Treasury Secretary Scott Bessent expects the U.S. housing market to quickly pick up steam after recent indicators came in below forecasts.

California leads the nation with over 1.5 million at-risk properties, but many threatened homes sit east including $68 billion worth of Florida real estate.

Nexpoint Real Estate Opportunities has now made its own bid for the REIT, just days prior to a special meeting to vote on the merger with Ready Capital.

The Consumer Financial Protection Bureau’s decision to no longer pursue its enforcement action against the credit reporting bureau marks the eighth lawsuit dropped by the agency in recent days.

Authors in two separate Urban Institute papers warn how headcount reductions at the entities could negatively impact borrowers, taxpayers and the housing market.

Bonds End The Week and The Month at Best Levels

Both MBS and Treasuries were easily at their best levels of the month as of today’s close (whether you want to use the 3pm CME close or the 4pm NYSE close, which can be more of a consideration for bonds on a month-end trading day). The bond strength was all the more notable in light of a fairly swift bounce in the stock market.  PCE data in the morning was a relative non-event.  If anything, it helped pave the way for the stronger momentum thanks to the unrounded core month-over-month numbers coming in below forecast. From here, we turn our attention to next week’s bigger ticket econ data, culminating in the next jobs report on Friday.

Econ Data / Events

Core PCE Price Index, MM

0.3 vs 0.3 f’cast, 0.2 prev
Unrounded, .285

Core PCE Price Index, YY

2.6 vs 2.6 f’cast, 2.9 prev

Market Movement Recap

09:45 AM Modestly stronger after data, but choppy.  MBS up 2 ticks (.06) and 10yr down 1.5bps at 4.246

12:18 PM Choppy still, and some more improvement.  MBS up 3 ticks (.09) and 10yr down 2.1bps at 4.24

02:22 PM MBS still up 3 ticks (.09).  10yr now down 3.7bps at 4.223

04:06 PM More strength at the 4pm NYSE close. Bonds at best levels with MBS up 5 ticks (.16) and 10yr down 4.9bps at 4.213

After more than a week of consistent and meaningful improvement, mortgage rates finally showed us that they were at least capable of moving in the other direction yesterday. Thankfully, that demonstration was short-lived.   The average lender got back to the recently typical business of offering the lowest conventional 30yr fixed rates in several months. As of today, you’d have to go back to December 9th to see anything lower, but if rates improve just a tiny bit more, you’d have to keep feeding quarters into the time machine until reaching October 18th. At that point, it would take quite bit more doing to extend the “best in x months” time frame, but no one’s complaining. The average lender is easily back into the upper middle 6% range with many of the more aggressive lenders actually in the mid 6% range for top tier scenarios. This is a surprising turn of events given the interest rate fears being parroted by many pundits as the market considered the potential impact of tariff implementation.  To be fair, fiscal policies will take much more time to make their impacts known on the economy and interest rates.  For now, the gains are courtesy of softer economic data, as-expected PCE inflation (announced just today), and investor concern over the economic impact from fiscal policy.  [thirtyyearmortgagerates]

As is the case almost every week of the year, the Mortgage Bankers Association released its weekly mortgage app survey this week, showing the changes in purchase and refinance applications. We can skip right past any discussion or analysis of the purchase application index as it was almost identical to last week, not to mention reluctant to be influenced by interest rate movement in the first place. Refinance demand, on the other hand, is notoriously beholden to rate fluctuations.  As such, it was somewhat surprising to see the refi index  decline by about 3.6%. After all, last week’s mortgage rates were lower than the previous week’s, and continued to fall throughout the week. While it’s true that rates were lower last week, it’s important to remember MBA’s methodology.  Application data is collected through the previous Friday and then reported on the following Wednesday. Mortgage rates only began moving lower in any serious way on Thursday.  That means the survey didn’t have much time to benefit from the rate drop this time around.   Given the pace of rate improvement since then, it would be a much bigger surprise to see another counterintuitive movement in next week’s data.  If precedent is an indication, refi demand could once again challenge the best levels since October 2024.

The Census Bureau released new home sales data for January this week, and the annual pace was a seemingly significant 10.5% lower than last month’s pace.  But before you devote even one extra BPM of your heart rate to the news, please look at a longer-term chart of the data in question. Home sales are indeed lower versus last month, but caveats abound.  First off, last month was revised up from 698k to 734k (annual pace). January’s 657k is only 5.9% lower from the unrevised number.  It’s also good to keep in mind that this data has a notoriously wide margin of error (±19.9 percent in the present case, according to the Census Bureau).  But even if the data was completely error free, the chart continues to tell a story that is far from troubling, even if it’s not grounds for unabashed excitement. Simply put, new homes continue to sell at a pace that’s very close to recent highs (excluding the frenzied moments from 2020 through early 2022). Current levels are also on the higher end of the pre covid range going back to 2016. Bottom line, much like home price appreciation, new home sales have been sideways and boring at relatively strong levels. Full release available from Census Bureau here: https://www.census.gov/construction/nrs/pdf/newressales.pdf

The massive spike and subsequent correction in home price appreciation (mid-2020 through early 2023) generated lots of opinions and concerns about the fate of the housing market. Early on, the fear was that prices were rising too high, too quickly. By mid-2022, the fear was that home prices were en route to a crash that could be reminiscent of the infamous mortgage meltdown and great financial crisis. Of those two fears, only the first was ever going to be valid (i.e. a melt-down style contraction wasn’t possible without the other ingredients in place 20 years ago).  Prices definitely rose too high, too fast, but let’s face it: the average homeowner isn’t really scared of their home becoming more valuable.  It’s only housing economists and first time homebuyers that are truly troubled by runaway prices.  Even then, higher prices were a bit of an illusion due to all-time low interest rates. By early 2023, the Case Shiller home price index had dipped well into negative territory, year over year.  At the time, we were comfortable reminding our readers that this was a logical byproduct of rapidly rising rates and a much-needed correction from the blistering pace of appreciation seen through early 2022. Two years later and things really couldn’t look any more boring, and this week’s most recent update to both the major home price indices is just the latest confirmation. Even if we look at the super noisy month-to-month readings, we can still see both indices bouncing around the historically normal mid-point like a well-behaved EKG.  Granted, Case Shiller’s EKG rhythms are a bit wider than normal, but this is always the more volatile of the two series.