|10 year government bond yield||3.05%|
|30 year fixed rate mortgage||4.78%|
Stocks are higher this morning on no real news. Bonds and MBS are down.
Mortgage applications increased last week despite a big uptick in rates. The overall index rose 1.6%, driven by a 4% increase in refis and a 0.3% increase in purchases. FWIW, I wonder if there is some sort of strange adjustment related to the Labor Day holiday going on. Rates hit a 7 year high, with the conforming 30 year fixed hitting 4.88%. ARMs increased to 6.5% of all activity.
Housing starts rose to an annualized pace of 1.28 million in August, which is up over 9% on a MOM and YOY basis. Permits disappointed however, falling just under 6% on a MOM and YOY basis. Multi-fam (which is notoriously volatile) drove the decline in permits and the increase in starts. Single family permits were up about 6%. Geographically, the action was in the West and South, while the Northeast and Midwest were flat / barely up.
Housing starts will probably take a step back in the next few months as construction workers will be occupied rebuilding North Carolina. Labor remains an issue for new home construction, but the tariff-driven spike in lumber prices is over, and futures are trading at 18 month lows.
Fannie Mae thinks growth has peaked for this cycle and that the second quarter’s torrid growth rate of 4.2% was artificially boosted by inventory build ahead of tariffs. This had the effect of borrowing growth from future quarters. In all fairness, they are probably correct – a 4.2% growth rate is so far above historical trend that it is almost by definition unsustainable. Housing continues to punch below its weight as affordability issues weigh on sentiment. Note that the number of people saying it is a good time to buy a house has hit the lowest level since the survey began 8 years ago. Blame rising rates and home price appreciation outstripping income growth. FWIW, they are somewhat bearish on consumer spending going into the 4th quarter, which seems to defy a lot of data we are getting about retailer activity.