Market Update: FHA announces tightened underwriting standards
Investors seek safety following weak manufacturing data
We’re continuing to see investors move away from risk and put money to work in the safety of the bond and mortgage-backed securities markets. The Dow Jones Industrial Index lost 460 points on Friday after a swath of weak manufacturing data, particularly in the Euro area.
FHA announces tighter guidelines for first-time homebuyers
Strong concerns about the outlook for global economic growth also whacked equities markets around the world, including Asia and Europe. Credit spreads on corporate debt are also substantially wider this morning and interestingly, the FHA announced it will tighten underwriting standards to first-time homebuyers who aren’t in a position to repay, affecting nearly 40-50k loans per year. As equities retreat and credit tightens, the markets will contend with a decent amount of treasury supply this week (which I think will be easily absorbed). Last week the 10-year yield traded through 2.50, putting bond yields in unfamiliar territory. 2.30% represents a 50% retracement of the entire move (1.36% in June 2016 to 3.23% November of 2018). The next target I have would be 2.05%, the low in 2017. Right now, the 10-year is trading at 2.44%.
What to watch for
The most notable economic data this week comes on Thursday when we get final Q4 GDP. We’ll also see Housing Starts, Building Permits, Case-Schiller Home Prices, and several Fed speakers.
Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.