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Home Builder Stocks MIght get a Boost from Lower Yields

David Becker
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The XHB (SPDR Homebuilder ETF) is trading under pressure but could receive a reprieve on Wednesday after a stronger than expected bounce in the mortgage index. The purchase index bounced higher and refinancing received a boost as yields in the US tumbled following the mixed employment report released by the Department of Labor this past Friday.

U.S. MBA mortgage market index rebounded 5.3% in data released earlier, while the purchase index snapped 8.9% higher and the refinancing index rose 2.4% for the week ended May-2. No doubt the latest drop in market yields in the wake of the mixed review of the April payrolls report last week helped drive mortgage rates lower and revive some activity. Even the better than expected ISM services report that was released on Monday failed to boost interest rates. Maybe the theme is not economic weakness that is driving rates lower but the knowledge that no matter how strong the economy is at the momentum, the Fed is on hold and will not increase interest rates until they see a long string of robust numbers.

The average 30-year fixed rate fell 6 basis points to 4.43% to the lowest level since November. The MBA noted on Tuesday that Q1 commercial and multi-family loan originations were off 1% from a year-ago, while some 45% lower from Q4.

This comes on the heels of weak number that were released for March, throughout April. Existing home sales along with new home sales were much weaker than expected and brought about the idea that home sales were contracting.

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