Sentiment Shifts, Rates Rise Slightly

Once again, the change in mortgage rates over the past week was mostly determined by movements in the stock market. Stocks gained, and mortgage rates ended the week a little higher.

Throughout January and the first two weeks of February, investors felt a need to buy relatively safer assets, such as U.S. government-guaranteed bonds, including mortgage-backed securities, and sell riskier assets like stocks. This caused a nice reduction in mortgage rates, but a sharp drop in stock prices. When major movements like this take place in financial markets, it is common to eventually see a significant move in the opposite direction. Late last week, sentiment appeared to have shifted. Stocks have recovered some of their losses, and mortgage rates have risen a little from their recent lows.

Recent housing market data suggests that the pace of homebuilding has slowed a little to begin the year. January housing starts declined 4% from December, but they remained at a higher pace than a year ago. For all of 2015, housing starts were 11% higher than in 2014. The recently released National Association of Home Builders (NAHB) sentiment index revealed a small decline in homebuilder confidence in February.

These reports also contained reasons to be optimistic about the outlook for homebuilding later this year. Building permits in January were 14% higher than a year ago, and the forward-looking component of the NAHB survey posted a small increase. Steady job gains and low mortgage rates also provide reasons to be optimistic.

Source: MBS Quoteline

- See more at: www,GrahamPeterson.com