The Mortgage Bankers Association (MBA) released its weekly application survey results on Wednesday.  The highlight was a 12.43% increase in purchase applications from the previous week.  That brought the purchase index to the highest levels since February. As has been and continues to be the case, there’s an obvious counterpoint to any of these periodic surges: the broader context.  In other words, yes, these are the highest levels since February, but even if we go back to February 2023, the range since then is historically low and sideways. With that in mind, we’re equipped to digest the refinance index with a grain of salt.  At first glance, we might lament the evaporation of the recent surge in September. But the broader context suggests that we can simply be in a perpetual state of lamenting refi demand for more than 2 years now. Other highlights from this week’s application data (current week change % vs previous week):
Refinance share of total apps

38.8  vs 41.0

FHA share of total apps

16.0 vs 16.6

VA share of total apps

12.4 vs 13.6

Week over week change in interest rates
Conforming 30yr fixed

6.86 vs 6.90

Jumbo 30yr

6.97  vs 7.03

FHA 30yr

6.61 vs 6.68

“I was late to my cannibal family’s Thanksgiving dinner. I got the cold shoulder.” LOs are experts on family life and demographics. The share of both same-sex and opposite-sex households with children under 18 (married and unmarried) declined from 2019 to 2023 , a reflection of drops in U.S. fertility rates. Among female couple households, 25 percent of married and 16 percent of unmarried couples had children in the household in 2023. Among male couples, 9 percent of married and 3 percent of unmarried couples had children in the household. About 21 percent of female couple households included a child in 2023, compared to just 6 percent of male couple households. A house hunter recently told me, “I’m not going to AI buy my house.” NAR is good at producing reports on how people actually do buy and sell houses , and it is worth a gander. (Today’s podcast can be found here and this week’s are sponsored by Truework . By connecting every verification method into one platform, Truework helps lenders eliminate process disruptions, maintain a competitive borrower experience, and reduce the fiscal impact of verifying income. Hear an interview with A and N Mortgage Services’ Neena Vlamis, Wilqo’s Lance Reese, and MCT’s Chris Anderson on data security and the importance of access to data for the mortgage industry.)

For the second time in the past three weeks, the 30-year fixed mortgage moved lower, but investors want clarity about U.S. economic policy, Freddie Mac said.

The latest plans include details on promoting housing development in underserved areas and increasing secondary market access to rural institutions.

The economist, who runs Roubini Macro Associates, is positioning for a curve steepener, a popular Treasuries trade where the gap between long- and short-dated yields widens.

The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 2.8% from October last year and 0.3% from a month earlier, according to Bureau of Economic Analysis data out Wednesday.

The trade group agreed to the settlement in March, which included paying $418 million to settle claims.

Stronger Bonds, Before and After (And Regardless of) Economic Data

Bonds were stronger overnight with 10yr yields hitting roughly 4.25% even before this morning’s economic data came out.  Now at the 3pm CME close, 10yr yields are still at 4.25% and they didn’t stray too far from that midpoint in either direction. Data was neither friendly nor unfriendly and there was certainly no discernible reaction.  We’re left to chalk up the rally to serendipitous, temporary factors such as month-end trading, holiday weekend position squaring, and the proverbial skids being greased by a light liquidity environment.  It was and always will be the plan to basically ignore market movement on Thanksgiving week and tune back in more attentively during jobs report week (i.e. next week).  NOTE: we are not currently planning on scheduled commentary for this Friday’s half day unless something momentous happens.  Bonds will be open until 2pm ET.

Econ Data / Events

GDP

2.8 vs 2.8 f’cast

Jobless Claims

213k vs 216k f’cast

Continued Claims

1.907m vs 1.910m f’cast

Core PCE Q/Q 

2.1 vs 2.2 f’cast, 2.8 prev

Core PCE M/M

0.3 vs  0.3 f’cast, 0.3 prev

Core PCE Y/Y

2.8 vs 2.8 f’cast, 2.7 prev

Market Movement Recap

09:19 AM moderately stronger overnight and no reaction to 8:30AM data.  MBS up 6 ticks (.19) and 10yr down 5.2bps at 4.253

10:14 AM Modest weakness after PCE data.  MBS still up 5 ticks (.16) and 10yr down 3.8bps at 4.268 but up from lows of 4.24

02:31 PM Near the best levels now.  MBS up a quarter point and 10yr down 6.6bps at 4.24

“Rob, my borrowers would be really happy with rates below 7 percent. When will we get there?” A wise economist with the MBA once told me, “If you’re going to give a number, don’t give a date. If you’re going to give a date, don’t give a number.” Probably early next year. If I could predict rates precisely, I’d be writing this from a sleepy village on a beach in Mexico. Depending on where the home is, maybe the focus should be more on obtaining homeowner’s insurance at a reasonable level. Everyone is talking about how delinquencies are following mounting insurance costs! Per HomeLight, nearly half (46 percent) of the people out there say that buyers and sellers are hoping for interest rates to drop to between 5.75 percent to 6.00 percent before they make a move. Homeowners are borrowing nearly 50 percent of their equity for three main reasons: Debt consolidation (88 percent), home renovations (79 percent), and purchasing another property (55 percent). However, homeowners have tapped into equity for some far-fetched reasons, too: loan officers reported clients using their equity to buy a helicopter, cosmetic surgeries, and fund food truck, bouncy house, and sheep herd fire abatement businesses, respectively. Writing a daily Commentary pales in comparison. (Today’s podcast can be found here and this week’s are sponsored by Truework. By connecting every verification method into one platform, Truework helps lenders eliminate process disruptions, maintain a competitive borrower experience, and reduce the fiscal impact of verifying income. Hear an interview with Socotra Capital’s Chris Baumann on hard money lending 101.)

The interest rate market continues the healing process after taking heavy damage in October.  During the course of that month, the average top tier conventional 30yr fixed rate increased more than 0.75% and broke above 7.0% for the first time since early July.  The first few days of November saw some additional volatility with our rate index hitting 7.13% on November 6th. Things have calmed down more and more since then.  While this doesn’t mean there’s been a huge correction back toward lower levels, the absence of additional weakness is nearly as big of a victory as we could have seen.  Today’s installment didn’t bring a huge day-over-day change to mortgage rates, but we were already close enough to the 1-month low that a modest improvement is all it took. Rates take cues from bonds which, in turn, take cues from economic data, among other things. Today was the busiest day of the week for data, but none of it ended up causing a big move in one direction or the other.  Instead, bonds calmly continued toward stronger levels.  Be aware that this sort of movement at this time of the year can be a serendipitous byproduct of market motivations that don’t have anything to do with the typical motivations.  That’s an opaque phrase, to be sure, but a high detail explanation would require a novel, and it would be fairly esoteric to boot.  Suffice it to say that traders have to make certain trades before the end of the month, and most bond traders would consider that to be today.  It shouldn’t necessarily be viewed as an indication of additional positive momentum.