Zoning – Oregon has one of the country’s most centralized systems of land use planning and some of the tightest building regulations. Major zoning changes with bipartisan support are moving through legislature this year in an attempt to combat a housing shortage of 110,000 units. House Bill 2001 increases the state’s oversight on local land use and creates a new system with the intent on producing equitable housing of both subsidized affordable and market rate. Critics fear that this system will be ineffective as there was a similar system in California which, lacking any teeth, failed to overcome local battles. Supporters hope that Oregon’s system will learn from California’s mistakes and spark a boom in housing production.
Mortgage Rates improved this week as the price of Mortgaged Backed Securities responded favorably to instability in the banking sector helping Mortgage Rates ease downward. Rates are up approximately 2.5% from this time last year.
Banking – First Republic Bank is now the 4th regional bank to be bailed out. They received $30B in aid from larger banks in an effort to stop the run on the bank’s deposits and stock. This band-aid will help in the short term – but what will happen when the big banks want their deposits back and why is no one purchasing these banks? It will interesting to see if the Fed continues to keep hiking interest rates next week in light of market instability. Regardless, banks will be eying their balance sheets and tightening their ability to lend – a deflationary action that reduces money supply and should be helpful for the bond market.
Jobs – the labor market remains tight. The number of individuals filing for unemployment for the first time fell back below 200,000 this week. Employers are trying to hold on to their workers.
New Construction – builder confidence has improved nicely since December but remains below 50 – meaning they are in contraction. High carrying costs for loans is putting a dampener on longer term projects. Single family starts are down 32% year over year which indicates a continued lack of supply to support the nation’s housing demand.
Manufacturing – both the Empire State and the Philly Manufacturing index declined last month. The Philly index has now been negative for 7 consecutive months.
Inflation – the February Producer Price Index report showed that wholesale inflation decreased by 0.1% (after a 0.4% negative revision in Jan). The year over year increase is down from 5.7% to 4.6%. The Core Rate, which strips out food and energy, was flat month over month. On a year over year basis the Core Rate has declined from a 5.4% increase to a 4.4% increase. The Cass Freight Shipping Index showed that shipping costs dropped by 5.5% last month. These indicators show that inflation is slowing down which will benefit Mortgage Rates.
Mortgage Applications to purchase homes rose 7% last week and are down 38% year over year. Refinance applications rose 5% last week and are down 74% from this time last year.