Builders are jumping on the recovery bandwagon, as January Housing Starts beat consensus estimates, heading UP 2.8% to an annual rate of 591,000 units. Single-family starts are now 35.6% up from their low a year ago. Total new building permits dropped a tad in January, but single-family permits were up 0.4% for the month and UP 48.2% from a year ago.
Concerns over stock price valuations continues to support our market as well. China slowing its economy, Greece going broke, and political policy uneasiness in Washington DC are all giving the stock market a continuing headache.
The Fed statement essentially followed the expected script, demand was strong for the Treasury auctions, and much of the economic data released during the week was stronger than expected. The net effect was a small increase in mortgage rates during the week.
While the economic data released this week had little impact, mortgage rates were heavily influenced by two big stories. One was an announcement that China will take steps to slow its economic growth and the other was President Obama's proposed new restrictions on the activities of financial institutions.
Bond prices rose yesterday as stocks suffered another beating. The Dow and bond yields both closed at their lowest levels in a month. Stocks were reacting, in part, to President Obama's renewed focus on reigning in big banks.
The S&P / Case Shiller home price index fell in October after five straight monthly increases. While the decline was barely measurable, it serves as a reminder that the bounce back in real estate prices is not likely to occur as quickly as the three-year decline. The consensus among analysts seems to be for another 10% decline in home prices in 2010, making a new bottom.
The final two weeks of December have not been kind to mortgage rates. Stronger than expected economic data, comments from Fed officials, and a stock market rally all were negative for mortgage markets, and mortgage rates moved higher during the period.
On a side note, Philadelphia Fed President Plosser (who will not be a voting FOMC member until 2011) said: "Looking ahead, I see an economy that will be growing over the next two years, which means real interest rates will be rising… the federal funds rate should be permitted to rise with them." He said that higher rates may be needed before the unemployment rate and resource utilization return to desirable levels.
A combination of factors helped Austin mortgage rates improve yet again during the short Thanksgiving week. Strong demand for the Treasury auctions, low inflation, and a fragile economy were all positive for mortgage markets. As a result, mortgage rates dropped to the lowest levels since January.
Since the Fed meeting on Wednesday of last week, Austin mortgage rates have improved a little each day. There was no major economic data released during the week, and even a weak 30-yr Treasury auction on Thursday failed to stall the rally in mortgage markets. As a result, Austin mortgage rates ended the week moderately lower.
