The morning has been both straightforward and interesting.  The straightforward part involved a moderate sell-off following stronger economic data.  Jobless claims fell (both weekly initial claims and continued claims), and core PPI came in 0.1 higher than expected in year over year terms.  A saving grace on the inflation front was the as-expected result in monthly core PPI (0.3 vs 0.3) and the fact that it was almost lower than expected (unrounded number was 0.253, which is about as low as it could be without rounding down to 0.2). The interesting part of the morning has been a quick return to positive territory.  The gains are not data-driven and the only objective justification would be a series of big block trades in 5 and 10yr notes that came in right as yields were peaking. 

Demographics matter. Although I am sending today’s Commentary out from a Dunkin’ near Columbus, Ohio, yesterday I found myself visiting a supposedly haunted hotel in Chattanooga, possibly the last “weather kiosk” in the world in Knoxville, a tourist attraction near Lexington built like an ark, and in a tavern, for lack of a better term, in Kentucky, and a fellow at the bar struck up a conversation with me. He explained that his family had moved from Wisconsin to Florida, found it intolerable, and was now thinking about living near Lexington. Per Prashant Gopal of Bloomberg, lots of investors snapped up land in Kissimmee, Florida, the suburb of Orlando, with the goal of making an easy buck renting them out to tourists trying to visit Disney. The suburb has over 30,000 short-term rentals, more than any other city in America, so lots of supply and not as much demand. The solution? Hire Home Theme Orlando, which will renovate the houses at a starting price of $150,000 a pop to make them “themed.” The ”theme” of this week in Mar Largo has been proposed appointments, and eventual changes in Washington DC. And today is another episode of The Big Picture at 3PM ET (click here to register). Today’s show has Mark Calabria (he was the Director of the Federal Housing Finance Agency – FHFA – and chief economist for VP Pence) discussing the possible future of Freddie & Fannie. (Today’s podcast can be found here. This week’s is sponsored by Floify. Floify is an easy-to-configure point-of-sale platform that allows each branch or loan officer to customize its look and feel to meet the needs of their lending team, homebuyers, and market. Today’s features an interview with CMG Financial’s AJ George on the strategy of mergers and acquisitions from an executive’s perspective.)

Losses… weakness… selling pressure…  When any of these things happen in the bond market, it puts upward pressure on interest rates.  Mortgage rates are primarily determined by bonds, after all.   Today started out well enough for the bond market.  This allowed mortgage lenders to set today’s rates roughly in line with yesterday’s levels.  That makes for 3 days in a row with the average lender offering top tier 30yr fixed rates just a hair above 7%.  Fed Chair Powell have a speech and answered questions today at a regional event in Dallas.  He echoed recent comments from other Fed speakers regarding the pace of Fed rate cuts. In short, Fed sentiment is shifting in favor of slower pace. As we hopefully learned from the market movement heading into (and out of) the Fed’s September meeting, expectations for Fed rate cuts have an immediate impact on longer term rates like mortgages. Days like today contribute to cooler expectations for rate cuts and thus put upward pressure on rates.  That’s not immediately apparent in mortgage rates, but this had more to do with the timing of bond market movement today.   Fortunately, bonds had gained some ground before they lost ground.  The net effect is not big enough for most mortgage lenders to raise rates. 

China raised $2 billion from three- and five-year securities at one and three basis points over Treasuries, respectively, according to a person familiar with the matter.

The study found nonbank lenders charging the highest interest rates and most points, and fintech pricing more in-line with depositories.

The real estate investment trust reported a GAAP loss and thin earnings available for distribution as a result of market shifts that also affected some peers.

Better touted the company’s efficient operations, including an artificial intelligence voice assistant handling all of its inbound customer calls.

The Trump victory is considered a positive for changing the status of Fannie Mae and Freddie Mac, but what would that do to interest rates?

“When I was young man, I met a girl in Tennessee who turned out to be a moonshiner’s daughter. That was a long time ago. But I love her still.” The Commentary is going out this morning from a Buc-ee’s in Northern Georgia (on my way northward to Ohio), economic activity is active. Are high rates in my rear-view mirror, with lower rates down the road? Mortgage rates and U.S. Treasury yields have climbed further, with the 10-year bond reaching 4.36% and mortgage rates near 7%, as investors anticipate potentially inflationary policies from President-elect Donald Trump, such as tax cuts and tariffs. With better economic data, perhaps a too-dovish Fed, and more policy details from the Trump administration are higher Treasury yields and worse mortgage pricing a surprise? Today at 2PM ET/11AM PT “Mortgage Matters: The Weekly Roundup” presented by L1 has Jess Medema, who runs secondary marketing for Altra CU, discussing what happens behind the scenes in a secondary department and what originators should know about rates & pricing. (Today’s podcast can be found here. This week’s is sponsored by Floify. Floify is an easy-to-configure point-of-sale platform that allows each branch or loan officer to customize its look and feel to meet the needs of their lending team, homebuyers, and market. Today’s features an interview with Experian’s Joy Mina and Ivan Ahmed on how lenders can navigate a tight market, from rates to equity.) Lender and Broker Software, Services, and Products

It’s not entirely clear if it’s a can or the proverbial bucket.  All we know is that mortgage applications have been kicking it.  There’s no great way to make the news interesting now that loan volume has done what anyone would have expected it to do, given the the rapid rise in rates over the past 6 weeks. Up until that point, there had been a noticeable uptick in refinance applications.  That uptick has now been fully erased, although this week didn’t decline nearly as much as the past several. In the bigger picture, that uptick wasn’t anything special considering the starting point was as low as it’s been in decades. To whatever extent refi apps have been historically muted, purchase applications have been reliably boring.  Little changes on that front from week to week. The bigger picture is more interesting here, perhaps, as it shows the rapid shift from a longstanding trend of steady improvement to the new reality of exceptionally light purchase activity. Other highlights include:
Refis accounted for 39.9% of the total, same as last week
FHA accounted for 16.0%, up from 15.5%
VA accounted for 13.3%, up from 12.5%
Survey rates were up to 6.86 from 6.81 (30yr fixed)
origination/points decreased to 0.6 from 0.68
FHA rates fell to 6.69 from 6.75
Jumbo rates rose to 7.00% from 6.98%