Like Many Housing Metrics, Builder Confidence is Just Waiting For Lower Rates

Historically low interest rates may not have guaranteed historically high levels of housing activity, but exceptionally high rates have definitely muted activity in a measurable way. We've cataloged this incessantly when it comes to refinance activity, but there's a correlation with home sales as well. The Housing Market Index (HMI) from the National Association of Homebuilders is just another way to see it. A de facto measurement of builder confidence/sentiment, the HMI had been flying high (all time highs, actually) shortly after the initial covid lockdowns. At the time, rates were at all-time lows and pent-up buying demand was being unleashed. Notably, that level of confidence was achieved despite housing starts only being about 2/3rds of their 2005 peak. Just as notable, as seen in the chart above, housing starts merely fell back to levels there were still higher than most of 2019 (a time when builder confidence was fairly close to all-time highs). So why would builder confidence swoon so much more than the activity level in the homebuilding sector would suggest? If the title and intro wasn't a giveaway, we'll make it clear: RATES! We could review a chart of rates compared to builder confidence, but that would look like an ink blot test with each line moving in opposite directions. Instead, the chart below uses the price of mortgage-backed-securities (MBS)--the bonds that dictate mortgage rates. The convenience of MBS in this context is that they'll move exactly like mortgage rates, but in the inverse (thus allowing us to more easily see the correlation between rate movement and the confidence swan dive).

November 18, 2024 Download our Mobile App: Download our Mobile App: Housing News Like Many Housing Metrics, Builder Confidence is Just Waiting For Lower Rates Historically low interest rates may not have guaranteed historically high levels of housing activity, but exceptionally high rates have definitely muted activity in a measurable way. We've cataloged this incessantly when it comes to refinance a... (read more) Mortgage Rate Watch Mortgage Rates Didn't Move Much Over The Weekend The average top tier conventional 30yr fixed rate was just a hair over 7% on Friday afternoon and the same is true at the start of the new week. Rates are based on bonds, but while bonds move constantly throughout the day, mortgage lenders only... (read more) MBS Commentary It's The Economy While financial news outlets continue focusing on politics and Trump's cabinet picks, the bond market is expressing anxiety about the risk that economic data continues coming in hotter than expected. Even when it comes to the Fed, monetary... (read more) Rob Chrisman FHA, HELOC, VOIE, DPA Products; Webinars and Training This Week; Climate Impact Interview “I didn't make it to the gym again today. That makes five years in a row.” I did, however, make it to the aerodrome over the weekend, which involved travel (not on Spirit) from Ohio to Nevada, and also a look in the mailbag. “Rob, are you hearing som... (read more) Mortgage Rates 30 Yr. Fixed Rate 7.08% +0.03% Rate Change Points Mortgage News Daily 30 Yr. Fixed 7.08% +0.03 0.00 15 Yr. Fixed 6.45% +0.02 0.00 30 Yr. FHA 6.40% +0.01 0.00 30 Yr. Jumbo 7.25% +0.01 0.00 7/6 SOFR ARM 7.10% -0.01 0.00 30 Yr. VA 6.42% +0.03 0.00 Updates Daily - Last Update: 11/18 15 Yr. Fixed Rate 6.45% +0.02% Rate Change Points Freddie Mac 30 Yr. Fixed 6.78% -0.01 0.00 15 Yr. Fixed 5.99% -0.01 0.00 Updates Weekly - Last Update: 11/14 Rate Change Points Mortgage Bankers Assoc. 30 Yr. Fixed 6.73% +0.21 0.69 15 Yr. Fixed 6.27% +0.29 0.77 30 Yr. Jumbo 6.77% +0.04 0.49 Updates Weekly - Last Update: 10/30 MBS / Treasuries UMBS 30YR 5.5 98.91 +0.08 Price / Yield Change MBS UMBS 5.5 98.91 +0.08 UMBS 6.0 100.57 +0.07 GNMA 5.5 99.39 -0.04 GNMA 6.0 100.68 +0.01 Pricing as of: 11/18 5:31PM EST 10 Year US Treasury 4.4173 -0.0231 Price / Yield Change US Treasury 2 YR Treasury 4.284 -0.017 5 YR Treasury 4.281 -0.026 7 YR Treasury 4.348 -0.026 10 YR Treasury 4.417 -0.023 30 YR Treasury 4.610 -0.007 Pricing as of: 11/18 5:31PM EST Latest Video Yun: Reducing spending brings down interest rates Homebuilder sentiment improved for the third straight month Powell's view is that policy is still restrictive and needs to be: Former N... Bond Report: 10-year yields touch 4.5% Around the Web Reuters Nomura expects Fed to pause rate-cut cycle in December Eye on Housing Residential Mortgages Experience Unchanged Lending Conditions, Weaker Demand in Third Quarter Eye on Housing Builder Confidence Moves Higher as Election Uncertainty is Lifted Calculated Risk Blog Housing Nov 18th Weekly Update: Inventory Up 0.1% Week-over-week, Up 26.7% Year-over-year CNBC 10-year Treasury yield ticks up slightly following week of gains Marketwatch Investors are bracing for higher-for-even-longer interest rates CNBC Young adults are holding off on moving out of their parents' house here's what's behind the trend Calculated Risk Blog Part 2: Current State of the Housing Market; Overview for mid-November 2024 Calculated Risk Blog Lawler: Early Read on Existing Home Sales in October Calculated Risk Blog 3rd Look at Local Housing Markets in October; First Year-over-year Sales Gain Since August 2021 Eye on Housing Single-Family Permits Higher in September 2024 CNBC European markets set for higher open as investors look to shake off negative sentiment Calculated Risk Blog Q4 GDP Tracking: Mid 2% Range

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