Mortgage services.

While it would be technically accurate to point out a slight increase in January's homebuilder confidence (officially the National Association of Homebuilders Housing Market Index or HMI ), the type of movement we've seen in the past 2 years is better characterized as "incidental" in the bigger picture. As with most housing-related metrics, HMI plummeted in 2022 as interest rates skyrocketed.  It's been broadly sideways ever since with the swings between highs and lows getting smaller and smaller. In market jargon, this is a textbook example of "consolidation"--something that can signal an eventual reversal back toward higher levels or a renewed slide to lower lows.  Absent another catastrophic episode like the Great Financial Crisis, it's not clear what would make builders feel incrementally more gloomy than the post-pandemic lows.  As such, this consolidation is widely viewed as representing some sort of lower boundary.  Time is the key variable, and one that's likely to be determined by economic factors such as interest rates and inflation. Other highlights from this month's NAHB data: 30% of builders lowered prices in January, which is in line with the average of the past 6 months Average price reduction: 5%, unchanged from last month Sales incentives were used in 61% of transactions, also in line with norms

The US Census Bureau released its New Residential Construction report for December today.  The report measures building permits, the start of the construction process (housing starts), and housing completions. While construction has definitely been running well below the highs seen 3 years ago, it continues to operate just above pre-pandemic levels.  That's something that can't be said for many other housing and mortgage market metrics. Last month's data showed housing starts closer to the low end of 2024's range.  Today's report shows a bounce back to the highest levels since February. The multifamily sector played the biggest role in the rebound--especially in the South which accounted for 128k additional units.  Nationally, multifamily housing starts increased by 155k units to a 12 month high of 418k and single family starts rose 34k to a total of 1.05 million.

There hasn't been meaningful change in economic data that measures activity in the housing and mortgage markets. In a nutshell, activity has been drifting along at long-term lows.  The weekly survey of mortgage application activity from the Mortgage Bankers Association (MBA) is no exception, for the most part.  Refinancing picked up in the summer months as rates fell, but not to historically strong levels, by any means. Purchase applications appear to be more volatile, but that's a factor of a narrower overall range.  They've been even more sideways. As of last week, both purchase and refi applications were effectively at the lowest levels of the year.  We knew the application landscape would be challenging due to the big jump in rates that hadn't yet been captured in last week's data.  The saving grace was the potential for seasonal distortions surrounding the New Year holiday.   Holidays that fall on specific dates can create inconsistencies in seasonal adjustments in economic reports. Last year saw New Year's Day fall on a Monday, which was less of a disruption to the business week compared to this year's Wednesday holiday. Perhaps the applications that tend to come in after the holiday were delayed by few days as a result, thus helping explain why applications rose for both purchases and refis despite the higher rates. Purchase activity was actually the highest in nearly a year.