Housing starts dropped significantly from a 1,048K annual
pace in December to a 880K annual pace in January, a 16% drop. The consensus
estimate had been for 950K. Harsh weather again is thought to be a
contributor to the decline - although we note that starts in the Northeast
actually rose. Housing permits, which is typically less weather
sensitive, fell 5.5% as well.
It is clear that the rise in mortgage rates over 2013 has
had a damping effect on the housing market. Although less clear is the
overall effect this has had - and will have - on the economy and to what
degree, if any, Fed policy will be influenced by this slowdown. However,
all else equal, a reduction in mortgage supply should have a firming effect on
mortgage spreads.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
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