Want better affordability? Lower house prices certainly helps, and this article states that more than half of homes in the United States have fallen in price in the last year. Forget interest rates: Certainly, there are fewer willing buyers when they know ahead of time that they may face increasing insurance, tax, or condo fees. (Lenders are doing what they can to control costs, and a recent STRATMOR piece is titled, “Rates Drop, Pipelines Pop: Don’t Let Fulfillment Flop.”) The strain is being seen and felt. CNBC reports that foreclosures rose in October signaling some type of distress. (Or delinquency and foreclosure numbers were really low to begin with, right?) As broker veteran Brian B. writes from Florida, “This is one reason for the popularity of DSCRs. Companies looking to buy real estate can buy the DSCR mortgages, and then the foreclosures are quicker because they are non-owner properties.” The foreclosure moratorium coming off is a likely source. Foreclosure activity is returning to normal ranges after years of artificially low volumes (Covid-era forbearance programs, etc.), according to ICE’s First Look report. However, FHA-backed loans are driving roughly half of foreclosure starts. FHA loans saw a 44-bps rise in non-current rates, while other loan types improved. Foreclosure starts hit 103,000 in Q3, up 23 percent over the same period YoY. FHA loans now account for 38 percent of all active foreclosures nationwide. Overall foreclosure volume remains historically low, with Q3 foreclosure sales at ~half of 2019 levels. (Today’s podcast can be found here and this week’s are sponsored by The Big Point of Sale, which delivers a fast, flexible, and low-cost mortgage POS that gets lenders up and running in hours (not months) while empowering loan officers and consumers to collaborate seamlessly from any device. Hear an interview with The Big Point of Sale’s Matthew VanFossen on the evolution of technology in the mortgage industry and how all parties privy to a mortgage transaction can be included on the same workflows.)

A federal judge threw out the criminal charges against former FBI Director James Comey and New York Attorney General Letitia James, ruling that the prosecutor who brought the cases had been illegally appointed.

The Natural Treasury Employees Union has asked a district court to clarify whether Russell Vought, the acting director of the Consumer Financial Protection Bureau, has complied with a preliminary injunction.

Social media posts point to a 40% to 100% price hike this year, the latest in a series of hikes started in 2023, when for some lenders prices rose 400%.

The government-sponsored enterprise took its first look at what new loan volume might be like in two years and found it could rise closer to pandemic levels.

While the tone is still generally upbeat, the market is mired below October’s price highs and yields are range-bound.

Lowest Yields in Almost 4 Weeks Despite Ongoing Stock Market Recovery

There’s no question that stock prices and bond yields have had more than the normal amount of correlation recently. While that created some risk of a bond market weakness in the event of a stock market correction, those fears are proving unfounded over the past 2 trading days. Granted, stocks haven’t surged, but they did move back to the highest levels in a week on Monday. But bonds didn’t follow. In fact, after a microscopically stronger start, yields continued to fall gradually throughout the session, ultimately closing at the lowest level since the late October Fed meeting.

Market Movement Recap

08:53 AM Modestly stronger overnight and holding gains so far.  MBS up 2 ticks (.06) and 10yr down 1.3bps at 4.05

12:04 PM MBS up 3 ticks (.09) and 10yr down 1.7bps at 4.047

02:52 PM Best levels of the day with MBS up an eighth of a point and 10yr down 2.7bps at 4.037

Thanksgiving weeks can be weird for mortgage rates. This has to do with the fact that rates are dictated by the bond market and the bond market depends on real live people who can actually be out of the office on holiday weeks. The lighter levels of participation can increase volatility and cause random movement for no apparent reason. We’ll cross that bridge if we come to it. As far as Monday is concerned, there’s no drama or weirdness to report. Bonds improved modestly throughout the day, thus allowing mortgage rates to move modestly lower.  Because rates were closer to the higher end of their recent range at the end of last week, the small drop means we’re still very much inside the prevailing range. The next two days bring some backlogged economic data. Combined with the typical holiday-week caveats, volatility risk will thus be higher through Wednesday. 

It’s a data-free Monday on a holiday-shortened week and there aren’t any high-impact headlines or massive stock swings to spark any serious bond market movement. Nonetheless, bonds have found a reason to rally ever-so-slightly this morning. Because yields were already at the low end of November’s range on Friday afternoon, the result is that today’s yields are the lowest we’ve seen since the late October Fed day. The next 2 days have quite a bit of data in addition to running a traditional risk of higher volatility due to holiday week trading conditions. In the bigger picture, we’re likely still waiting for the mid-December econ data before bonds would have enough info to threaten the still-relatively-narrow 3 month trading range. 

“Remember to bring up politics at Thanksgiving to save some money on Christmas presents.” “What do tornadoes and Tennessee divorces have in common? Someone’s going to lose a mobile home.” (My father’s family is from there, so I can use that one.) Mobile homes are one segment of the manufactured home biz, and at the other end of the scale there are some grand houses out there that are made in factories… It makes so much sense. Many in the United States believe that manufactured housing, and planned developments, are the way to go, and with good reason. But elsewhere, not so much. Neom, Saudi Arabia’s hugely expensive, architecturally bizarre urban development project, is floundering and close to collapse. “A new report from the Financial Times cites high-level sources within the project to paint a picture of dysfunction and failure at the heart of the quixotic effort.” Acceptance is a matter of supply and demand… Why does the United States have so many big houses? The answer is actually more complicated than you think but if you’re an originator, or work with builders, you should definitely know the reasons. If you’re a proponent of more housing, then you’ll have to unwind some of them. (Today’s podcast can be found here and this week’s are sponsored by The Big Point of Sale, which delivers a fast, flexible, and low-cost mortgage POS that gets lenders up and running in hours (not months) while empowering loan officers and consumers to collaborate seamlessly from any device. Interview with Experian’s Royce Chang on the Homebuyers Privacy Protection Act and the end of trigger leads, exploring what the shift means for lenders and how predictive modeling, pre-screen tools, and new borrower-engagement strategies can help them compete and thrive in a privacy-first market.)