Tucson Arizona Mortgage & Real Estate Blog

If you only read headlines this past week, you may have missed two very important points.

The first story relates to Housing Starts.  Housing Starts measure the number of new homes entering the construction phase.  The headline blared “Housing starts plunge to 16-year low”.

If you are a homeowner, this is terrific news. 

Because home values are governed by Supply and Demand, fewer homes built means that home demand has a chance to rebalance against home supply. 

This places upward pressure on home prices nationwide.

When Housing Starts drop, it says more about weakness in builder sentiment that it does about the state of the housing nationwide.  Housing Starts are at all-time lows because builders want to sell the product they have before putting more product on the market.

The second story was yesterday’s New Home Sales figures.

The headline read that “US new-home sales slide in record plunge” but, again, let’s look a little deeper.

New Home Sales are defined as homes that are newly built.  Stated differently, it specifically counts the number of homes sold that were once classified as “Housing Starts”.

If Housing Starts falls, therefore, we can expect New Home Sales to fall, too.  The two data points count the same housing inventory at two different points along a timeline.

These two stories are related but neither should be construed as bad news.  As builders cut back on the supply of homes, it should create an increase in relative demand.

For homeowners, this is a positive development.

(Image courtesy: New York Times)

Mortgage rates change from day-to-day, but last week’s volatility was a record-breaker. 

After drooping through Tuesday and then skyrocketing Wednesday and Thursday, mortgage rates retreated slightly on Friday. 

By weeks’ end, rates were at their same levels from mid-December.

This is in contrast to Tuesday, just after the Fed’s rate cut and before the stock market rally.  Mortgage rates had been touching near four-year lows for some home loan products.

This week could be equally hectic because heavy economic data it hitting the wires, and because the Federal Open Market Committee is meeting.

The major activity gets started Tuesday with the Consumer Confidence report. 

Markets care about this survey because recessions tend to be self-fulfilling prophecies — if people believe it will happen, it generally does.  Therefore, if average Americans are feeling worse about the economy, it may cause stocks to sell-off to the benefit of mortgage rates. 

Notice from the graph above how confidence plunged through the second half of last year. read more