Papanii Okai will fill a newly created position of executive vice president of product engineering at Rocket Mortgage.

Despite rising consumer confidence in the housing market, declining mortgage rates, alone, don’t seem to be able to lure home buyers in, two new reports find.

Depending on who wins, it will be four years of progressive policy chaos or four years of indifference towards the housing market.

Here’s a repeat of the lock/float considerations posted on Friday after the jobs report: “Friday’s strong jobs report and resulting bond market rout change the calculus for rate expectations until further notice. Traders now need new data to reinvigorate the case for an economy that’s weakening enough to support the Fed’s expected case of rate cuts. As big as Friday’s sell-off was, it still makes sense to view it as the start of a trend toward higher rates until the market proves otherwise.” 
Big reactions to NFP–especially those that follow a consolidation period–often lead to momentum that remains intact for days if not weeks.  The only potential saving grace here is that we already had a bit of negative momentum heading into last Friday.  Even so, it makes more sense to plan for it to continue until data speaks up in favor of a reversal. If we’re simply waiting for traders to be tired of selling, that conversation doesn’t really start until 10yr yields are closer to 4.15%.
Why 4.15%?  That’s where the bond market was before the recent bout of labor market concern ramped up in early August.  Recall that the early August rally was only as sharp as it was due to the Yen carry trade craziness and that subsequent trading settled in on a range of 3.8 to 4.0.  And that was AFTER a very downbeat jobs report.  Now we have a very upbeat jobs report (and one that incidentally provided a big upward revision of that very downbeat report released in early August).  The fact that 10yr yields are “only” up around 4% is fairly gentle, all things considered.  4.15% would be the first point at which we’d start to wonder if we’d seen enough negative momentum for some old fashioned “technical support.” 

Yesterday I flew west to Philadelphia (“Philly”) to spend some time with the Spring EQ sales team. It is a well-known fact that the process of boarding a plane takes about twice as long as deplaning: predictably passengers take longer to find their seats and settle in versus grabbing their belongings and heading for the door. What isn’t so predictable are mortgage rates. Why have mortgage rates gone up when they were supposed to have gone down following the Fed’s move? Tune in tomorrow at noon PT to the Capital Markets Wrap, presented by Polly, to find out. Many people predicted a significant hurricane season with climate change, but there had only been one hurricane by mid-August causing some to revise their predictions. There was even talk that less damage would mean savings for insurance companies resulting in savings for us, instead of more dramatic price increases for consumers. But we are reminded that “Mother Nature bats last.” (Today’s podcast is found here and this week’s is sponsored by LoanCare. The mortgage subservicer is known for delivering superior customer experience through personalization and convenience. LoanCare is part of Fidelity National Financial, a Fortune 500 company and leading provider of services to real estate and mortgage industries. Today hear an interview with Megan Anderson on how young people can better carve out careers for themselves in the mortgage industry.) Lender and Broker Software, Services, and Loan Programs

It’s been a strange and frustrating couple of weeks for anyone who mistakenly believed that mortgage rates would move lower after the Fed rate cut.  To be sure, there is plenty of that sentiment out there according to the just released Fannie Mae sentiment survey showing the highest net percentage of respondents who thought rates would go down since the survey began in 2021. To be fair, the survey asks about a 12 month time frame and a lot can happen in 12 months.  As for the 3 weeks since the Fed rate cut, however, things have not been great.  Today’s rate movement added insult to Friday’s injury with the market still working through the momentum created by Friday’s stronger jobs report. Given the motivations for the rate spike and the available economic data, it’s unlikely that rates will move quickly back down to the levels seen in mid September.  They’d need a lot of downbeat economic data to do so.  Even then, traders would still be waiting to see what the next jobs report had to say before getting too carried away. Meanwhile, there’s some risk of additional weakness in rates if the economic data is more resilient than expected.  The average lender is already back up to levels last seen in early August. Bottom line, markets got locked into the belief that data would slowly deteriorate (with a lot of weight being given to the last few jobs reports) only to see the most recent jobs report say “not so fast!”  There’s a bit of a re-set happening at the moment.  We can’t know exactly how big it will be until we get through more econ data.  Unfortunately, this week is much lighter than last week in that regard.  

Bonds Undergoing a Bit of a Reset

3 weeks ago, the Fed voted to cut rates by 0.50%.  Traders had rushed to get in position for that, so a small “reset” followed as the market waited for the most important vote.  The vote in question was on whether or not the market was ahead of itself in mid September and it was cast by last Friday’s jobs report.  When marquis reports coincide with big changes in Fed policy, and when Fed policy changes had a lot to do with the past two examples of the marquis report in question, and when the marquis report not only offers a completely different message from the past two, but also revises the past two in a way that casts doubt on the extent of the Fed’s decision, you get exactly what we’ve seen since Friday morning.  It’s a firm rejection of mid-September’s rates and a wake-up call that rates can still move higher, but not the same sort of watershed moment seen in 2013 before the taper tantrum.  Barring unforeseen exogenous shocks, we’ll now need another weak jobs report (or two or three) before re-challenging the mid-September floor.

Market Movement Recap

11:29 AM Weaker overnight and flat since then.  MBS down almost 3/8ths and 10yr up 5.6bps at 4.014

02:03 PM very low volatility at weaker levels.  MBS and Treasuries unchanged from pervious update.

03:52 PM A bit more weakness in Treasuries with 10yr up 7.1 bps at 4.029.  MBS still down 3/8ths. 

Most of the investment community overall showed more favorable sentiment toward one presidential candidate than the other, but a subset of it begs to differ.

Over 4 million residents in the region, both coastal and inland, face dangers similar to residents in Hurricane-weary Florida, Louisiana and Texas.

National issues such as the economy are prominent. But so are local concerns like a $10,000 limit on deductions for state and local taxes and high housing costs.