Morning Report: The MBA updates its origination forecast.

Vital Statistics:

S&P futures4,17524.8
Oil (WTI)64.440.77
10 year government bond yield 1.61%
30 year fixed rate mortgage 3.17%

Stocks are higher this morning as commodity prices fall. Bonds and MBS are flat.

China has vowed to crack down on commodity speculation and this is having reverberations throughout global commodity markets, especially the metals. Since commodities generally correlate, we could see some pressure on lumber, which would be welcome in the US.

We have a big week of economic data, with real estate prices, new home sales, GDP and personal income / spending. We will also have a lot of Fed-speak.

Economic activity moderated in April, according to the Chicago Fed National Activity Index. Production-related indicators added to the index while consumption and housing deducted from it. This is consistent with some of the weaker data we saw in April, especially retail sales and employment.

Shortages – of land, lumber, gypsum and labor – are restricting development of new homes. The number of actively selling subdivisions is off 30% compared to 2019. As one developer noted: The “L’s: location, location, location” now mean “lumber, lumber, lumber.” Builders are now paying about $48,000 in softwood lumber for the average priced home.

The MBA updated its origination forecast. The advocacy group now predicts that 2021 origination will come in at $3.4 trillion before dropping to $2.3 trillion in 2022. Purchase originations will continue to increase while refis will fall off a cliff. They forecast that the 30 year fixed rate mortgage rate will average 3.5% in 2021 and 4.2% in 2022. Interestingly, the mortgage rate will increase faster than the 10-year bond yield. I am not sure what would drive that, given that the big mortgage originators (Rocket, United Wholesale, etc) are girding for a price war.

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