Morning Report - what homebuilders are saying about the market

Vital Statistics:

	Last	Change	Percent
S&P Futures	1675.5	-8.5	-0.50%
Eurostoxx Index	2744.8	4.5	0.16%
Oil (WTI)	104.4	-1.1	-1.03%
LIBOR	0.265	0.001	0.45%
US Dollar Index (DXY)	81.77	-0.203	-0.25%
10 Year Govt Bond Yield	2.55%	-0.02%
Current Coupon Ginnie Mae TBA	104.5	0.2
Current Coupon Fannie Mae TBA	104	0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.38

Markets are lower on no real news. Bonds and MBS are up small. 

There isn't much in the way of economic data this morning. I would expect activity to dwindle as most of the Street will be on the L.I.E. by noon.

Yesterday was a big day for real estate-related earnings - we heard from four homebuilders - Meritage, D.R. Horton, Standard Pacific, and Pulte. As far as the question "Has higher mortgage rates affected traffic and purchase activity?" goes, the answer is yes, at least in some areas. Meritage (who is primarily in the West / Southwest) noted an increase in orders, as did Pulte and SPF. Pulte noted that buyers still have a "sense of urgency." On the other hand, D.R. Horton, which is more geographically diversified reported a decrease in orders. That was huge. D.R. Horton said that buyers are "alarmed" at the rapid rise in rates and it has affected sales. I guess it makes sense when you think about it - on the West Coast, inventory is depleted and prices are rising at double digit rates. So it would make sense that buyers would feel a sense of  urgency - the fear is not being able to find a house. Elsewhere in the country, with prices flat / up small, that doesn't exist. Horton is at the lower price points as well, so maybe you are starting to get into DTI issues with first time homebuyers. Anyway, the increase in rates is starting to bite as far as purchase activity goes.