Housing starts came in at a seasonally adjusted rate of 853,000 which was a decline from last month. However, the majority of that decline was in apartment and multi-family and not in single family residences.

Confidence among builders is rising. The National Association of Home Builders says its builder confidence index rebounded in May to a reading of 44, up from 41 in April. The outlook for sales reached its highest point in more than six years.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -65 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move upward for the third straight week. We had our highest mortgage rates on Friday and our lowest rates on Thursday.

We had a very volatile week with large swings in MBS pricing. We traded in a very large range with a -86 BPS range between our highs and lows. Bonds (which include MBS) sold off on much better than expected Retail Sales and Consumer Sentiment. But bonds rallied on very tame inflationary data as measured by CPI and PPI, and higher than expected Initial Jobless Claims. In the end, the economic data was responsible for some daily spikes in pricing but the real momentum in the market place was something else.

And that momentum was not good for rates. Bonds were hammered as traders started to join in on the belief that the Federal Reserve would begin to scale back on the amount of monthly MBS purchases sooner rather than later. There is no exact time frame and no “offical” announcement has been made on the timing, but market participants are betting that it is sometime around September. Since the Fed is the single largest purchaser of MBS, having even a small decrease in their monthly bond purchase would pressure mortgage rates.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based on.

Well, Fannie Mae is baaaaaack, posting it largest profit ever.  Yes that’s right, they posted a bigger profit than even at the height of the housing boom. Mortgage giant Fannie Mae has now been turning a profit for more than a year. In fact, it has turned record a profit: $8.1 billion in its latest quarter.

With Fannie Mae and its smaller cohort, Freddie Mac, turning so much profit, the push to dismantle them becomes far more complicated. Unlike several years ago, they are now making the government money at the same time that the feds considered  winding them down.

The chief beneficiary of Fannie’s newly discovered riches is none other than the federal government—the same entity that bailed it out at the height of the financial panic nearly five years ago. Fannie Mae will pay the Treasury $59 billion by the end of this quarter, bringing its total tally of dividend payments to $95 billion—close to the $117 billion it originally drew.

Now that Fannie and Freddie are on solid footing again, they can begin to loosen up underwriting standards.  But this time it will be small and responsible adjustments.  Still, relaxing the guidelines even just a little could open the door for many potential new homebuyers that have been kept of out of the market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -89 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move upward for the second straight week. We had our highest mortgage rates on Friday and our lowest rates on Thursday morning.

We traded in a very thin range for the majority of the week as MBS were trapped in a narrow trading channel that saw very small daily movements (+1 to -7BPS) from Monday through Thursday.  There were very few economic releases.  The biggest report to hit the wires was Thursday’s weekly Initial Jobless Claims which were lighter than expected.  This was good news for the economy and pressured bonds slightly.  We had a 10 year Treasury auction which saw a pull back in demand but it really didn’t impact MBS pricing by the end of the day.

MBS really sold off on Friday, in the absence of any economic data.  When MBS sell off, mortgage rates rise.

Why did they sell off?  There were several reasons but lets focus on the two largest factors:  First, the Treasury Secretary stated that we would not hit our debt ceiling again until later than the market had projected.  Remember, MBS are trading higher than normal (better rates for you) due to fear and uncertainty about our debt.  The fact that our deficit is doing better than expected is a negative for our bonds because it means that Congress will put off solving our larger issues longer.

Secondly, the Yen has absolutely tanked and that has made investment in other foreign markets more attractive than in the U.S.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday.

Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006.

A scarcity in ready-to-build land has many builders working to get local governments to approve new land for construction, he said. The process can take 12 to 18 months. A survey of homebuilders released Monday noted similar concerns.

The jump in home building is expected to contribute to economic growth in 2013 for a second straight year — a reversal from 2006 through 2011, when it held back the economy. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy homes. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained+39 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Thursday and our lowest rates on Friday morning.

MBS were trapped in a very narrow trading channel for the past nine trading sessions which caused pricing to move sideways.  But that certainly changed on Friday with the release of the GDP data.  The first release (it will be revised two more times) of the first quarter GDP missed the mark and came in much weaker than expected (2.5% vs 3.0%).

Historically speaking, a national growth rate of 2.5% is very desirable.  It shows growth without any major inflationary pressure.  The market expectations for growth of 3.0% would have been inflationary and bonds hate inflation, so when this number came in lower than expected – bonds rallied as a result.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday. Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006.

A scarcity in ready-to-build land has many builders working to get local governments to approve new land for construction, he said. The process can take 12 to 18 months. A survey of homebuilders released Monday noted similar concerns.

The jump in home building is expected to contribute to economic growth in 2013 for a second straight year — a reversal from 2006 through 2011, when it held back the economy. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy homes. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained+5 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Friday and our lowest rates on Monday morning.

MBS were trapped in a very narrow trading channel which caused pricing to move sideways. The majority of the economic data was generally favorable for MBS pricing and therefore rates.  Both the Empire Manufacturing index and the Philly Fed showed much weaker than expected regional manufacturing levels.  The Consumer Price Index was very tame which showed a reduced threat of inflation in the near term and Initial Jobless Claims ticked up.  All of these reports were favorable for bonds and therefore rates too.

