What goes down must come up? Definitely not always the case, but true this time for residential construction numbers. The Census Bureau’s latest report showed a rebound in December, with both housing starts and building permits moving higher after softer readings in prior months. Privately owned housing starts rose 6.2% to a seasonally adjusted annual rate of 1.404 million , up from November’s revised 1.322 million pace. Despite the monthly gain, starts were 7.3% lower than December 2024 levels. Single-family starts increased 4.1% to 981k, while multifamily starts (buildings with five units or more) came in at 402k. On the permitting side, activity also strengthened. Total building permits climbed 4.3% to an annual rate of 1.448 million , though that figure remains 2.2% below year-ago levels. Single-family permits slipped 1.7% to 881k, while multifamily authorizations rose to 515k, driving the overall monthly increase. For the full year, an estimated 1.36 million housing units were started in 2025, down 0.6% from 2024. Permits totaled approximately 1.43 million , representing a 3.6% annual decline. The year-end data suggest a construction sector that regained some footing in December but remained modestly below last year’s pace overall.

Mortgage application activity picked up last week with the Mortgage Bankers Association (MBA) reporting an increase of 2.8% on a seasonally adjusted basis for the week ending February 13. Refi applications were in the driver’s seat, and although it was hardly a “jump”, the Refinance Index did increase 7% from the previous week and was 132% higher than the same week one year ago. marking the strongest week for refinance activity since mid-January. This also keeps refi demand in the highest range seen since early 2022. Purchase demand moved in the opposite direction, falling 3% versus the previous week. Notably, VA purchase applications bucked the broader trend, rising 4% for the week. Joel Kan, MBA’s Vice President and Deputy Chief Economist, attributed the pickup in overall activity to the lowest mortgage rates in four weeks.  The composition of activity shifted modestly. The refinance share of total applications increased to 57.4% from 56.4% the prior week, while ARM share ticked up to 8.2% . FHA share held steady at 18.4%, VA share rose to 16.5% , and USDA share remained unchanged at 0.4%. Mortgage Rate Summary:
30yr Fixed: 6.17% (from 6.21%) | Points: 0.56 (unchanged)
15yr Fixed: 5.50% (from 5.65%) | Points: 0.73 (from 0.68)
Jumbo 30yr: 6.21% (from 6.30%) | Points: 0.27 (from 0.34)
FHA: 5.99% (from 6.01%) | Points: 0.65 (from 0.68)
5/1 ARM: 5.29% (from 5.33%) | Points: 0.62 (from 0.67)

Builder confidence fell for the second straight month in February according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Affordability pressures and elevated construction costs continued to hamper already gloomy sentiment. While the move was modest in outright terms (just one point lower than before), it reinforces the broader malaise seen over the past several years.  The underlying components were mixed but leaned negative. The index measuring current sales conditions held steady at 41 , while the gauge tracking prospective buyer traffic declined two points to 22 , remaining firmly in “low to very low” territory. Most notably, future sales expectations dropped three points to 46 , extending their move below the breakeven level of 50. “Builders reduced their expectations for future sales as buyers report affordability challenges, which is contributing to declining consumer confidence for the overall economy,” said NAHB Chairman Buddy Hughes. He added that while most builders continue to offer buyer incentives — including price reductions — many prospective buyers remain on the sidelines. At the same time, remodeling activity has remained comparatively resilient due to limited household mobility. NAHB Chief Economist Robert Dietz noted that affordability remains a central obstacle early in 2026, arguing that meaningful improvement will require policies aimed at bending the construction cost curve and expanding attainable housing supply. On a more constructive note, he pointed to easing inflation as a potential pathway to lower interest rates for both mortgages and builder financing.

Mortgage rates at the average lender moved up by 0.01% today–the smallest increment measured by the MND daily rate index. This means that most borrowers won’t see a meaningful different in today’s rates vs yesterday’s. That’s welcome news considering yesterday’s rates were tied for the second best day in more than 3 years. In the bigger picture, the absence of improvement over the past 2 days may suggest that recent bull run in rates is pausing for reflection, or at least until and unless certain economic reports justify renewed momentum. On that note, this week’s nearest examples of such reports will almost all be released on Friday morning, but they’re notably less potent than the data seen over the past 2 weeks.

Toll Brothers Inc. fell short of analysts’ estimates for quarterly orders, signaling that fewer people are signing contracts to build homes as high prices and economic uncertainty hold some buyers back.

The agencies’ representatives weighed in on the insurance fund’s capital ratio and evolving policies at the Mortgage Bankers Association’s servicing conference.

Some observers say changes to MSR risk-weighting would have limited near-term impact and are unlikely to prompt banks to rush back.

In a speech Tuesday, Federal Reserve Gov. Michael Barr said it was possible that artificial intelligence will boost productivity in an undisruptive way. But he said policymakers should also be wary of a financial crash if those gains are not realized or a rapid adoption that could lead to labor displacement.

The two organizations announced the Certified Home Equity Advisor credential, which will help financial professionals integrate home equity in retirement plans.

Calm Start Even if Modestly Weaker

The day before and/or after a 3-day weekend is more volatile than the average weekend-adjacent trading day. Last Friday fit that bill but today could have been mistaken for a summertime Monday (despite being a wintertime Tuesday). There were no significant reports and the available Fed comments weren’t actionable.  After nearly touching 4.0% in the overnight session, 10yr yields climbed slowly to 4.06 by 10am and then held mostly sideways through the close.  Considering the scope of last week’s rally, a “mostly sideways” day is a victory. On a cautionary note, the absence of follow-through and the overnight bounce underscore resistance potential near present levels.

Econ Data / Events

NY Fed Manufacturing

7.1 vs 7.7 prev

Market Movement Recap

08:43 AM Modestly stronger overnight. MBS up 1 tick (.03) and 10yr down 1.4bps at 4.036

11:20 AM weaker in the early trading. MBS down 1 tick (.03) and 10yr up 0.7bps at 4.055

01:33 PM Weakest levels. MBS down 2 ticks (.06) and 10yr up 1bp at 4.058

04:26 PM heading out fairly flat. MBS down 1 tick (.03) and 10yr up 1.1bps at 4.059