Home Builders Confidence Remains Very High

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The National Association of Home Builders Sentiment Index was released today and it came in at 68. Anything above 50 is considered positive sentiment. The survey was at 64 in July of 2017.

U.S. home builders are heartened by the strong demand and tight supply in today’s housing market, but they still can’t meet that demand as much as they might like.

“Consumer demand for single-family homes is holding strong this summer, buoyed by steady job growth, income gains and low unemployment in many parts of the country,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.

Challenges to homebuilders include rising costs for land, labor and materials. The price of lumber spiked to a record high a few months ago and is still up over 50 percent in the past year.

“Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market,” said NAHB Chief Economist Robert Dietz.

Source: NAHB

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -8 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview:  We had some very strong inflationary data (CPI and PPI) which is normally very negative for mortgage rates (makes them move higher) and while bonds did feel some of the pressure, it was largely offset by the global uncertainty of the scale and length of the Trade War that started on July 5th.  These opposing forces “squeezed” bonds into a very narrow range which pushed mortgage rates sideways.

Inflation Nation: The June Consumer Price Index (CPI) matched market expectations but hit the highest level since 2012. The headline YOY number hit 2.9% vs est of 2.9% and the Core (ex food and energy) came in at 2.3% vs est of 2.2%. Both were higher than the previous YOY pace in May. The CPI would have been even hotter if it wasn’t for a -3.7% drop in hotel prices. The June Producer Price Index (PPI) was much hotter than expected with the YOY Headline number coming in at 3.4% vs est of 3.2% and it is the highest level since 2011. The Core (ex food and energy) was also a beat to the upside (2.8% vs est of 2.6%). The Atlanta Fed Business Inflation Expectations hit 2.1% in July which matched June’s pace.

Small Business Optimism: The NFIB Index was stronger than expected (107.2 vs est of 105.6). Overall, it was a good report. But small business are still reporting that they are unable to fill open positions with skilled workers.

Jobs, Jobs, Jobs:
 The May Job Openings and Labor Turnover Survey (JOLTS) was hotter than expected (6.638M vs est of 6.583M) and still shows more open positions available than there are people looking for work.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.