But the rally with MBS prices was slowed due to a much better than expected Housing Starts and comments by a member of the Federal Reserve that he favored ending QE3 earlier than the rest of the board.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By looking at two metrics — an affordability index and a price-to-income ratio — Zillow researchers have determined that low mortgage rates that make homes appear incredibly affordable are overshadowing a bigger overall trend in which the overall prices of homes are actually significantly more expensive than historic norms relative to annual incomes.

Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose (52.1 percent more),Los Angeles (48.8 percent more), Portland, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more).

What Happened To Rates Last Week?

Mortgage backed securities (MBS) lost -24 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move higher. We had our highest mortgage rates on Wednesday and our lowest rates on Monday morning.

MBS sold off -86 basis points from Monday through Wednesday which drove mortgage rates upward.  Much of the reason for this was the early release of the FOMC Minutes which showed that a few of the members were in favor of considering a pull-back in the monthly bond purchases by the Fed earlier than expected.  One of the primary reason for our ultra-low mortgage rates is the artificial demand that is created by the Federal Reserve purchasing $85 billion in Treasuries and mortgage backed securities each and every month.  So, a decrease in the amount of monthly purchases would certainly negatively impact rates.

MBS rebounded on some very tame inflationary data as Import Prices and the Producer Price Index were both very tame.  Then, MBS rallied on Friday on the much weaker than expected Retail Sales and Consumer Sentiment Index which helped mortgage rates move lower from their highs earlier in the week.

What To Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

In March, 75% of agents with broker Redfin said their clients’ offers were countered by rival bids, up from 56% who said so in late 2011. The competition has been most intense in California, where 9 out of 10 homes sold in San Francisco, Sacramento and cities in Southern California drew competing bids during the month. And at least two-third of listings in Boston, Washington D.C., Seattle and New York generated bidding wars.

“The only question is not whether a new listing will get multiple bids but how many it will get,” said Kris Vogt, who manages 14 Coldwell Banker offices in the Sacramento area. One home in an Elk Grove, Calif., subdivision recently received 62 separate bids. The final sale price was for more than $150,000, well above its $129,000 asking price.

Homebuyers eager to purchase before home prices and mortgage rates rise are finding few homes for sale as sellers hold out for better deals, said Glenn Kelman, Redfin’s CEO. Even though home prices are on the rise, the balance between buyers and sellers has been thrown off balance, said Kelman. “With buyers out in force and sellers cautious, the market is in an awkward ‘tweener’ phase,” he said.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +119 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move to lower. We had our highest mortgage rates on Monday morning and our lowest rates on Friday.

All U.S. based bonds (including MBS) rallied on two main factors: 1) Reduced risk of domestic inflation and 2) Global fear. Lets address the first factor: The economic releases were a major disappointment with just about every economic report coming in below market forecasts. Both ISM Manufacturing and Non-Manufacturing showed economic expansion but at levels that were significantly lower than recent trends. ADP Private Payrolls, Initial Jobless Claims and the Unemployment report missed the mark and really disappointed the markets. The Unemployment Rate dropped from 7.7% to 7.6% but that was due to the participation rate falling, not due to an improvement in the labor force. MBS rallied (giving you the best rates of 2013) on the Non-Farm Payroll data which came in significantly lower than forecasts.

The second factor was global fear. Economic reports showed an economic retraction in Europe and their European Central Bank said that they would be in an accommodative stance for a very long time. We saw weaker numbers out of Asia and the Bank of Japan announced yet another round of intervention. But the greatest factor was North Korea and the “saber rattling” which has traders very concerned that an event could escalate there. This all drives foreign funds into our bonds and temporarily helps our mortgage rates.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Lawrence Yun, NAR chief economist, said limited inventory is holding back the market in many areas. “Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels,” he said. “Most local home builders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.”U.S. home resales (the largest segment of the housing market) hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.

More good news: Yun projects existing-home sales to rise about 7 percent in 2013 to approximately 5 million sales, which is near the current level of activity and the national median existing-home price is forecast to rise nearly 7 percent this year, while mortgage interest rates should remain historically low, but trend up slowly.

So, the industry experts are saying: 1) Good quality Inventory is moving fast and at 2) higher prices and 3) with mortgage rates rising throughout the year.  What does this tell you?

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained 34 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move to slightly lower.  We traded in a fairly narrow range and had our highest mortgage rates on Monday morning  and our lowest rates on Wednesday.

We had a mixed bag of economic news last week.  On the plus side, Durable Goods Orders, New Home Sales, Pending Home Sales and Consumer Sentiment were all very strong.  But on the negative side we saw weakness in Initial Jobless Claims, Consumer Confidence and Chicago PMI.  This caused MBS to trade in a very well defined trading channel.  This channel was capped by our 50 day moving average and supported by our 10 and 25 day moving averages.

