April 19th, 2022 9:56 AM by Richard Sardella MLO.100007700/NMLS 233568
Builder Confidence Remains High:
Builder confidence in the market for newly built single-family homes came in at 77 in April which matched consensus estimates, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. A reading above 50 is positive.
Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales conditions fell two points to 85 and the component charting traffic of prospective buyers posted a six-point decline to 60. The gauge measuring sales expectations in the next six months increased three points to 73 following a 10-point drop in March.
Looking at the three-month moving averages for regional HMI scores, the Northeast posted a one-point gain to 72 while the Midwest dropped three points to 69, the South fell two points to 82 and the West edged one-point lower to 89.
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. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are moving sideways today. The MBS market worsened by -58 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Higher
Three Things: These are the three areas that have the greatest ability to affect rates this week. 1) The Fed, 2) Domestic News and 3) Geopolitical
1) The Fed: The primary focus of the markets remains trying to hedge for future (and as of yet not officially announced) rate hikes and balance sheet reduction (QT). Speculation on the path of these two items is driving bond yields. We will hear from several key Fed members this week and get their Beige Book on Wednesday.
2) Domestic News: We get a lot of housing related news this week but we don't have any major economic releases that, by themselves, could cause rates to change. Initial Weekly Jobless Claims will get the most attention to see if our weekly sub-200K trend continues.
3) Geopolitical: China and Ukraine continue to dominate the headlines. On Chinese front, they had much stronger than expected 1st QTR GDP but their draconian lockdowns are a major headwind. China is actually now reporting covid related deaths in the Shanghai region and we now see civil unrest with clashes between citizens and the government over forced lock down centers. Ukraine and Russia will continue to cause issues with supply-side inflation related to wheat, fertilizer, etc. We also have an IMF meeting this week to watch.
Treasury Sales: We have a 20 year Treasury Bond auction on Wednesday
This Week's Potential Volatility: High
Markets moving sideways to start the week without any major data releases. Volatility is moderate to start but will likely spike later in the week on headline news.
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.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.