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Mortgage Market in Review – April 18, 2016

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. This was another week of choppy trading but within a very narrow range. Rates improved slightly Tuesday morning in response to sentiment that the Fed will not raise rates again until December. However, Fed official Kaplan said the earlier rate hike was not a mistake which reinvigorated the Fed “credibility” concerns. Retail sales were weaker than expected and inflation readings on the consumer and producer sides were both tame. Weekly jobless claims printed at 253K versus the expected 270K. Industrial production fell 0.6% versus the expected unchanged reading. Capacity use was 74.8% versus the expected 75.5%. Mortgage interest rates finished the week unchanged to better by 1/8 of a discount point.


Date & Time

NAHB Housing Index Monday, April 18,
10:00 am, et
59 Moderately Important. A measure of single family housing. Weakness may lead to lower mortgage rates.
Housing Starts Tuesday, April 19,
8:30 am, et
1182K Important. A measure of housing sector strength. Weakness may lead to lower rates.
Existing Home Sales Wednesday, April 20,
10:00 am, et
5.085M Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday, April 21,
8:30 am, et
259K Important. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, April 21,
10:00 am, et
8.4 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
FHFA House Price Index Thursday, April 21,
10:00 am, et
Up 0.8% Moderately Important. A measure of single family house prices. Weakness may lead to lower rates.
5-year Treasury TIPS Auction Thursday, April 21,
1:15 pm, et
None Important. TIPS will be auctioned. Strong demand may lead to lower mortgage rates.

Housing Starts

Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.

Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Declines in housing starts can lead to economic slowdown. On the other hand, increases in housing starts can signal positives for the economy. From the opposite perspective, changes in interest rates often lead to changes in housing starts. Higher interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates remain low. Low mortgage rates affect both home sales and housing starts.

Copyright 2016. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.