Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It’s no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It’s the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Bedford , this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

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Mortgage markets worsened last week on general profit-taking in the U.S. bond market, combined with talk of a coordinated rescue effort for Greece and its debt burden. Mortgage-backed bonds sold off, causing conventional and FHA mortgage rates to rise.

There wasn’t much hard data on which to trade last week, either, so momentum took markets farther than they otherwise might have moved on their own.  It marked the first time in 5 weeks that rates rose for NH rate shoppers.

This week, data returns. Expect mortgage market movement.

Some of the week’s more important releases include:

1. Housing Starts and Building Permits (Wednesday)
2. The release of the last month’s FOMC Minutes (Wednesday)
3. Business and consumer inflation figures (Thursday and Friday)

Inclement weather may have impacted last month’s Housing Starts reading so pay closer attention to Building Permits.  Permits precede actual construction and can be more indicative of economic optimism. If permit readings are strong, it should be a negative for mortgage rates.

The same is true for the FOMC Minutes. 

Last month’s FOMC post-meeting press-release was decidedly middle-of-the-road, but the statement is just a summary of the Fed’s 2-day meeting, boiled down to a few paragraphs.  Wednesday’s release of the FOMC Minutes will reveal the deeper discussions among members of the Fed.  Wall Street will mine it for clues about the future of the economy.

If Wall Street senses optimism coming from the Fed — again — mortgage rates should rise.

And, lastly, keep an eye on Thursday and Friday’s inflation data.  Inflation is bad for mortgage rates so a higher-than-expected reading should spark a bond market sell-off.

Since mid-December, mortgage rates have moved within a tight range and there’s little reason for rates will break this range this week. However, we are near the top of the channel. If you know you’re going to need a rate locked soon, it’s probably best to do early in the week.

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