Following last week’s burst of major economic headlines there was very little market moving news this week. Mortgage rates reversed a portion of last week’s increases, ending the week a little lower.
This week’s news had little impact on mortgage rates. Very little economic data came out this week, and the results for the Treasury auctions were close to average. A meeting of the European Central Bank (ECB) produced no surprises. In short, after weeks of high volatility, daily mortgage rate movements were relatively small this week.
The much anticipated Qualified Mortgage regulation was released this week by the CFPB. This rule, when first proposed, caused concern in the housing industry for how its requirements might overly restrict mortgage availability. As released, though, it should have very little impact on mortgage availability, and much of what will be required under the regulation (when it becomes effective a year from now) is common practice today.
Not only claims surprised; Dec housing statistics were expected to be up about 3.0%, as reported stats increased a whopping 12.1% to 954K annualized units, the best year for housing since 2008. Construction of single-family houses climbed 8.1% in December from the prior month to a 616,000 annual rate, also the highest since June 2008. Work on multifamily homes, such as apartment buildings, climbed 20.3% to an annual rate of 338,000. For all of 2012, builders began work on 780,000 homes, up from 608,800 a year earlier. Starts jumped by 28.1% in 2012 from the prior year, the biggest annual gain since 1983. Building permits were expected to be up 0.7%, as reported up 0.3%. Most every housing data report has indicated the sector is well on the way to recovery with low mortgage rates driving builders and consumers.
Yesterday the bond and mortgage markets traded to their respective 20 day averages but were not able to break the technically bearish pattern. The markets are continuing to hold within narrow ranges, however the increasing belief that rates have run their course and are more likely to increase than decline much have kept any rallies in check. One major support keeping rates from increasing much is the debt ceiling debate; we expect the ceiling will be increased after a month of talk and threats. A failure to increase the ceiling would cause US interest rates to increase substantially, weakening the anemic recovery, cause rating agencies to cut the US debt rating and push the economy back into recession; in the end it really isn’t an option.
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