Home Builders' Sentiment Jumps

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Published Date 8/21/2017

Realtor Report

Home Builders' Sentiment Jumps

The National Association of Home Builders (NAHB) released their recent Housing Market Index, and it showed a very robust reading of 68. It's the 4th highest reading since 2007. Any reading above 50.0 is considered positive for the housing market.

Builder confidence in the market for newly-built single-family homes rose four points in August to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Our members are encouraged by rising demand in the new-home market,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “This is due to ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.”

“The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market,” said NAHB Chief Economist Robert Dietz. “GDP growth improved in the second quarter, which helped sustain housing demand. However, builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.”

All three HMI components posted gains in August. The component gauging current sales conditions rose four points to 74 while the index charting sales expectations in the next six months jumped five points to 78. Meanwhile, the component measuring buyer traffic increased a single point to 49.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 48. The West, South, and Midwest all remained unchanged at 75, 67 and 66, respectively.

Source: NAHB Press Release

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 +2 bps. This was not enough to improve mortgage rates or fees. Mortgage rates, for the most part, were very stable.

This Week's Rate Forecast: Neutral

Three Things: These are the three things that can have the most influence on mortgage rates this week. 1)Jackson Hole, 2) Across the Pond and 3) Geopolitical

1) Jackson Hole: Starting Thursday, the Kansas City Fed will host its annual Economic Policy Symposium in WY. This will drive markets for the next couple of weeks. We will hear from a ton of Fed and Foreign central bankers including Yellen and Draghi (ECB) on Friday. The bond market is going to be very reactionary to any comments by either regarding tapering and rates.

2) Across the Pond: We will get a heavy dose of Markit Manufacturing PMI from most of the big 10 economies this week as well as final GDP data out of Germany and revised GDP out of Great Brittan. We also get inflationary readings out of Japan.

3) Geopolitical: The markets are very much interested in who our next Fed Chair will be and are starting to hedge that Gary Cohn will get the nomination, but of course that is all speculation at this point. However, if he does eventually get the nod, you can expect MBS to sell off as he has said that he wants to reduce the amount that banks are forced to hold in reserves to pass their stress tests and is in favor of reducing the Fed's balance sheet. The bond market will continue to focus on the looming debt ceiling and the ability of the Republican's to work together to get tax reform and a budget done.

This Week's Potential Volatility: Average

This is a pivotal week for mortgage rates. We're looking for market rates to move sideways until Thursday with weekly jobless claims and Friday when Janet Yellen and Mario Draghi speak. While today and through most of the week mortgage rate volatility is average, look for volatility to spike toward the end of the 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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