Earlier this morning, Housing Starts fell 5.9% to 575 thousand units while Building Permits dropped 1.6% to 612K. The data was close to economist’s expectations. Regions were mixed with the Northeast declining 9.6% and the South down 15.5%. The Midwest however jumped 10.6% and the West was up 7.9%. Multifamily units fell 76K.
The big story of the day will be front and center at 1:15 pm cst. That being the FOMC one day meeting to determine short term interest rates and make any changes to the policy statement. For the most part, it looks like they could have mailed this one in with the only possible change coming in policy language regarding “low interest rates for an extended period of time”. Some analysts are looking for the word “extended” to be dropped. We see no change to rates or policy as we view the Fed to be “out of bullets” given zero percent interest rates and quantitative easing bloated balance sheet issues. In our opinion, all they can do is manage expectations until the economy starts to pick up and then shift to an exit strategy.
What happens if all of the above is true? The most likely outcome will be stocks doing better as they view “cheap’ money to continue. That could put pressure on our mortgage pricing. If they remove the “extended” language, both stocks and our Austin mortgage pricing would most likely suffer as traders attention would turn to Fed Funds rate hikes being priced in (in the near future). As you can see, our best case is for Austin mortgage rates to hold steady so use this time to be a little defensive into the announcement.
Currently, the 10 year note is up 6/32’s (yield 3.68%), mortgage backs unchanged to off 1/32nd (widening spreads), and stocks up a baker’s dozen on the big board.