Mortgage Rates : Housing Starts Surprise Wall Street
The Fannie Mae (FNMA) 3.0% 30-year coupon fell -9/32 to 104.21, and the Ginnie Mae (GNMA) 3.0% 30-year coupon closed down -10/32 to 106.04.
Fannie Mae bonds are linked to conforming mortgage rates; Ginnie Mae bonds are linked to FHA and VA mortgage rates. Each rose 0.125% Tuesday.
Jumbo mortgage rates did not change.
Rates Rise On Housing Starts, Fiscal Cliff
Tuesday, the Census Bureau, in a joint release with the U.S. Department of Housing and Urban Development (HUD) announced a 4% monthly increase in U.S. Housing Starts.
A "housing start" is a home on which new construction has started.
As compared to one year ago, Housing Starts are higher by 42%, a figure which reflects the rising and improving U.S. housing economy. A total of 894,000 units were started last month. In addition, in October, 866,000 building permits were issued nationwide -- a 30 percent annual increase.
The data helps illustrate why U.S. home builder confidence has moved to a six-month high.
As reported by the National Association of Homebuilders earlier this week, the Housing Market Index -- better known as the "homebuilder confidence survey" -- rose five points to 46. Not since May 2006 has builder confidence been so strong.
Single-Family Housing Starts were mostly unchanged in October from the month prior, but remain 35% higher as compared to one year ago.
Mortgage Rates : Fiscal Cliff, Europe And Thanksgiving
There is very little economic data scheduled for release Wednesday. Initial Jobless Claims will hit the wires early, but should receive little attention. Instead, mortgage markets will take their cues from Capitol Hill, from overseas, and from the holiday calendar of the week.
With Fiscal Cliff talks ongoing, mortgage rates remain susceptible to "progress". With each report that congressional leaders are close to agreement on the pending Fiscal Cliff, stock markets gain and mortgage rates rise. When talks appear stalled, or step backward, mortgage rates improve.
In addition, mortgage rates are moving on Eurozone action.
Late Tuesday, Eurozone leaders failed to reach agreement on a debt-reduction package for Greece and talks broke up after 11 hours of meetings. A financing package for the nation-state will not be completed until November 26, at the earliest. U.S. mortgage bonds are expected to improve on the news.
Rates may be volatile, too. With markets closed on Thursday for Thanksgiving, and on a half-day for Friday, traders are expected to get a head-start on their respective time-off. With volume expected to be light on Wednesday, mortgage rates may be more jumpy than normal.
Expect mid-day rate changes with any serious change in momentum.
Mortgage Rates To Rise In December
With Friday, the holiday shopping season starts in earnest. Based on the first "mall-watching" reports, mortgage rates may face pressure to rise. Strong consumer spending will bode poorly for people waiting on 2013 mortgage rate projections; looking for rates to drop.
High levels of consumer spending lead to economic expansion and a growing economy can be bad for mortgage rates. In each of the last two years, big Black Fridays have pushed mortgage rates higher. This year, a repeat may be likely.
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