Blogging With The Krew

Check some recent articles and posts about the industry.

Slightly Weaker Drift, But Broadly Uneventful

Slightly Weaker Drift, But Broadly Uneventful Friday may as well have been a 4th weekend day for the bond market.  Volume and liquidity were obviously in holiday mode.  Trading levels were basically flat, although it might not feel that way if you're seeing MBS prices end the day down more than an eighth of a point.  It's unclear whether we're seeing actual weakness at the end of the day or an incidental expression of extremely thin liquidity. Even if it's "real," it's still not bad considering where we were on Tuesday afternoon.   Econ Data / Events Building Permits 1.483m vs 1.460m f'cast Housing Starts 1.499m vs 1.320m f'cast Market Movement Recap 09:37 AM stronger overnight but giving up those gains in the past hour.  MBS now unchanged and 10yr down half a bp at 4.609 01:57 PM Sideways at the lows.  MBS down 1 tick (.03) and 10yr down half a bp at 4.608 04:05 PM Weakest levels of the day.  MBS down an eighth of a point and 10yr up 0.4bps at 4.617

Uneventful Day For Mortgage Rates

Mortgage rates are driven by the bond market and Friday was the least active day of the week for bonds.  There were no major economic reports to cause rapid changes in trading levels. As such, mortgage rates started out very close to the levels seen yesterday and most lenders didn't make any mid-day changes. The absence of any significant movement is a victory, of sorts, in light of the ground covered over the past 2 days (the best 2-day improvement since November). On the other hand, rates began the week at the highest levels since May 2024. It's more common to see bigger gains when rates are recovering from long term highs--a fact that detracts from the victory to some extent. Bonds are closed on Monday for the holiday and Tuesday could see a flurry of market activity in response to political news. There's no way to know if that activity would be good or bad for rates ahead of time, let alone if it will even materialize in the first place. [thirtyyearmortgagerates]

Homebuilder Confidence Consolidation Continues

While it would be technically accurate to point out a slight increase in January's homebuilder confidence (officially the National Association of Homebuilders Housing Market Index or HMI ), the type of movement we've seen in the past 2 years is better characterized as "incidental" in the bigger picture. As with most housing-related metrics, HMI plummeted in 2022 as interest rates skyrocketed.  It's been broadly sideways ever since with the swings between highs and lows getting smaller and smaller. In market jargon, this is a textbook example of "consolidation"--something that can signal an eventual reversal back toward higher levels or a renewed slide to lower lows.  Absent another catastrophic episode like the Great Financial Crisis, it's not clear what would make builders feel incrementally more gloomy than the post-pandemic lows.  As such, this consolidation is widely viewed as representing some sort of lower boundary.  Time is the key variable, and one that's likely to be determined by economic factors such as interest rates and inflation. Other highlights from this month's NAHB data: 30% of builders lowered prices in January, which is in line with the average of the past 6 months Average price reduction: 5%, unchanged from last month Sales incentives were used in 61% of transactions, also in line with norms

Housing Construction Bounced Back in December Thanks to Multifamily Sector

The US Census Bureau released its New Residential Construction report for December today.  The report measures building permits, the start of the construction process (housing starts), and housing completions. While construction has definitely been running well below the highs seen 3 years ago, it continues to operate just above pre-pandemic levels.  That's something that can't be said for many other housing and mortgage market metrics. Last month's data showed housing starts closer to the low end of 2024's range.  Today's report shows a bounce back to the highest levels since February. The multifamily sector played the biggest role in the rebound--especially in the South which accounted for 128k additional units.  Nationally, multifamily housing starts increased by 155k units to a 12 month high of 418k and single family starts rose 34k to a total of 1.05 million.

AMC Alternative, Verification, Realtor Fee Financing Tools; Letter to FHFA Director

We’re more than halfway through January already, the MBA has lowered its 2025 projection to $2.1 trillion, and there is a sense of “wait and see” out there among lenders and vendors regarding rates, products, regulations… Maybe you should do something besides just making a few extra calls. STRATMOR’s current blog is “Leaders Don’t Wait for Markets” which may give you some tips. In 2023, 12 percent of Americans changed residences (leaving states like CA, FL, and NY), a statistic not lost on top LOs and real estate agents. Elon Musk has the luxury of being geographically mobile, putting headquarters of various companies in places like Texas, but others not so much. The statistical gap between “the haves and the have nots” is widening. Here are some statistics that are probably all too familiar with underwriters and loan originators. In 2022, almost half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). More than one in four Americans (28%) have savings below $1,000. 12 percent said they had no savings at all. Helping someone save is a good way to lay the groundwork for future business and referrals. (Today’s podcast can be found here and this week’s is sponsored by Calque. White-labeled buy-before-you-sell solutions powered by Calque help you increase purchase volume and increase realtor business by helping them differentiate with a better process. With coverage in the 48 contiguous states, what are you waiting for? Hear an interview with RAMS Vik Kasparian on supply and demand in the mortgage asset sales space, secondary market dynamics, and current production trends.)

