Underlying U.S. inflation eased for a fourth month on an annual basis in July, keeping the Federal Reserve on track to lower interest rates next month.

Uncommonly Flat CPI Reaction

Over the past year, the average CPI day can be picked out on a chart of daily bond market movement because it is often the biggest candlestick (or bar on a bar chart) between the 10th and 15th of any given month.  This was not destined to be the case today.  The as-expected result was the crux of the problem.  Even when looking beyond the headline numbers, there were offsetting factors with the unrounded number being bond friendly and the shelter component making the opposite argument.  Bonds ended almost perfectly flat despite some 2-way volatility in the morning.

Econ Data / Events

Core M/M CPI

0.2 vs 0.2 f’cast, 0.1 prev
(unrounded, 0.165)

Core Y/Y CPI

3.2 vs 3.2 f’cast, 3.3 prev

Market Movement Recap

10:15 AM Initially slightly weaker after CPI, but bouncing back now.  MBS up 1 tick (.03) and 10yr down 2.1bps at 3.822

01:37 PM Off best levels, but still stronger.  MBS up 2 ticks (.06) and 10yr down 1.6bps at 3.826

Today brought the release of important economic data with the power to cause a sharp increase or decrease in mortgage rates.  There are a wide variety of economic reports that guide investors as well as Fed policy (which in turns has an impact on investor decisions).  All of the above makes for movement in the bond market which, in turn, drives day to day changes in interest rates. Some reports are more relevant than others when it comes to their potential rate impact and today’s Consumer Price Index (CPI) has frequently caused the biggest swings on any given month.  August will not be one of those months as today’s installment was right in line with the market’s expectations, resulting in exceptionally tame market/rate movement (for a CPI day anyway). Bonds managed to improve modestly, resulting in the top tier conventional 30yr fixed rate index dipping back under 6.5% by a hair.   From here, other economic data can and will leave a mark, for better or worse.  Tomorrow morning’s Retail Sales data now becomes the biggest volatility risk for the present week.  But it’s not until the jobs report in early September and the next CPI report the following week that we’ll get back to top tier data.

These things happen…  While it’s true that CPI is one of the two hardest-hitting economic reports (the other being the jobs report), it’s also true that the data needs to come in higher or lower than expected in order to see the movement.  This morning’s key line item, core month-over month CPI, was right in line with the forecast of 0.2.  Even then, we still saw some initial movement due to some of the underlying data although that move has now been erased with help from early stock market weakness (the “something else” in the chart below).

This morning I head through Chicago to Michigan to the MMLA Conference, where one of the discussion topics will be the NAR changes and how they impact lenders (if they do). What would some consider a great job for a “washed up creative” to do? Well, as this short video that Maryland’s Ken S. points out, real estate agent comes to mind, and reminds us that three out of four participants in a real estate transaction have no interest in a low price, and in fact want a higher price. “The more money they spend, the more money I make!” Homeowner’s insurance will also be a topic, as once again our clients, or potential clients, are facing rates that sometimes cause the loan to fall through. For those out there hoping for lower mortgage rates… what will lower rates do to housing prices, especially houses in the first-time home buyer sector? (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 MBA’s Mike Fratantoni on volatility, spreads, and how the latest economic data is fitting into the Fed’s thinking.) Lender and Broker Software, Services, and Products What does the CFPB have in store for mortgage servicers? The most recent proposed rule, “Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties,” is poised to make significant changes to loss mitigation requirements. Industry comments are due in less than a month. With proposed RESPA changes, early intervention, notification of loss mitigation determination, credit reporting consistency, and assistance for those with limited English proficiency all on the table, you’ll want to check out Clarifire’s current blog, “CFPB Proposes More Rules for Mortgage Servicers.” Discover more about the proposed rules and how CLARIFIRE® is uniquely designed to help your organization implement changes quickly and easily for uninterrupted servicing of your borrowers’ needs. Connect with us today to streamline and add capabilities to your organization and experience CLARIFIRE®, a modern, intelligent innovation that’s truly BRIGHTER AUTOMATION®.

A second week of lower interest rates appeared to send homeowners scrambling to refinance their higher-rate mortgages assumed over the last few years. The Mortgage Bankers Association said its Market Composite Index, a measure of mortgage loan application volume, increased 16.8 percent on a seasonally adjusted basis. On an unadjusted basis, the Index increased 15.0 percent compared with the previous week. The Refinance Index soared by 35.0 percent compared to the prior week and was 118 percent higher than the same week one year ago. The refinance share of applications rose to 48.6 percent from 41.7 percent. [refiappschart] The seasonally adjusted Purchase Index was 3.0 percent higher than a week earlier, and the unadjusted Index was up 2.0 percent. It trailed the Index from the same week in 2023 by 8.0 percent. [purchaseappschart] “Rates on both 30- and 15-year fixed-rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Overall applications increased almost 17 percent to the highest level since January 2023 , driven by a 35 percent increase in refinance applications. The refinance index also saw its strongest week since May 2022 and was 117 percent higher than a year ago, driven by gains in conventional, FHA, and VA applications. Additionally, purchase applications increased by 3 percent, with small gains seen across the various loan types, indicating that prospective homebuyers are slowly reentering the market.” 

The lender says the acquisition will boost its retail run rate to more than $240 million per month.

Against the backdrop of high interest rates and inflation, consumers have held off buying homes or pursuing bigger renovations that typically need financing. This pullback in spending has hurt Home Depot and other retailers, a reversal from the pandemic when people upgraded their houses.

Five other cities are now at over $1 million in median price, up from four in previous periods, the National Association of Realtors said.

Sellers of contract-for-deed home financing deals must provide disclosures, financing terms and assess a borrower’s ability to repay, the CFPB said in an advisory opinion.