“I just won $10 in the lottery! The 7-11 clerk wanted to sell me a $10 lottery ticket in Atlanta. I said no.” Hopefully most people realize that a lottery is simply a tax on people who don’t know math (given the odds of winning). But the amount of equity that homeowners have, as a whole, is a sure thing… and staggering. U.S. homeowners now hold a record $17.8 trillion in equity, per ICE, including $11.6 trillion that’s “tappable.” That, versus the trillions in high interest credit card, auto, and student debt, certainly points to continued HELOC and 2nd mortgage offerings. That’s one trend, but there are others. The MBA’s Marina Walsh told us in the Loan Vision audience in Atlanta that the MBA expects a 1 percent home price average appreciation rate. As always, it is based on location and price point. Overall origination points at $1.7 trillion last year moving up to $2 trillion this year. Lenders, however, know that units are important, and those are expected to go from 4.572 million up to 5.598 million units. (Today’s podcast can be found here and this week’s podcasts are sponsored by BeSmartee, the most innovative mortgage technology platform for banks, credit unions, and non-bank mortgage lenders. Hear an interview with Guideline Buddy’s Marc Hernandez on AI-powered tools designed to bring instant clarity and confident decision-making to mortgage guidelines, helping industry professionals structure loans faster and more accurately, combining human-in-the-loop intelligence with plans for broader tech integration and white-label partnerships.)

Thursday was the first day of the week with any meaningful economic reports. This is important to mortgage rates because economic data influences the bonds that determine day-to-day changes in rates.  In general, stronger data is bad for rates and today was no exception.   While today’s GDP data was for Q2 (and thus fairly stale), it was revised up from 3.3 to 3.8 which is a fairly big jump. In separate reports, the level of weekly jobless claims fell to much lower than expected levels and a report on big ticket manufactured goods showed much stronger demand than expected. All of these reports came out at 8:30am ET, which is roughly an hour before mortgage lenders begin setting rates for the day. This gives the bond market time to move to weaker levels resulting in mortgage lenders setting higher rates. Fortunately, the damage in the bond market was modest and the average lender didn’t drift too much higher versus yesterday’s latest levels. 

The latest reports from ICE Mortgage Technology and VantageScore appear to be in line with hints at growing borrower pressure officials are eyeing in policy.

Mortgage applications increased 0.6% last week after jumping 29.7% the week prior, according to the Mortgage Bankers Association.

The data suggest U.S. homebuilders are successfully luring buyers off the sidelines with aggressive sales incentives.

The lender is seeking to dismiss the lawsuit, calling the purported scheme to also deprive its loan officers of full compensation implausible.

The title industry sustained improvement first seen last year, with second-quarter premium totals up on both a quarterly and annual basis, ALTA said.

Over time, mortgage rate movement lines up almost perfectly with movement in the underlying bond market, but there can be day to day discrepancies depending on the timing of market volatility. Think of mortgage rates like a restaurant that adjusts menu prices daily depending on the price of ingredients. Sometimes, ingredient prices will change significantly and early in the day, thus prompting the restaurant to adjust menu prices in the middle of the day.  Other times, the ingredient prices may not change by enough or may happen too late in the day to prompt any change from the restaurant.  These eventualities speak to the past 2 days for mortgage rates. Specifically, bonds improved yesterday afternoon, which would eventually push mortgage rates lower.  But it was too late in the day for most lenders to change their mortgage rates.  Now today, bonds moved back to the weaker levels from yesterday morning. So the bond market is weaker, which would indicate higher rates, but because mortgage rates didn’t adapt to yesterday afternoon’s changes, lenders weren’t compelled to raise rates compared to yesterday morning’s levels.

Weaker Thanks to 2 Kinds of “Supply”

At its core, the bond market is like any other financial market, and securities are like almost any other commodity/good/service when it comes to the laws of supply and demand. That means we can reconcile today’s weakness in bonds by talking about factors that may have decreased demand or increased supply. The latter is the easier discussion today. We’re in the middle of this week’s Treasury auction cycle, and although that supply is well known ahead of time, it can nonetheless tap the breaks on demand from certain buyers who will wait to buy until the auction or afterward. The other supply was not well known ahead of time.  It came in the form of a $15bln this primer). 

Econ Data / Events

New Home Sales (Aug)

0.8M vs 0.65M f’cast, 0.652M prev

Market Movement Recap

10:31 AM Moderately weaker overnight and holding mostly sideways. MBS down an eighth and 10yr up 2.6bps at 4.129

12:48 PM Little-changed near weaker levels.  MBS down 5 ticks (.16) and 10yr up 3.5bps at 4.138

01:16 PM No major reaction to 5yr auction.  MBS down an eighth and 10yr up 3.7bps at 4.14

It would be an overstatement to say that this week’s econ calendar has been “active,” but yesterday at least had unscripted comments from Fed Chair Powell, several other Fed speakers, and an occasionally important S&P PMI report. In contrast, today’s only monthly econ report is New Home Sales which is almost always a non-event for bonds and today is proving to be no exception. This leaves only the 5yr Treasury auction to inspire intraday movement–at least in terms of scheduled events. Incidentally, concessionary pre-auction selling (or, rather, buyers waiting until 1pm) could also be driving some of today’s moderate weakness, but a majority of the selling lines up with a big bond announcement from Oracle at 8am ET.