Blogging With The Krew

Check some recent articles and posts about the industry.

Solid Conclusion to a Solid Week

Solid Conclusion to a Solid Week Bonds benefited from a one-two punch of economic data and stock market weakness on Friday, eventually helping 10yr yields flirt with their lowest levels since December 18th (Feb 5th and 7th still technically a hair lower). MBS have outperformed over that time, briefly hitting December 13th levels during today's best moments.  While the morning gains were clearly tied to the S&P PMI data, afternoon gains came courtesy of a flight to safety with investors dumping stocks aggressively.  Econ Data / Events S&P Services PMI 49.7 vs 53.0 f'cast, 52.9 prev S&P Manufacturing PMI 51.6 vs 54.5 f'cast, 51.2 prev Consumer Sentiment 64.7 vs 67.8 f'cast, 71.1 prev Market Movement Recap 09:53 AM moderately stronger overnight with additional gains after the PMI data.  MBS up roughly a quarter point and 10yr down 4.5bps at 4.462 01:14 PM Stocks are tanking and pulling bond yields lower (not always the way it works, but that's how it's working today). MBS up 10 ticks (.31) and 10yr down 8.8bps at 4.418 04:36 PM MBS still 10 ticks higher (.31). 10yr just off strongest levels, down 7.4bps on the day at 4.432

Mortgage Rates End Week at Lowest Levels Since December 18th

Back on December 18th, rates began the day fairly close to where they ended the previous day. In the afternoon, rates surged sharply higher following the Fed announcement. Even since then, the average 30yr fixed rate has operated almost exclusively above 7%.  Rates dipped a pinky toe into the 6% range on Feb 5th and then a few more toes last Friday.  Now today, we're ending another week with damp digits, right in line with last Friday at the best levels since December 18th.  Today's improvement was initially driven by weak economic data this morning in the form of S&P Global's service sector index dropping sharply to the lowest levels since the middle of 2023. Rates tend to benefit from economic weakness. The next leg of the improvement was mainly seen in underlying bond markets, and it came courtesy of a big stock market sell-off.  Stock market weakness has a mixed relationship with bonds/rates.  There are times where they move in unison and other times, in opposite directions.  Today's version involved organic, heavy selling in stocks which ultimately pushed some investors into the bond market as a safe haven. When investors buy more bonds, rates drop, all other things being equal. These additional gains in the bond market occurred after most mortgage lenders published their initial rates for the day.  Only a handful of lenders dropped their rates in the afternoon in response to the additional bond market gains. 

Refi Apps Still Near Best Levels Since October, Despite Larger Decline This Week

Per the latest release from the Mortgage Bankers Association (MBA), both refinance and purchase indices decreased this week. In terms of the change from the previous week, it was the biggest drop so far this year, but not remotely as big as last week of 2024.  Here is the refi index in terms of week-over-week change: And here is the exact same data, but expressed in terms of the outright index: If we're just focusing on 2025, the chart above doesn't look too bad for refi demand.  But in case anyone needed to be reminded, the farther back one looks into the past, the more sobering the current levels become--even those seen at last year's peak. Purchase activity struggled as well, down 6% weekly, just barely beating the drop seen in the first week of the year in terms of week-over-week change. In outright terms, this brings purchase activity back near the middle of its recent range. The following bullet points offer a few highlights of changes in the % share of total activity for various categories: ● FHA Share increased from 16 to 16.6 ● VA Share decreased from 14.6 to 14.2 ● Refi Share decreased from 40.2 to 38.7

Building Permits Staying Fairly Calm as Housing Starts Whipsaw

The Census Bureau released its New Residential Construction report this week, frequently referred to by its principal component "housing starts" (a term for the start of the first phase of new home construction). In addition to housing starts, the data also logs building permits as well as completions.  There's not always a perfectly linear correlation between the various metrics for a variety of reasons. Some permits never turn into construction, for instance.  Sometimes there's a backlog of permits waiting on materials, labor, or weather before construction can begin.  In general, building permits remain more even-keeled while housing starts gyrate.  The past three reports have been a good example of this.  During that time, building permits have barely budged at an annualized pace of 1.49m, 1.48m, and 1.48m in Nov, Dec, and Jan respectively. Meanwhile, housing starts have whipsawed from 1.305m to 1.515m and now back down to 1.366m.   Using "millions" as a unit number makes it easy to overlook the fact that we're talking about a swing in this year's national housing availability of a whopping 149k units.  But even then, such a swing doesn't necessarily look too troubling in the bigger picture. Housing completions suggest an even lower cause for concern of the trajectory of construction. Regionally, the biggest decline in percentage terms was in the Northeast (-27.6%). But in terms of outright units, the South led the decline with a drop of 207k.  Contrast that to the Northeast's unit count only declining by 40k.

