FRM Update

July 24, 2017



Mortgage yield spreads were mixed and activity was generally slow as Treasury yields grinded lower again last week. Mortgage rates were also mixed last week (15yr down 3bps and 30yr up 1bp) and mortgage applications for the week ending July 14 rose 6.3% with both purchase and refinance applications increasing. Housing starts and building permits were stronger than expected in June, while the homebuilder confidence headline index fell to the lowest reading since the election.

MBS

 





CMOs

Trading activity in CMOs was on the slower side and yield spreads in CMOs were generally unchanged last week. Depositories were focused on stable structures with 4- to 6-year average lives.

 

Rates and Refis

 


Housing

Housing Data Improves While Builder Sentiment Pulls Back

The June Housing Starts and Building Permits data were stronger than expected with starts rising 8.3% (exp. +6.2%) and permits rising 7.4% (exp. 2.8%).  There were also positive revisions to the May housing starts data.  Starts were bolstered by a 6.3% increase in single family activity and a 13.3% jump in multi-family.  On a YoY basis, housing starts are now up 2.1%, the best rate of gain in four months.  Permits were lifted by a 4.1% increase in single family permits and a 13.9% jump in the volatile multi-family series.  Building permits are now up 5.1% YoY.

The homebuilder confidence headline index fell back from 66 to 64, the lowest reading since the election with analysts speculating that builders are becoming 1) less confident in legislative changes from Washington and 2) more concerned the Fed could lose control of longer interest rates pushing mortgage rates higher and 3) supply-side costs are rising putting more pressure on builders to contain costs at a time when buyers could be becoming more price sensitive.

 

 


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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