Rate Snapshot: New housing starts slated to exceed expectations

by MPA19 Nov 2014

By David Shirmeyer, CEO at Sigma Research

October housing starts and permits will be released today; starts are expected at 1,028 mil up 1.1% while permits are expected at 1,035 mil up 1.7%. Starts and permits will be compared to yesterday’s NAHB index that jumped 4 points, from 54 to 58; expectations were for 55.


New-home sales, in the first nine months of 2014, rose just 1.7% from the same period a year earlier, according to the Commerce Department. Sales of previously owned homes fell 1.7% in September from a year earlier, according to the National Association of Realtors.


Construction of apartment buildings and other multifamily dwellings has far outpaced the building of new single-family homes. Construction started this year through September on 22.7% more structures with five or more units compared with the first nine months of 2013.


Also, this afternoon the FOMC minutes from the October meeting when the Fed announced the end of the monthly purchases of treasuries and MBSs, will be released


Another session with no movement in the bond and mortgage markets The stock market though doesn’t know what a pullback might look like, money continues to flow into U.S. equities the only game in town (globally). The 10-year at 2.32% was down 2 bp points yesterday but remains glued to the very narrow range, now approaching the 18th day today---it has been since Oct 28th that the 10-year has ventured out of 2.38% to 2.30%.


Since we have little to talk about in the bond and stock market, let’s talk weather. 50% of the U.S. has snow on the ground and temps are well below normal (Indianapolis 25 degrees below norms). It’s the earliest that the halfway mark has been passed since the current method for measuring began 2008, an event that usually doesn’t happen until December.


Predictions from Accuweather are for more cold. Todd Crawford, a meteorologist at Weather Services International in Andover, Massachusetts, says snow cover reflects a lot of sunlight back into space. “So instead of the solar radiation being used to heat the ground and lower atmosphere, the energy is basically wasted, resulting in a cooler atmosphere from a global perspective.”


Why do we care, other than freezing our butts off? Because if the cold weather persists with these temps and more snow, it won’t be long before we hear the cacophony about weaker consumer spending at stores and how much more consumers are buying on the internet. The markets are always talking about the impact of weather on the economy. Recall Q1 when GDP dropped 4.6%, it was completely blamed on weather. And while I am at it, what has become of Black Friday?


Black Friday is no more! Once a big deal for shoppers the day after Thanksgiving, now the old Black Friday has morphed into just another shopping day. The Black Friday sales have already gotten underway. I think it started on Labor Day but not really sure.


And what do you think about retail stores opening on Thanksgiving? Wouldn’t it be nice to keep stores closed and let employees enjoy a day off while we watch football and eat pumpkin pie (with whipped cream piled high), with turkey sandwiches for a late night snack? Could well be we will start Black Friday in 2015 on the 4th of July. Can’t wait to hear why shopping centers don’t see traffic and that consumers would have spent more but weather interfere, the reason Q4 didn’t meet forecasts.




10 year note:                    +5/32 (15 bp) 2.32% -2 bp

5 year note:                      +2/32 (6 bp) 1.61% -1 bp

2 Year note:                      unch 0.51% unch

30 year bond:                   +12/32 (37 bp) 3.04% -2 bp

Libor Rates:                 1 month 0.153%; 3 month 0.232%; 6 month 0.326%; 1 year 0.563%  

30 year FNMA 3.5 Dec:    103.50 +8 bp (+2 bp from 9:30)

15 year FNMA 3.0: Dec     103.88 +8 bp (+4 bp from 9:30)

30 year GNMA 3.5:          104.58 +8 bp (+1 bp from 9:30)

Dollar/Yen:                  116.88 +0.23 yen

Dollar/Euro:                $1.2538 +$0.0088

Gold:                           $1194.60 +$11.10 (Russian buying)

Crude Oil:                   $74.53 -$1.11

DJIA:                           17,687.82 +40.07

NASDAQ:                    4702.44 +31.44

S&P 500:                     2051.80 +10.48