Their second quarter pace trailed pandemic highs but still accounted for one of every six homes sold nationwide.

Calmer Week, But Are Storms Brewing?

By the time this week’s CPI data came in as expected, it was highly unlikely that the present week would live up to the volatile legacy of the previous two weeks. Thursday’s jobless claims / retail sales combo did its best to stir the economic pot, but bonds weren’t interested in panicking.  Treasuries followed European yields lower overnight and then drifted back toward unchanged levels before ending the day in stronger territory.  All told, the entirety of this week’s trading session would fit inside NFP Friday from 2 weeks ago… Next week’s focus is on Fed Chair Powell in the event he offers any clarification or setting of the stage for the September rate cut.

Econ Data / Events

housing starts

1.238m vs 1.33m f’cast, 1.329m prev

building permits

1.396m vs 1.43m f’cast, 1.454m prev

Consumer Sentiment

67.8 vs 66.9 f’cast, 66.4 prev

Consumer Inflation Expectations

unchanged vs previous

Consumer Current Conditions

60.9 vs 62.7 prev
lowest since Dec 2022

Market Movement Recap

09:49 AM Modestly stronger overnight but giving up some gains early.  MBS up only 1 tick (.03).  10yr down 1.7bps at 3.894.

12:13 PM Some additional weakness after consumer sentiment data.  MBS unchanged and 10yr down less than half a bp at 3.907.

01:48 PM Bouncing back a bit.  MBS up 3 ticks (.09) and 10yr down 2bps at 3.89

05:40 PM Heading out near the best levels with MBS up 5 ticks (.16) and 10yr down 3bps at 3.881

Mortgage rates had a much calmer week this week compared to the previous 2.  The average top tier 30yr fixed rate held a fairly narrow range between 6.49 and 6.58, with Friday’s latest move being a decent drop back to 6.56%.  Contrast that 0.09% range to the previous two weeks, which saw ranges of 0.29% and 0.41%!   The volatility is a byproduct of the market honing in on the likely path of economic data heading into the September rate announcement.  The market is 100% convinced the Fed will cut by at least 0.25%.  Earlier in the month, a majority of traders thought it would a 0.50% cut and some were even calling for an immediate emergency cut of 0.75%. That drama was based on the lackluster jobs report at the beginning of the month.  Since then, the weekly jobless claims updates (separate data) have painted a less dire picture for the labor market–an important development considering the Fed is increasingly comfortable with inflation progress and instead focusing more attention on jobs.  In the coming week, investors don’t have nearly as much data to digest as the past 3 weeks, but there’s an important speaking opportunity for Fed Chair Powell on Friday morning at the Jackson Hole Symposium. One day earlier, there will be another chance for weekly Jobless Claims numbers to either stick to the same old script or to suggest that things may indeed be shifting (something that looked like it might have been happening 4 weeks ago as seen in the red line in the following chart).

At first glance, the first half of the trading day has been volatile for the bond market, but at second glance, trading levels are just returning in line with the same narrow, sideways ranges seen for most of the day yesterday.  

In the only-slightly-bigger picture, today’s volatility is fairly mild compared to moves seen over the past 3 weeks.  Either way, the net effect is a classic consolidation pattern near the strongest levels of the year.

Residential construction slowed in July. Both the rate of permitting and of housing starts were down from the prior month and starts were the worst in more than four years. The U.S. Census Bureau and the Department of Housing and Urban Development said overall starts declined 6.8 percent from June levels and, at a seasonally adjusted annual rate of 1.238 million, were 16.0 percent lower than in July 2023. Single-family starts dropped by 14.1 percent to a rate of 851,000, a 14.8 percent annual decrease. Multifamily starts, at the rate of 363,000, represented an 11.7 percent increase from the prior month but a 21.8 percent year-over-year decline. On a non-adjusted basis, construction started on 113,000 residential units in July, 79,800 of which were single-family dwellings. In June, the corresponding numbers were 124,000 and 94,400. [housingchartall] Permitting was only slightly better. They were issued at an annual rate of 1.396 million during the month, down from 1.454 million in June. That was a -4.0 percent change for the month and -7.0 percent on an annual basis. Single-family permits were virtually unchanged from the previous month at 7938,000 and 1.6 percent lower than the same period last year while permits for construction in buildings of five or more units dropped to 408,000 from 466,000. This is 12.4 and 18.2 percent lower than in the two earlier periods. On an unadjusted basis, permits were issued for 125,600 units, including 85,600 single-family houses. Both numbers were nearly identical to those in June. [housingpermitschart]

On a sad note, entrepreneur “Famous Amos” passed away a few days ago. Cookies are a major food group for me, and here was a fellow who had fun and made money providing a simple product and helping consumers! Home loans sure aren’t simple, but here in Michigan, at the MMLA, and across the nation there are a lot of mortgage people focused on helping consumers too. The talk in many places revolves around continuing to lower the cost to produce a loan, how certain exceptions should be made to the LO comp rules (for bond programs, for instance), and how the owners of servicing are quick to refinance borrowers. The folks attending the MMLA conference from Illinois are also watching a story unfold involving Ishbia. No, not Mat. His brother Justin; “A Chicago billionaire is ruffling feathers in a ritzy Lake Michigan neighborhood after he razed shorefront bluffs on his property to make way for an enormous $44 million mega-mansion. Justin Ishbia, 46, who co-owns the Phoenix Suns NBA team with his brother Mat, is already hard at work constructing his new home in Winnetka – which has seen the bluffs on his 3.7-acre property completely leveled and all greenery removed.” I know, not mortgage-related, but the activities certainly highlight the rights of property owners. (Today’s podcast is found here and this week’s is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Hear an interview with Realfinity’s Luca Dahlhausen on the dual licensing future that potentially awaits originators and real estate agents.)

In addition to promoting Tom Hutchens to president, non-qualified TPO Angel Oak Mortgage Solutions also named a trio of new executive vice presidents.

While the total dollar volume of apartment originations fell last year, the number of companies making loans increased from 2022, the Mortgage Bankers Association said.

Benutech’s former CEO will head Voxtur, which is selling a majority stake in Blue Water Finance Technologies and repositioning itself in real estate lending.

While other indicators all reported the 30-year fixed rate mortgage was lower on a week-to-week basis, Freddie Mac’s survey increased for the first time in three weeks