FRM Update

November 20, 2017

Mortgage rates were generally unchanged last week and mortgage yield spreads were unchanged to slightly tighter versus Treasuries. Mortgage rates have traded in a tight range over the last month and for much of this year, while mortgage yield spreads remain historically tight. 10-year Treasury yields fell last week, while two-year yields increased, resulting in the flattest curve since 2007. The MBA Refi Index rose 6.3% to 1372 and mortgage applications rose for the first time since October 10th. The NAHB Housing Market Index improved to the second strongest level since 2005, an indicator that homebuilders remain confident. Building permits and housing starts were much stronger than expected in October. Housing starts were the second strongest of the cycle with geographically‐widespread gains.









CMO spreads were generally unchanged last week except for 5-year PAC structures, which widened 4bps. Activity in CMOs was strong last week compared to recent levels with investors active in swaps focused on odd lot cleanup trades and in PAC structures offering extension protection in various collateral types. Depositories continue to focus on stable structures with 4- to 6-year average lives.



Mortgage Rates and Refinance Activity





NAHB Housing Market Index improved to the second strongest level since 2005 as homebuilder confidence rose from 68 to 70.



Housing starts rose 13.7% in October, a sizeable surprise to the upside, to 1.29 million units. This marks the second highest level of this housing cycle, only surpassed by October 2016. The increase was driven by a solid month for single family starts, up 5.3%, but an even more impressive 36.8% increase for multi-family starts. Overall starts rose 155k:  Northeast +43k, Midwest +33k, South +91k, and West -12k. Building permits also rose a solid 5.9%, boosted by a 1.9% increase in single family permits and an even more impressive 13.9% increase in multi-family.





Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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