No New ECB Stimulus

After spending the last couple of weeks at or near the lowest levels of the year, mortgage rates rose this week. The cause came from investor disappointment with Thursday's European Central Bank (ECB) meeting. The U.S. economic data contained few significant surprises and had little effect.

At its last meeting in March, the ECB announced significant new stimulus measures to spur economic activity and inflation in the eurozone. In speeches following the March meeting, ECB President Mario Draghi emphasized the ECB's readiness to do more if needed. Investors liked what they heard and pushed interest rates around the world lower in anticipation of more stimulus. This week, however, the ECB chose to add no new measures, and some of the improvement in rates was reversed.

The recent housing data was mixed. The existing home sales data for March revealed a solid increase of 5% from February, and they were higher than a year ago. Also notable,inventories of existing homes for sale increased 6%. Tight inventories have been a big factor holding back home sales activity in many regions. National median sale prices were 6% higher than a y ear ago.

In contrast to home sales, housing starts declined 9% from February, but they still were 14% higher than a year ago. The drop was evenly split between single-family and multi-family units. Building permits, a leading indicator of future activity, fell 8% in March but also remained above year ago levels.

The figures for housing starts and building permits are very volatile from month to month, which makes it necessary to look at a longer time period to determine the underlying trend. Housing starts in 2016 are well above the levels seen a year ago.

Looking ahead, the next Fed meeting will take place on Wednesday. No change in rates is expected, but the statement could have an impact on mortgage rates. This will be followed by a Bank of Japan meeting which could influence U.S. markets on Thursday. Before the meetings, durable orders will come out on Tuesday. The first reading for first quarter gross domestic product (GDP), the broadest measure of economic activity, will be released on Thursday. The core PCE price index, the Fed's preferred measure of inflation, will come out on Friday.