Builder Confidence Dropped, But Not Enough to Jump to Conclusions

The National Association of Homebuilders (NAHB) along with Wells Fargo released the monthly builder confidence index this week, and it came out much weaker than expected. With tariff and immigration news rapidly evolving, it's tempting to conclude that any major changes in homebuilder sentiment would be directly related.  For instance, if builders think that building materials could be harder to obtain or more expensive, it generally hits the confidence index.  This would be a particularly big problem with something like lumber as the U.S. imports roughly a third of its framing lumber from Canada. While it's easier to agree with this narrative based purely on concepts and words, the actual numbers tell a different story when you see them on a chart.  Builder confidence has been strongly locked into what market watchers would call a "consolidation pattern."  On charts, this takes the shape of converging lines marking recent highs and lows.   Some technical analysts (market watchers who infer significance or movement cues based on chart patterns) believe that momentum will continue in the direction of a breakout--something that inevitably must happen this year as far as this consolidation is concerned.  Just as often, however, a consolidation breakout can give way to broadly sideways momentum until underlying economic fundamentals change in a big way. In the current case, it would be hard to argue that elevated interest rates are anything but the key factor depressing home sales and builder confidence.

Watching Rates

Check our some recent articles and posts about current rates.

Mortgage Rates End Week at Lowest Levels Since December 18th

Back on December 18th, rates began the day fairly close to where they ended the previous day. In the afternoon, rates surged sharply higher following the Fed announcement. Even since then, the average 30yr fixed rate has operated almost exclusively above 7%.  Rates dipped a pinky toe into the 6% range on Feb 5th and then a few more toes last Friday.  Now today, we're ending another week with damp digits, right in line with last Friday at the best levels since December 18th.  Today's improvement was initially driven by weak economic data this morning in the form of S&P Global's service sector index dropping sharply to the lowest levels since the middle of 2023. Rates tend to benefit from economic weakness. The next leg of the improvement was mainly seen in underlying bond markets, and it came courtesy of a big stock market sell-off.  Stock market weakness has a mixed relationship with bonds/rates.  There are times where they move in unison and other times, in opposite directions.  Today's version involved organic, heavy selling in stocks which ultimately pushed some investors into the bond market as a safe haven. When investors buy more bonds, rates drop, all other things being equal. These additional gains in the bond market occurred after most mortgage lenders published their initial rates for the day.  Only a handful of lenders dropped their rates in the afternoon in response to the additional bond market gains. 

Mortgage Rates Casually Drift Back to 2 Month Lows

It was a fairly decent day for mortgage rates with the average lender returning to the lowest levels in just over 2 months. The improvement followed early morning comments from Treasury Secretary Scott Bessent regarding the probable mix of future Treasury debt. What's that got to do with mortgage rates?  So much...  Mortgage rates are based on mortgage-specific bonds that are in the same extended family as US Treasuries.  If Treasuries are like oranges, mortgages are like orange juice--i.e. they're sort of a substitute for some people, but either way, heavily dependent on the price and availability of the former. All that to say that anything that impacts Treasuries in an obvious way also tends to impact mortgage rates.   Today's impacts were minimal, but mortgage rates weren't too far from those 2 month lows to begin with. Bigger victories would require a decisive shift toward lower inflation in key economic reports, or toward a markedly weaker economic data in general.

Mortgage Rates Unchanged After Mid-Day Changes

It was almost a mildly interesting day as rates started out slightly higher.  To be fair, even that would not have been too interesting because the move was so small that most rate quotes would have been unaffected.  Still, just to be sure to avoid any and all excitement, rates received a minor, friendly bump back to yesterday's levels in the afternoon.  The improvement followed the bond market's favorable reaction to the release of the minutes from the most recent Fed meeting.   Mortgage lenders tend to avoid making mid-day changes to rates unless the underlying bond market moves by a certain amount. Because today's intraday bond market movement was on the small side, only a handful of lenders changed their rates, but it was enough for the average 30yr fixed rate to drop 0.01%--the smallest increment we measure.

Mortgage Rates Bounce Back Up

Mortgage lenders were unable to update their rates yesterday as the bond market was closed for the Presidents Day holiday.  Three day weekends can occasionally result in extra volatility on the first day of the new week because--in many cases--the rest of the world's financial markets continue moving. This leaves the US bond market (which is responsible for dictating interest rates) with the need to cover 2 days worth of ground.  In today's case, that ground led toward higher rates both yesterday and today. The net effect was a return to the rates just a hair below those seen last Thursday, thus erasing most of Friday's gains.  The silver lining is that Thursday's rates were already near the lowest in just under 2 months.