Harvard University housing experts anticipate home improvement spending to rise in the next 12 months.

Underlying borrowers have accumulated significant amount of home equity in their homes, to a weighted average (WA) original cumulative loan-to-value (CLTV) ratio of 69.5%.

Housing starts decreased 0.5% last month to a 1.35 million annualized rate, according to government data released Friday, after a big rebound in August.

The company expects that a previously announced sale of its residential mortgage servicing business will reduce its workforce by an additional 1,200 employees when the transaction is completed this quarter.

Waiting Game Returns With Straightforward, Sleepy Friday

Bonds were technically a hair weaker in the overnight session, but even if they never improved from those levels, yields still would have been inside the prevailing range (4.0 to 4.12 in terms of the 10yr).  As it stands, they did improve a bit, ultimately hitting 4.063 at the lows and holding near there through the close.  MBS picked up a microscopic gain as well.  All of the above is perfectly reasonable considering the lack of motivation in economic data.  Today’s only report (residential construction) hasn’t moved markets in over a decade.  With that, we’re back to waiting for relevant data with the next notable installment not arriving until Thursday.

Econ Data / Events

Housing Starts

1.354m vs 1.350m f’cast, 1.356m prev

Building Permits

1.428m vs 1.46m f’cast, 1.47m prev

Market Movement Recap

10:05 AM Unchanged to slightly weaker overnight, but making early gains.  MBS up 3 ticks (.09) and 10yr down 2.4bps at 4.068

01:20 PM Stronger into mid-day, but leveling off now.  MBS up 2 ticks (.06) and 10yr down 2.2bps at 4.07

03:28 PM Sleepy day with low volatility.  MBS up 1 tick (0.03) and 10yr down 1.8bps at 4.074

There hasn’t been much day to day movement in mortgage rates after the big jump caused by the jobs report earlier in the month.  That jump ended on Monday the 7th and the average 30yr fixed rate hasn’t moved more than 0.06% since then.  For context, we wouldn’t consider a short term move to be significant unless it was at least twice as big (the jobs report reaction was 6 times bigger at +0.36%). Today was the smallest move of the week with Friday’s average rate holding perfectly in line with Thursday’s and only 0.04% above last Friday’s latest levels.  In other words, it was a perfectly flat day on what was already a fairly flat week. This will certainly change.  The only question is by how much.  To a lesser extent, the question may be “when?”  But in all likelihood, the next big move will arrive between November 1st and November 6th due to a confluence of massively important events including the jobs report, presidential election, and Fed rate announcement.  As always, there’s know way to know how these events will play out ahead of time, only that the rate reaction could go big in either direction.  

While this technically signals some cooling in new construction potential, it wasn’t much more of a drop than investors expected.  Moreover, there has been a gradual cooling trend intact for more than 2 years.  That’s not as ominous as it sounds considering construction activity is still higher than it was in mid-2019.   Housing starts, which measure groundbreakings for new home construction, actually came in just slightly higher than forecasts, barely declining month-over-month.  Here too, there is a general cooling trend over the past few years, but a flatter trend over the past few months. Housing completions are a different story.  They never experienced the same correction as starts and permits.  They may have dropped from last month’s high (highest level since 2007), but completions have been in a decisive uptrend since the middle of 2023 and a broad uptrend since 2011.  Here’s the bigger-picture context for construction:

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While the recent trend has been unpleasant for the bond market, at least it’s logical.  Apart from some uncertainty related to the election and forthcoming Fed meeting, data drives all (to be fair, data drives the Fed as well).  Thursday brought the week’s biggest supply of data with all the big reports being stronger than expected.  Bonds logically tanked.  Now today, there is no significant data so bonds have no reason to tank.

For those wondering why we’d say there’s no data today despite the release of Housing Starts/Building Permits, that’s because the new residential construction data hasn’t had even a modest impact on the bond market for well over a decade.  This isn’t likely to change unless there’s another “crisis” type recession focused on the housing market. And even then, other housing-related data would be more likely to move markets than Starts/Permits. 

The Dallas bank has spent the last three years building itself into a new company. Now, it has to prove the investments will pay off.