Daily Commentary by Larry Baer: The Commerce Department reported earlier this
morning new home construction rose 0.8% last month - reasonably in line with
most analysts' expectations. Starts for single-family units, which
comprised about two-thirds of the total, edged up 0.5% to their highest level
since June 2008. Permits for future home construction rose 4.6%, also the
quickest pace since June 2008. While the improvement in the home
construction sector is certainly welcome - it is important to put this data in
context. No matter how one chooses to slice and dice the housing starts
and building permits numbers - the new home construction industry remains a
shadow of its former self, with building starts running less than half of the
pre-recession peak and near levels last seen in the early 1990's.
The primary focus of
mortgage investors this week will be on the results of the Federal Open Market
Committee's two-day monetary policy strategy meeting that began earlier today
and will end tomorrow afternoon with the release of the committee's post-meeting
statement. Market participants, both stock jocks and bond daddies,
broadly anticipate Chairman Bernanke and his fellow central bankers will
maintain their ultra-loose monetary policy, including monthly purchases of $85
billion worth of Treasury debt obligations and agency eligible mortgage-backed
securities, at least through the end of the year.
If, as expected, the
post-meeting statement and Mr. Bernanke's press conference later the same day
shows the Fed remains firmly committed to their repeated vow to keep short-term
interest rates near zero and to support the economy with quantitative easing
efforts until the jobless rate falls to 6.5% and/or inflation at the consumer
level rises above 2.5% -- mortgage interest rates will probably continue to hover
near current levels.
On the other hand,
in the highly unlikely event there is a shift in the terminology contained in
the Fed's post-meeting statement that suggests the Fed is considering
throttling back their QE3 purchase program sooner rather than later -- look for
the stock market to take a nosedive - to the direct benefit of the prospects
for fractionally lower mortgage interest rates. The Fed's post-meeting
statement will be released at 2:00 p.m. ET Wednesday afternoon and Chairman
Bernanke's news conference will begin thirty-minutes later at 2:30 p.m.
ET.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
