The Mortgage Bankers Association’s preliminary first half 2023 analysis shows the highest jump since the 2000s housing boom. Here’s what might happen next.

The 30-year average rate got closer to 7% as central bank officials dashed near-term hopes of a cut, according to Freddie Mac.

The Drift Continues

Bonds only had a small reaction to the stronger Jobless Claims data, despite the reference period being the same as the next NFP number.  Traders were more interested in the lower price pressures reported in the S&P PMI data.  This suggests a certain level of receptiveness to some of the other 2nd tier data that may offer a counterpoint to the most recent CPI.  But that assumes the data is friendly in the first place.  Even if it proves to be friendly, we’re waiting at least a week for the first candidate (PCE next Thursday), and then another week beyond that before getting any top tier data.  In the meantime, bonds are in drift mode, and not the fun kind.

Econ Data / Events

Jobless Claims

201k vs 218k f’cast, 213k prev

Continued Claims

1862k vs 1885k f’cast

S&P Services PMI

51.3 vs 52.0 f’cast
“input prices rose at the weakest pace since October 2020”

Market Movement Recap

08:45 AM Slightly weaker overnight. Brief selling after Claims data, but bouncing back a bit now.  10yr now up only 1bp at 4.329.  MBS down an eighth.

09:57 AM Back in positive territory after PMI data.  MBS up 2 ticks (.06).  10yr down 1.2bps at 4.307.

12:29 PM Back into weaker territory.  10yr up 1.2bps at 4.331.  MBS down 1 tick (.03).

02:39 PM Fairly flat. MBS down 1 tick (.03). 10yr up less than 1bp at 4.327.

Mortgage rates continue making nearly microscopic movements in day-over-day terms, but they continue adding up.  Today’s increase over yesterday was negligible, but yesterday matched the highest levels in more than 2 months.  That leaves today with the dubious distinction of being the new multi-month high, even though many borrowers may not see meaningful changes in today’s rate quotes. There is little to observe or discuss until something significant happens.  We’re most likely to see something significant in response to  scheduled economic data.  While we get that almost every day, there are only a small handful of reports that would be considered “top tier.” At the moment, we’re waiting at least two weeks for the next true top tier report (the big jobs report on Friday, March 8th). There are a few other honorable mentions in the meantime, but not until the 2nd half of next week.  That means unless something unexpected happens, we could see small day-to-day rate movement continue.  It’s not glamorous or exciting, but it is what it is.

Prospects for the spring market look a bit brighter as January numbers show an increase in both the pace of existing home sales and the size of the unsold inventory. The National Association of Realtors® (NAR) said sales of pre-owned single-family houses, townhomes, condominiums, and cooperative apartments were at a seasonally adjusted annual rate of 4.00 million. This was an increase of 3.1 percent from the December rate of 3.88 million and was 1.7 percent below the pace in January 2023.  December sales figures were also revised slightly higher, cutting the previously reported year-over-year decline nearly in half to -3.7 percent. Single-family home sales rose from 3.48 million in December to 3.6 million, a gain of 3.4 percent, and remained lower year-over-year by 1.4 percent. Condo sales were flat at an annual rate of 400,000 and were 4.8 percent lower than one year earlier. Existing home sales beat analysts’ expectations, but not by much. The consensus forecast from Econoday was 3.97 million. “While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said NAR Chief Economist Lawrence Yun. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.” Those listings did expand in January, up 2.0 percent to 1.01 million units. This is estimated to be a 3.0-month supply at the current rate of sales, but that estimate is virtually unchanged from that in both December and January 2023. Properties typically remained on the market for 36 days in January, up from 29 days in December and 33 days in January 2023.

Rates are “data dependent” and the two biggest pieces of economic data are CPI and the big jobs report.  Neither are on today’s calendar, but there was an anecdotal indicator for the jobs report in the form of weekly jobless claims.  This usually forgettable, but if there was one week of the month to pay attention, it would be when the report covering the 12th of the month comes out.  Why the 12th?  The survey for the big jobs report (BLS Employment Situation / nonfarm payrolls) is conducted on the week that includes the 12th.  With that in mind, the bond market did a good job of overlooking a stronger result this morning and actually took solace in S&P PMI data just over an hour later.  Despite the recovery, yields are edging back into slightly higher territory heading into the PM hours (for reasons unknown).

This weakness is occurring at unfortunate levels as some might see it as a failure to find support at the 4.32% ceiling.  It’s still too soon and too close to call in the bigger picture, however.

Did someone say, “National Margarita Day”? (Splendid timing, especially as vendors and lenders contemplate a rate and volume environment that may not change much for months, and compensation & personnel adjustments continue.) In 2023, the United States was the leading recipient of Mexico’s tequila exports, importing 84.8 million gallons of tequila from South of the Border. This has nothing to do with residential lending, other than plenty of folks in our biz enjoy a tasty margarita. While we’re on taste, the other day I mentioned a joke about vultures saying clowns taste funny which blog poster and attorney Brian Levy took as an invitation to “poke a little fun at this bear” in his most recent post. Levy’s most recent Mortgage Musings edition is titled, LO Comp, Bozo Buckets and “P&L Branches” and offers a spirited and insightful discussion of a couple LO Comp related issues that have been in the news (including this daily commentary). (Found here, this week’s podcast is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Today’s has an interview with PRMG’s Kevin Peranio and Truv’s Richard Grieser on verification across income, employment, assets, and insurance.) Lender and Broker Services, Products, and Software “As rates decreased in January, IMBs saw an increase in dwell-time and warehouse expenses. In January, dwell-time was up 3 days from the 15-day average. While rates are down for borrowers, overnight SOFR rates averaged 5.32 percent. With the additional 3 days of dwell, for the average IMB costs increased by nearly $70 per funded loan, a 170 percent increase from December. With full automation from funding of loans through Purchase Advice reconciliation and paydown activities, OptiFunder now offers the most comprehensive Warehouse Management System available, allowing originators to get loans from the primary to the secondary markets quickly and efficiently. Top IMB’s are using funding automation to save time and capital. Meet with us at Lenders One Summit or at the ICE Experience to see how you can streamline funding through loan sale to lower dwell and warehouse expense. Sign up for our monthly newsletter for more warehouse trends.”

Since mid-January, “we have seen a meaningful uptick in demand that has continued through this past weekend,” Toll Brothers Chief Executive Officer Doug Yearley said in an earnings call Wednesday.

Data used to determine the non-QM and prime jumbo numbers represent 75% of securities in each respective loan segment, the companies said.

The Federal Housing Administration’s new foreclosure prevention strategy starts soon and a Department of Veterans Affairs option is getting final approvals.