U.S. Housing Market and Interest Rates for March

  
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U.S. Housing Starts Climb in March:

The Commerce Department reported that groundbreaking increased 2.8 percent to a seasonally adjusted annual rate of 946,000.

Plus, February's data was actually better than first released. As February's starts were revised to show a 1.9 percent rise rather than the previously reported 0.2 percent fall.

Gaines in home building has been difficult as a brutally cold winter weighed on home building in December and January.  Activity has also been hampered by shortages of building lots and skilled labor as well as rising prices for materials.

Groundbreaking for single-family homes, the largest segment of the market, surged 6.0 percent to a 635,000-unit pace last month. Starts for the volatile multi-family homes segment fell 3.1 percent to a 311,000-unit rate.

     

U.S. Housing Starts Climb in March:

The Commerce Department reported that groundbreaking increased 2.8 percent to a seasonally adjusted annual rate of 946,000.

Plus, February's data was actually better than first released. As February's starts were revised to show a 1.9 percent rise rather than the previously reported 0.2 percent fall.

Gaines in home building has been difficult as a brutally cold winter weighed on home building in December and January.  Activity has also been hampered by shortages of building lots and skilled labor as well as rising prices for materials.

Groundbreaking for single-family homes, the largest segment of the market, surged 6.0 percent to a 635,000-unit pace last month. Starts for the volatile multi-family homes segment fell 3.1 percent to a 311,000-unit rate.

What Happened to Rates Last Week?


Mortgage backed securities (MBS) lost - 67 basis points (BPS) from last Friday's close which caused 30 year fixed mortgage rates to move higher from the prior week.  The market saw the lowest rates on Tuesday and the highest rates on Thursday.  For the month of April, MBS are down -7BPS.

For the fourth straight week, we had domestic economic data that under normal circumstances would have caused MBS pricing to deteriorate.  Retail Sales were much stronger than expected as were Industrial Production, Capacity Utilization, Initial Jobless Claims and the Philly Fed survey.  New Fed Chair Janet Yellen spoke twice.  Her comments had some impact on the stock markets but the long-bond market was not impacted.

Over the prior three weeks, we have been reporting that our domestic economic data has been showing growth. And growth always pressures bonds and causes rates to rise.  But rates had not risen during that period.  Why?  Its because bonds were the beneficiary of a huge international "flight to safety".  Essentially, bonds prices were propped up (which means lower rates) due to a spike in demand from investors wanting to put their cash into nice, safe and low return yields of U.S. bonds.

There are several reasons why international demand for safety in our bonds spiked but the primary reason has been the ongoing conflict between Ukraine and Russia.  So, when it was announced on  Thursday that a peace accord had been agreed to by Ukraine, Russia, the U.S., and the European Union, concern over that conflict escalating was reduced and therefore the need for safety in our bonds was reduced.  Investors sold out of their boring and low-yield bond holdings and put that money back to work in other areas.  This caused a big sell off in mortgage backed securities on Thursday and led to the highest rates of the week.

Posted April 21, 2014

By Dianne Yelm

Century 21 Affliated

 

Dianne Yelm

Dianne Yelm

REALTOR
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