What To Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

The National Association of Realtors said on Thursday existing home sales increased 0.8 percent to an annual rate of 4.98 million units last month, the highest level since November 2009. The January sales pace was revised upward to 4.94 million units from the previously reported 4.92 million units.

The median home sales price in February rose 11.6 percent from a year ago to $173,6000. In a separate report, the U.S. Department of Commerce reported that New Home Starts rose. Building Permits for new construction approached a five-year high.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained just +9 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move to sideways.   We had a very choppy week  with had our highest mortgage rates on Friday and our lowest rates on Tuesday.

News about the bailout negotiations with Cyprus dominated the week and overshadowed any U.S. economic data.  Essentially, as fears rose that Cyprus would not be able to raise five billion euros to qualify for its bailout, MBS improved which in turn improved mortgage rates.  As fear dissipated over Cyprus then MBS sold off which moved mortgage rates upward.

New Home Starts and Building Permits were both better than expected and Initial Weekly Jobless Claims fell again. Existing Home Sales improved and would have improved even more but were constrained due to lack of inventory. The FOMC had their moment in the sun on Wednesday. As expected there was no change in their interest rate and their policy statement was almost the same as the last two meetings. The only small change is that Bernanke stated that they would be reviewing the amount of their monthly bond purchases as our economy continues to grow.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

During the slow down in new construction, wages were cut or laid  off workers naturally sought out other jobs. Now that housing starts and housing demand have heated back up, the housing industry is struggling to get those workers back to fill demand. And in order to attract skilled workers back, builders are paying more.

Total employment in construction increased by 48,000 in February. Since September, construction employment has risen by 151,000. The biggest growth in February construction jobs came in residential specialty trade contractors, up 17,000. Those trades, such as plumbers, painters and electricians, have been boosted not just by an increase in home construction but in home remodeling as well.

For example: in Las Vegas where Pardee Homes is building 150 percent more homes this year than they did last year, finding workers is increasingly difficult. “We lost quite a bit labor to the oil fields and to places like Wyoming and North Dakota, where you would not expect it to go,” noted Klif Andrews, Pardee’s Las Vegas president.

Andrews said he is paying workers five to ten percent more now, and that has pushed his home prices higher. “We’ve raised median home prices up over 15 percent, so we’ve been able to stay a little bit ahead of it, but cost increases, it’s not just labor, it’s also materials,” he added.

Nationwide, the median price for newly built homes rose 2 percent in January and new home prices now far exceed the median price existing homes.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -133 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move to their highest levels of 2013.   We had our highest mortgage rates on Friday and our lowest rates on Monday.

When an economy grows you eventually see signs of inflation.  And inflation is the enemy of long-term bonds such as Mortgage Backed Securities and Treasuries.  Inflationary concerns about the future are a major factor in bond prices and therefore interest rates.

We have certainly had many better than expected economic reports over the 60 days. But last week’s data finally was enough to cause bonds to sell off which pushed up mortgage rates.  The servicing sector (which is 2/3 of our economy) showed expansion according to the ISM Non-Manufacturing report.  But the biggest market mover was Friday’s Unemployment report.  The headline Unemployment Rate fell from 7.9% to 7.7%.  But bond traders are more interested in the Non-Farm Payroll data.  The market was expecting this number to increase by around 165K but instead it shot up to 236K new jobs.  This set off a chain reaction where bonds sold off.

What to Watch Out For This Week?

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Home Prices Increase Again: The Case-Shiller Home Price Index once again showed that home values were increasing with a year-over-year increase of 6.82% in their 20 city index. The monthly gain was at 0.88%.

Pending Home Sale Jump: The National Association of Realtors said Wednesday that its seasonally adjusted index for pending home sales rode 4.5% last month to 105.9. Volume is now 9.5 percent above January 2012 and is the highest reading since April 2010.

New Home Sales Best Since 2008: New home sales surged in January, rising almost 16% from December in another sign of an improving housing market. Sales of new single-family homes in January came in at a seasonally adjusted annual rate of 437,000, the government said Tuesday.

That’s three separate reports last week, all from separate sources that all show the same thing that we have been seeing for several months. Housing is clearly on the right path.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +72 basis points from last Friday top the prior Friday which caused 30 year fixed mortgage rates to move to their lowest levels in 4 weeks. We had our highest mortgage rates on Monday and our lowest rates on Friday.

We had a slew of much better than expected economic data. Normally, when we get strong economic data, bonds sell off (which causes higher mortgage rates) but the economic data was over-shadowed by financial fear in global markets. First up was the Italian elections. The results have investors concerned that Italy will not follow their current path to austerity and that threatens the stability of the entire European Union. Here at home, the U.S.A. continues to operate without a budget and faces another debt ceiling and automatically triggered spending cuts. These events are what primarily drove mortgage rates downward.

Our economy continues to chug along. We saw major improvements in both the ISM Manufacturing and the Chicago PMI reports which show strong growth in the manufacturing sector. Consumer Confidence improved and so did Consumer Sentiment. Housing continued to impress with gains home values (Case-Shiller Index) and sales (New Home Sales and Pending Home Sales).

What To Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.