Mortgage Rates Not Moving After Better Open

Mortgage rates did open a bit better this morning but have not moved much since then as the 10yr is flat at 2.27% with MBS pricing in the slightly negative territory as of 11:00AM this morning.  There has been moderate volatility in the market as of late causing some concerns on where the rates may head, but nothing that will move them quickly.

Yesterday the July NAHB housing market index was soft compared to estimates, declining to the lowest level since last November. Buyer traffic numbers came back negative for the second month in a row.   This morning we get somewhat of reverse with weekly mortgage apps were (+6.3%) from the prior week with purchase apps on the positive side.  What was surprising is that refinances were up 13.0%, which could mean that some buyers are staying put and remodeling their current homes.

June housing starts and permits were also better than forecasts. Starts for single-family homes rose 6.3% in June's report to 849,000 with multi-family up 13.3% to 366,000. June building permits were also better than anticipated. Good news for the housing industry after weaker in May. Despite June's gains, second-quarter starts and permits are below those of the first quarter averaging 1.164 million for starts vs 1238K. Permits are also down, at 1217K vs 1260K.  

 

The stock market continues to increase - bad news or good it appears not to matter. Yesterday’s failure to do anything on health care did not matter, weak economic outlooks does not matter, the equity markets in the US and globally are on an unrelenting march higher. This morning, we are seeing the big three with positive numbers.

Read a lot of commentaries this morning after the health care bill was tubed yesterday. Most of what I read centered on what is next for Trump and Republicans, tax cuts and infrastructure spending. I was surprised how many in the media were echoing the idea that there is a possibility for tax cuts and spending on bridges and roads. Not going to happen - there is little reason now to expect any of Trump’s campaign ‘promises’. No tax cuts - Trump is not even going to release the tax cut plan until September, and there is absolutely no way any major tax overhaul will happen in 2017 and likely not in 2018. This is Washington at its finest, and the Democrats will not help, Republicans on the ropes with more opinions than answers and the mid-term elections will spell doom for tax cuts. Infrastructure, no way either. Republicans are as divided on these issues as they are on health care. Lawmakers have not even given him money to build his border wall.

The economy is holding together but with weak GDP growth and so far no increases in wages as the Fed believes. Washington in complete disarray. The debt ceiling coming and Congress must approve a $1 trillion spending bill. All of this and the inability to accomplish any reforms has not dented investing in equity markets. No one wants the US dollar, another testimony to the mess in Washington. The extreme lack of volatility is a warning that investors have become very complacent and that is a warning sign. Why should you care? Because if (when) the stock market does begin a major correction interest rate markets will be the beneficiaries.

Till then, interest rates are holding so far today and there is no more data to digest. I am going to recommend cautiously float unless you are closing in the next 15 days.