asked about the Senate tax plan, MacDonald said, “Though NAHB believes the Senate tax legislation is better for the housing sector, like the House, it fails to provide a meaningful incentive for homeownership for the middle class. We will continue to work with Congress on tax policy and other areas to ensure that housing and homeownership remain a national priority. Enacting meaningful tax reform that will help the middle class and small businesses is vital to keep the housing market moving forward and to create job and economic growth.”

Granger referred in part to the House proposal for tax reform which removed a long-standing program for low- and middle-income home buyers that would allow first-time buyers to claim a portion of their mortgage interest as a tax credit.

The United States Census Bureau published its findings for privately-owned housing completions in October: 1,232,000. This represents at 11.7% increase over the October 2016 rate of 1,067,000.

Source: TBWS

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today. Last week the MBS market improved by +23bps. This was enough to slightly improve mortgage rates or fees. Mortgage rates remained fairly flat last week with low volatility.

This Week's Rate Forecast: Neutral

Three Things: The following three areas have the greatest ability to impact mortgage rates this week. 1) Tax Reform, 2) Across the Pond and 3) Domestic.

1) Tax Reform: While it has moved past the house, the market is not pricing in that it will pass in the Senate at this point. The revised bill has made it out of committee but cannot be voted on until they return from their holiday break. However, comments from Republican Senators that are "on the fence" will carry significant weight with the bond markets.

2) Across the Pond: There is plenty to rile the bond markets. Germany's PM Merkel is in trouble and so is Great Britain's PM May and the Brexit negotiations are a mess. The more this tragic soap opera plays out, the more uncertainty and instability there is in the markets. We also hear from ECB President Draghi and get key economic releases from Japan, Germany, Eurozone, and GB.

3) Domestic Flavor: Wednesday will be the biggest day of the week with the release of the Minutes from the last Fed meeting as well as important data points with Durable Goods Orders and Consumer Sentiment.

This Week's Potential Volatility: Average

We have an abbreviated week this week with Thanksgiving. Markets will be closed on Thursday and partially opened on Friday. We expect mortgage rates to be relatively flat for the week with low volatility. What's happening overseas could play a more significant than usual part in the movement of mortgage rates this week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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