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Mostly Charts And Quick Takes on Housing and Rates

It's a busy time of year on a busier-than-normal year, so I'll keep this short. Those interested in more detail can click through the links.

One major theme in the 2nd half of 2020 is that mortgage rates have been insulated from market drama--walking a different path than their usual best friend, 10yr Treasury yields.  If you ask Treasuries, the big bounce in rates is already well underway.

20201218 nl2.png

Here's how mortgage rates have bucked that trend:

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Last week's newsletter goes into more detail on WHY the insulation exists (revisit it by clicking here), but the important thing to know is that we're getting closer to "normal" day by day.  Once we get there, mortgage rates will be less willing to defy their Treasury counterparts.

20201218 NL6.png

As to the likely fate of Treasury yields, there's room for movement in either direction. In the bigger picture, rates  will take cues from the economic recovery--a multifaceted issue in itself--and the success of vaccine production/distribution.  

Vaccine news already had a big impact in November.  Vaccine headlines have since ceded the spotlight to fiscal stimulus headlines.  While there will be one more spat of volatility after congress decides on stimulus (allegedly, before Christmas), the bond market is largely cooling down at this point and getting ready for the next big move.  Even the mighty Federal Reserve--frequently the most important consideration for interest rates--failed to stir markets this week (any small scale reaction is completely lost inside the red lines below).

20201218 nl1.png

Another theme over the past 6 months has been stunningly strong housing numbers.  This week's construction and builder confidence reports are just the 2 latest additions to the list.

20201218 NL5.png

Recently Released Economic Data

Time Event Actual Forecast Prior
Tuesday, Dec 15
8:30 Nov Import prices mm (%) 0.1 0.3 -0.1
8:30 Nov Export prices mm (%) 0.6 0.3 0.2
8:30 Dec NY Fed Manufacturing +4.9 6.90 6.30
9:15 Nov Industrial Production (%) 0.4 0.3 1.1
Wednesday, Dec 16
7:00 w/e MBA Purchase Index 331.6 325.7
7:00 w/e MBA Refi Index 4014.5 3959.2
8:30 Nov Retail Sales (%) -1.1 -0.3 0.3
9:45 Dec PMI-Composite (source:Markit) 55.7 58.6
10:00 Dec NAHB housing market indx 86 88 90
10:00 Oct Business Inventories (% ) +0.7 0.7 0.7
14:00 N/A FOMC rate decision (%) 0 - 0.25 0.125 0.125
14:30 Powell Press Conference
Thursday, Dec 17
8:30 Nov House starts mm: change (%) 1.2 4.9
8:30 Dec Philly Fed Business Index 11.1 20.0 26.3
8:30 Nov Housing starts number mm (ml) 1.547 1.530 1.530
8:30 Nov Build permits: change mm (%) 6.2 -0.1
8:30 Nov Building permits: number (ml) 1.639 1.550 1.544
8:30 w/e Jobless Claims (k) 885 900 853
Friday, Dec 18
10:00 Nov Leading index chg mm (%) +0.6 0.5 0.7
Tuesday, Dec 22
8:30 Q3 GDP Final (%) 33.4 33.1 33.1
10:00 Nov Existing home sales (ml) 6.69 6.70 6.85
10:00 Nov Exist. home sales % chg (%) -2.5 -1.0 4.3
Wednesday, Dec 23
8:30 Nov Core PCE Inflation (y/y) (%) 1.4 1.5 1.4
8:30 Nov Durable goods (%) 0.9 0.6 1.3
9:00 Oct Monthly Home Price yy (%) 10.2 9.1
10:00 Nov New Home Sales (ml) 0.841 0.995 0.999
10:00 Dec Consumer Sentiment (ip) 80.7 81.3 81.4
10:00 Nov New Home Sales (%) (%) -11.0 -0.3 -0.3
Thursday, Dec 24
8:30 Nov Durable goods (%) 0.7 1.3
14:00 Christmas Holiday
Friday, Dec 25
0:00 Christmas Day

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