Wednesday, January 19, 2011

Market UpDate W/Housing Starts Data

Wednesday’s bond market has opened in positive territory following the release of some mixed housing data and early stock losses. The Dow is currently down 3 points while the Nasdaq has lost 22 points. The bond market is currently up 4/32, but we will still likely see an increase of approximately .125 of a discount point in this morning’s rates due to weakness late yesterday.

December's Housing Starts was the day’s only relevant economic data. It showed that starts of new home construction fell much more than expected last month. That is good news for the bond market because it hints at a slowing housing sector. However, clouding the picture was a spike in new permits issued that gives us an indication of future home starts. Prior to construction beginning, builders must pull permits from local city and county offices. The unexpected increase in new permits tells us that more projects are about to get under way, making it likely that w e will see an increase in January’s Housing Starts data. Therefore, we can consider this data neutral towards mortgage rates.
There are two monthly reports scheduled for release late tomorrow in addition to weekly unemployment figures that have carried a little more significance lately than they usually do. December’s Existing Home Sales is the first and is considered to be moderately important. The National Association of Realtors will give us this housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect mortgage rates tomorrow.

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