It was the third of September, a day I’ll always remember… Will September 18th be remembered as the day that the Federal Reserve lowers fed funds for the first time since April of 2020? Probably… It is certainly already priced into interest rates. (Fed funds have been in the mid-5’s for a year.) Mortgage interest rates have started to fall making buying a home more affordable again and injecting some new life back into the real estate and home finance business. STRATMOR Group Senior Partner Garth Graham believes the upcoming surge in purchase business will not look like it did the last time the industry saw a wave of new business, and it won’t benefit all lenders equally. Listen in today at 11AM PT as he and STRATMOR Senior Advisors Brett McCracken and Sue Woodard talk about why the ongoing battle between the industry’s largest real estate companies and the Department of Justice over consumer disclosures regarding buyer’s agents is having a massive impact on the real estate business and what lenders can do to prepare. Let’s not forget the wild card of homeowner’s insurance: Allstate has received approval to raise its California homeowners insurance premiums by an average of 34% starting in November, the largest rate increase this year amid the state’s insurance crisis. Well, at least Allstate is not bailing out of doing business in CA! (Today’s podcast is found here and this week’s is sponsored by Stavvy. Moving real estate beyond paper documents. Stavvy is the digital platform that helps real estate professionals grow their business and ditch the paper process. Book a demo today! Hear an interview with Short Solutions Liz Short on how C-Suite executives can define technological goals, streamline processes and integrations, and maximize revenue.)

Remember last Friday?  It was sort of “weird” due to enigmatic selling pressure in the bond market. Yields stretched up to the highest levels in more than two weeks without any apparent provocation.  To some, it may have seemed like the prevailing consolidation pattern was breaking down in favor of a shift toward a selling trend.  To others, it was just the sort of random trading often seen on month-end Fridays–especially those that occur ahead of a 3 day weekend.  This morning’s trading is more than completely erasing the weirdness and getting trading levels back in line with last week’s best.

The interim procedure applies to nonjudicial foreclosure sales and is aimed to help avert “immediate adverse financial and market impacts” when surplus funds are not available.

The case over a federal investigation is unrelated to the trade group’s recent commissions changes.

Borrowers who worked with third party originators last year will save on average over $10,000 over the life of their loan, according to an analysis of public data.

The Mortgage Bankers Association anticipates recent developments will change dynamics in the market for lending on income-producing properties.

California lawmakers have sent a bill to Governor Gavin Newsom’s desk that would expand a state-backed down payment assistance program to undocumented immigrants who are looking to buy a home.

Month-End Volatility, But No Bearing on Bigger Picture

It was a deceptively interesting Friday for the bond market with month-end trading creating volatility that seemed relevant at first glance.  Those trades easily overshadowed the calmer market movement seen in the morning hours following the PCE data, but that was a very low bar.  In the grand scheme of month-end trading days (especially those that fall on the Friday before a 3 day weekend), today’s volatility was average. Next week holds far more promise to shape the debate over a 25 vs 50bp Fed rate cut and, consequently, the next big move for the bond market.

Econ Data / Events

M/M Core PCE

0.2 vs 0.2 f’cast, 0.2 prev

Y/Y Core PCE

2.6 vs 2.7 f’cast

Chicago PMI

46.1 vs 45.5 f’cast, 45.3 prev

Consumer Sentiment

67.9 vs 68.0 f’cast, 66.4 prev

1yr inflation expectations

down 0.1%

Market Movement Recap

08:51 AM Flat overnight and modestly/paradoxically weaker after PCE data.  MBS down 3 ticks (.09) and 10yr up 1.7bps at 3.878

12:20 PM small but quick selling pressure just now with 10yr up 3.2bps at 3.893.  MBS down 5 ticks (.16) on the day. 

04:17 PM Sharply weaker in the PM hours and now recovering a bit after month-end trades run their course.  MBS down 3 ticks (.09) and 10yr yields up 4.1bps at 3.903

Day to day movement has been subdued in mortgage rates recently, and now the week over week movement is just as uneventful.  Friday’s average top tier 30yr fixed rate almost perfectly matched last Friday’s and it was identical to where we began the week.   Given the absence of any major market moving motivations, this isn’t a surprising turn of events.  That said, it’s worth considering that the past 3 days have seen gradual upward pressure implied by the bond market.  This didn’t immediately translate to upward pressure in mortgage rates due to the timing of the market movement relative to when mortgage lenders set rates for the day.   Whether or not this ends up looking like a vague warning sign depends on the economic data in the coming week.  Unlike the present example, there are important data points each day with the most important report of them all–the jobs report–on Friday.  If there’s a strong bias toward strength or weakness in the data, it will go a long way toward resolving the debate over the size of the Fed’s rate cut in 3 weeks.  The rate cut itself has no bearing on mortgage rates, but shifts in rate cut expectations tend to produce comparable shifts in mortgage rates in the run up to the Fed’s official announcement. 

(In honor of labor, there is no Commentary tomorrow; Tuesday will be the next one. But in honor of August 31 being National Bacon Day, we celebrate with a bacon joke below.) College football is back in the news, with its assortment of personalities. Lots of us are on the road this weekend, bunking down at Motel 6 and Econo Lodge. At the other end of the spectrum, they “have’s” are also bunking down: The number of U.S. hotels with an average daily rate of $1,000 for a room hit 80 (WSJ subscription needed) as of the first half of this year, up from just 22 such hotels in 2019. In Europe, the number of $1,000-a-night hotels tripled over the same period, to 183 establishments. On Monday, millions of Americans will joyfully stay home, hearing news about politicians saying how they love the common man, fire up a grill, or head to the beach… traditions enshrined, indirectly, in 1894, when Congress made Labor Day a national holiday. For many, the day is now so deeply entwined with leisure, pleasure, and department-store sales that it’s easy to forget its origins in the labor movement. (Today’s podcast is found here and this week’s is sponsored by EarnUp and its new AI Advisor tool. The industry’s first-ever context-aware conversation agent instantly analyzes users’ real-time banking and credit data to answer complex financial questions and provide tailored product recommendations. Hear an interview with Lawn Love’s Kimberly Magerl discussing a survey about 2024’s most expensive metropolitan areas for renters.)