While lower rates have peaked borrower interest, most are waiting for some key events to pass before buying or refinancing, originators said.

New rules from Treasury’s Financial Crimes Enforcement Network will mandate reporting for non-financed real estate transfers and expand anti-money-laundering requirements for investment advisors.

Real estate agents and loan officers from post-Soviet states say the war has altered relationships between one another and made dialogue with some clients strained.

Purchases managed a small rise, but refinance activity held steady, according to the Mortgage Bankers Association.

Without Major Data, Bonds Remain Quiet

While it makes riveting analysis a challenge, it’s not necessarily a bad thing for the bond market to be incredibly boring sideways right now.  After all, we’ve had a stable run of rates near their longer-term lows for several weeks.  Volatility could creep back in with the upcoming economic reports, but today, it was nowhere to be found.  Bonds started slightly stronger and drifted slightly weaker throughout the session with MBS not even an eighth of a point away from yesterday’s latest levels for the entirety.  Data relevance increases sharply on Thursday with Jobless Claims and quarterly PCE (via GDP).  

Econ Data / Events

Case Shiller Home Prices

up 6.5% y/y vs 6.0% f’cast
up 0.6% in June

FHFA Home Prices

down 0.1% in June vs +0.2% f’cast
up 5.1% y/y vs 5.3% f’cast

Consumer Confidence

103.3 vs 100.7 f’cast, 101.9 prev

Market Movement Recap

10:19 AM Mostly flat overnight with quick 2-way volatility in the first 2 hours.  10yr unchanged at 3.826.  MBS unchanged.

01:03 PM No reaction to uneventful 5yr auction.  MBS down 1 tick (.03) and 10yr up 1bp at 3.836.

01:41 PM Weakest levels.  MBS down 2 ticks (.06) and 10yr up 1.2 bps at 3.84

On Wednesday, the average mortgage lender was quoting top tier, conventional 30yr fixed rates at the 2nd lowest level in more than a year.  That’s counterintuitive considering the modest losses in the bond market (weaker bonds = higher rates, all other things being equal). The explanation comes down to simple timing.  Bonds were improving enough yesterday afternoon for many lenders to offer mid-day improvements.  Between the lenders who were tentative in that approach and those who abstained altogether, there was still some room for improvement. More importantly, the bonds that directly affect mortgage rates actually began the day in slightly stronger territory.  They’ve since lost some ground, but not enough for most lenders to issue mid-day changes in the other direction.  Keep in mind, this does mean that the average lender would need to offer slightly higher rates tomorrow assuming the bond market is perfectly unchanged between now and then. How likely are we to see a perfectly unchanged bond market?  It’s always possible, but it’s less likely on Thursday due to the scheduled release of more important economic data.  Bonds take reliable cues from econ data and there hasn’t been anything substantial so far this week.  The relevance ramps up on the final two days and the following week will bring even higher stakes. 

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It would have been hard for the present week to be any more of a boring, sideways grind than the previous week, but so far, so boring!  Why do we say that?  Consider that this is the 14th straight day with yields inside the range set on NFP Friday, the 6th straight day holding inside a 10bp trading range with less than 5bps of directional movement.  Things do get more boring at times, but not by much.  This isn’t a huge surprise given the market’s focus on only a handful of the most closely watched reports.  With none of those on tap, we’re left to watch things like today’s 5yr Treasury auction for short-term, small scale guidance.

The mortgage market seemed to be in a wait-and-see mode last week as the Federal Reserve signaled a might, maybe, we are thinking about it, approach to a September rate cut. In the interim, most interest rates inched lower. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier and fell 1.0 percent on an unadjusted basis.   The Refinance Index dipped 0.1 percent from the previous week but has now climbed to an  85 percent lead over the same week one year ago. The refinance share of applications increased to 46.6 percent of the total, up from 46.3 percent the prior week. [refiappschart] The seasonally adjusted Purchase Index increased 1.0 percent but was 1.0 percent lower before adjustment. Purchase applications were 9.0 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates declined for the fourth consecutive week, with the 30-year fixed rate at 6.44 percent, the lowest since April 2023. Rates have now come down more than 80 basis points from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications were slightly higher, driven by marginally stronger purchase activity. Refinance applications were essentially unchanged but are still 85 percent higher than last year as borrowers continue to act – particularly FHA and VA borrowers. As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”

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