Watching Rates

Check our some recent articles and posts about current rates.

Uneventful Day For Mortgage Rates

Mortgage rates are driven by the bond market and Friday was the least active day of the week for bonds.  There were no major economic reports to cause rapid changes in trading levels. As such, mortgage rates started out very close to the levels seen yesterday and most lenders didn't make any mid-day changes. The absence of any significant movement is a victory, of sorts, in light of the ground covered over the past 2 days (the best 2-day improvement since November). On the other hand, rates began the week at the highest levels since May 2024. It's more common to see bigger gains when rates are recovering from long term highs--a fact that detracts from the victory to some extent. Bonds are closed on Monday for the holiday and Tuesday could see a flurry of market activity in response to political news. There's no way to know if that activity would be good or bad for rates ahead of time, let alone if it will even materialize in the first place. [thirtyyearmortgagerates]

Mortgage Rates Back Down to Lowest Levels in 2 Weeks

After having a great day yesterday, mortgage rates were able to add another "good" day today.  The net effect brings the average lender's top tier 30yr fixed rate back down to levels last seen on January 2nd, exactly 2 weeks ago.   Yesterday's key motivation was the palatable inflation data in the Consumer Price Index (CPI).  Today's economic data wasn't nearly as pertinent to the outcome although a slightly softer reading on Retail Sales didn't hurt this morning.  Rather, it was comments from a member of the Federal Reserve (Waller) and the Treasury Secretary nominee (Bessent). Waller said he sees inflation continuing to fall into line along with the possibility of more Fed rate cuts in the first half of the year. Rates didn't have a huge reaction to that, but it was a friendly one nonetheless.  Bessent fielded questions during his confirmation hearing and bond markets were pleased to hear his level of austerity with respect to government spending--something that contributes to higher rates indirectly, but significantly. 

Mortgage Rates Drop Back to Last Week's Levels After Softer Inflation Data

We knew that today's Consumer Price Index (CPI) was a hotly anticipated economic report that at least had the potential to give rates a big push, and it didn't disappoint. Any time we're dealing with an important economic report that gives rates a big push, there's generally an equal chance of getting pushed in either direction.  We can know this with confidence because rates are based on financial markets and traders wouldn't wait to make their move if they already knew what that move would look like. All that having been said, there are occasionally situations where these pushes end up being more likely to be bigger in one direction vs the other.  Today could be argued to be benefiting from such a phenomenon simply because rates were at the highest levels in 8 months over the past few days.  Some of the biggest single day rate drops we've seen have followed a similar formula (i.e. rates at long term highs followed by an obviously rate-friendly economic report). The past examples of this have only tended to involve 2 economic reports: the jobs report (which hurt us last week) and the Consumer Price Index (CPI), which helped us today. Long story short, the relevant components of the CPI data were lower than the market expected.  Bonds improved immediately and lenders were able to move rates back down to the levels seen earlier last week. Granted, the levels seen earlier last week were still the highest in many months at the time, but any move back toward lower rates has to start somewhere.  We won't know how long this one will last until we see the extent to which additional economic data supports the same conclusion.  

Mortgage Rates Make a Modest Recovery Ahead of Important Inflation Data

Mortgage rates officially hit the highest levels since May 2024 yesterday, even though the average was almost imperceptibly higher than last Friday's.  We saw a similarly small move today, but in the opposite direction. In other words, the average rate moved lower by an amount that won't even have an impact on many of yesterday's rate quotes. As always, keep in mind that our rate index is an average of multiple lenders and on days with very small changes, some lenders can be noticeably better or worse compared to the previous day. This morning's economic data featured the Producer Price Index (PPI)--a report that measures inflation at the wholesale level.  It came in at lower levels than expected.  That would normally be good for rates, but it didn't have much of an impact today.  Tomorrow's inflation report--the Consumer Price Index (CPI)--is in a different league. If it undershoots forecasts by the same margin, rates would almost certainly move lower.  Conversely, rates would almost certainly rise if inflation overshoots forecasts. There's no guarantee of rate-friendly data tomorrow simply because today's inflation report was lower than expected. CPI frequently departs from PPI on any given month, even though the two tend to do the same things over longer time horizons.