Manufactured housing could see eased lending rules if the defense bill removes the “permanent chassis” requirement, expanding FHA mortgage eligibility.

BTIG is waiting with “baited breath” for Fannie Mae and Freddie Mac to relist their common stocks, but if spreads widen, it could derail it from happening.

Federal Housing Finance Agency Director Bill Pulte should be called to testify before lawmakers no later than the end of January, the Democratic members of the Senate Banking Committee wrote in a letter Friday to Republican Chairman Tim Scott.

US consumer spending stalled in September, suggesting Americans were already stretched going into the government shutdown in the face of stubborn inflation.

A recent Remax survey found 88% of respondents said they are “very” or “somewhat likely” to purchase a home next year.

Technicals Help Reconcile Selling Pressure

In the realm of market commentary, technicals are a vastly overused explanation for past movement, let alone for the prediction of future movement. In this week’s case, however, the consolidation pattern in bond yields offers one of the only ways to understand the otherwise inexplicable selling pressure. Long story short, the weakness was just the right size and pace to complete the pattern heading into events with more power to inspire definitive reactions and lasting momentum.

Econ Data / Events

Consumer Sentiment (Dec)

53.3 vs 52 f’cast, 51.0 prev

Sentiment: 1y Inflation (Dec)

4.1% vs — f’cast, 4.5% prev

Sentiment: 5y Inflation (Dec)

3.2% vs — f’cast, 3.4% prev

U Mich conditions (Dec)

50.7 vs 51.3 f’cast, 51.1 prev

Core PCE (m/m) (Sep)

0.2% vs 0.2% f’cast, 0.2% prev

Core PCE Inflation (y/y) (Sep)

2.8% vs 2.9% f’cast, 2.9% prev

Inflation-Adjusted Spending (Consumption) (Sep)

0.3% vs 0.3% f’cast, 0.6% prev

Personal Income (Sep)

0.4% vs 0.3% f’cast, 0.4% prev

Market Movement Recap

09:29 AM Modestly weaker overnight but recovering a bit.  MBS down 1 tick (.03) and 10yr up 1.2bps at 4.11

10:59 AM 10yr yields are up 3bps at 4.128. MBS are down only 3 ticks (.09) on the day.

12:20 PM MBS down an eighth and 10yr up 3.1bps at 4.129

Recently I paid over $10 for a simple Oscar Mayer 12-ounce package of bacon. Jerome Powell, help me! Well, the U.S. Federal Reserve doesn’t set bacon prices, or things that come from China like rare earth metals, most of which I’ve never heard of but are apparently in my phone and car’s dashboard. Geopolitical tensions and export restrictions in China sending the prices of crucial metal components in electronics way up. The price of dysprosium is up to $910 per kilogram, triple the pre-export restrictions price. The price of terbium hit $3,700 per kilogram, quadruple the previous rate. The benchmark price for gallium has reached $1,325 per kilogram, which is 2.3 times the price at the beginning of the year and the highest price on record. China produces 99 percent of the world’s gallium. Our Federal Reserve can only do so much when it comes to combatting inflation. (Today’s podcast can be found here and this week’s are sponsored by Two Dots, whose conversational screening agent replaces manual underwriting with a streamlined, end-to-end process that reduces risk and fraud while securing safer borrowers, increasing profitable loan volume, and lowering underwriting overhead. Today’s has an interview with Creative Title’s Caleb Christopher on how lenders can adopt advanced AI and creative financing models while maintaining transparency, security, and consumer protection, and examining how private-capital “non-bank bank” structures, tightening credit, and the needs of underserved borrowers will shape the balance between innovation, risk, and trust.)

Seasonally adjusted mortgage application activity edged 1.4% lower last week according to MBA’s Weekly Mortgage Applications Survey for the week ending November 28. Unadjusted applications were down sharply (33%) due to the holiday. The Refinance Index slipped 4% from the previous week but remains 109% higher than the same week one year ago—still a significant year-over-year improvement, even as borrowers appear to be waiting for lower rate levels before jumping in more aggressively. Purchase applications were more resilient, rising 3% seasonally adjusted. On an unadjusted basis, purchases fell 32% from the prior week (again largely driven by the holiday), but remain 17% above last year’s levels—a continued sign of underlying buyer demand supported by easing prices and gradually improving inventory conditions. The index is currently at the highest level since early 2023. “Mortgage rates moved lower in line with Treasury yields, which declined on data showing a weaker labor market and declining consumer confidence. The 30-year fixed mortgage rate declined to 6.32 percent after steadily increasing over the past month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “After adjusting for the impact of the Thanksgiving holiday, refinance activity decreased across both conventional and government loans, as borrowers held out for lower rates. Purchase applications were up slightly, but we continue to see mixed results each week as the broader economic outlook remains cloudy, even as cooling home-price growth and increasing for-sale inventory bring some buyers back into the market.”

Average mortgage rates drifted slightly higher to end the week, though they remained under the levels seen on Monday and Tuesday. Even then, none of this week’s movement was especially abrupt. That’s interesting considering there was a decent amount of economic data throughout the week. It could be that the rate market is simply waiting for the heavier hitting events on the horizon. Next Tuesday’s Job Openings data is on the watch list. It will be the first major October employment data from the Bureau of Labor Statistics (the same agency that publishes the big jobs report) since the end of the government shutdown. That’s especially notable in this case because we won’t ever get a full jobs report for October, and the portion that remains won’t come out until the following week. Then on Wednesday, the The Fed will announce its rate decision. Markets are fairly convinced the Fed will cut rates, but the confidence isn’t as iron-clad as normal. Additional surprises could arrive with the Fed’s dot plot (updated rate forecasts from each Fed members) as well as Fed Chair Powell’s press conference.  As always, keep in mind that a Fed rate cut has no bearing on longer-term rates like mortgages. It’s actually been more common to see mortgage rates rise following Fed rate cuts.  

If there’s one resounding theme in the bond market this week, it’s that trading momentum marched to its own beat with almost zero regard for the available economic data. While this was a notable disconnect on Wednesday (little reaction to ADP/ISM), it’s fairly easy to reconcile on a day like today where the PCE data is super stale (delayed release from September) and the only other report, Consumer Sentiment, rarely has an impact. 

In general, the past 5 days have marked a casual return to the prevailing range (or more appropriately, the prevailing trend channel), thus setting the stage for a bigger break after the bigger events on the horizon (Fed day next week and jobs report the week after).