While the lock-in effect on existing supply has helped drive consumer interest in new construction, first-time buyers have been taking a greater share of that inventory.

There is a $446 difference between typical rent payments and typical mortgage payments in New Orleans.

In the non-prime pool, owner-occupied properties account for most of the assets, at 55.1%; the amount of investor properties represents 41.6% of the deal.

Summer has officially come and gone; the autumn equinox was yesterday. Columbus Day, Halloween, Veteran’s Day, and Thanksgiving are in the coming months. Here in Chicago (which knows how to celebrate) I spent some time in preparation with Garth Graham of STRATMOR who is noticing the market reactions to the decline in interest rates. Many lenders are encouraged that this could be a bump up for purchase business, but Garth believes there could be a divide in who benefits from the pickup in the purchase market. Among his observations is that recent legal developments affecting the real estate agents may result in consolidation in that business even as the business itself picks up, which he explains in this article. While we’re on legal issue implications, the Loan Originator Compensation Rule has been a thorn in the side of the mortgage industry since 2011 and in his latest Mortgage Musing, comparing LO Comp to the Berlin Wall, attorney Brian Levy again criticizes this uniquely anticompetitive price fixing rule that prevents mortgage commission negotiation at the expense of all consumers. (Today’s podcast is found here and this week’s is Sponsored by Silk Title Co. Silk is for lenders who have centralized operations, are tech driven, process oriented, focused on the borrower experience, standardized in their approach, and most importantly… collaborative. Listen to an interview with ALTA’s Chris Morton on a the previously rejected Fannie Mae pilot program that would have waived the requirement for lender’s title insurance on certain refinances under the guise of lowering housing costs.)

Mortgage rates rose modestly last week after hitting long term lows before the Fed announced its 0.50% rate cut.  In not so many words, mortgage rates had already gotten in position for that cut and were thus left to undergo a mild correction. The new week threatens to extend that corrective momentum as the average lender moved a bit higher again on Monday.  The counterpoint is that the underlying bond market (bonds dictate day to day rate momentum) ended up recovering in the middle of the day.  A bond market recovery is consistent with downward pressure on rates, but most lenders will wait until the following morning to make changes to their mortgage rate offerings unless the bond market moves more sharply.  Point being: mortgage rates are indeed higher today, but momentum in the bond market suggests there’s at least a possibility that the post-Fed correction is leveling off. 

Post Fed Correction Leveling Off?

Based on the weakness in the bond market this morning, it looked as if the post-Fed correction that began last week was set to continue into the new week.  And while that indeed may prove to be the case, there’s some room for doubt after the close.  Bonds rallied nicely in the late AM and early PM hours with both Treasuries and MBS making it back to unchanged levels. They’ve faded a bit after that, but not nearly back to the mid-day lows.  Comments from Fed’s Goolsbee lined up with the reversal, but the volume behind the move suggests that may not have been the primary motivation.  In any event, the milder weakness builds a case for the post-Fed correction potentially leveling off.  Tuesday will be more telling in that regard.

Econ Data / Events

S&P Services PMI

55.4 vs 55.3 f’cast, 55.7 prev

S&P Manufacturing PMI

47.0 vs 48.5 f’cast 47.9 prev

Market Movement Recap

09:55 AM Slightly weaker overnight and additional losses after PMI data.  10yr up 4bps at 3.781.  MBS down 6 ticks (.19).

02:06 PM Back to “unchanged” in MBS and nearly there in 10yr yields, currently up 0.1bps at 3.741.

03:42 PM Sideways for most of the PM hours.  MBS down 1 tick (.03) and 10yr up 0.3bps at 3.744

We closed last week with the idea of “buy the rumor, sell the news” seemingly being a good way to think about the time leading into and away from the Fed’s 50bp rate cut.  While bonds looked to be leveling off in terms of the pace of selling on Friday, the new week is seeing a bit of a resurgence.  The still-strong S&P Global Services PMI this morning surely didn’t help.

It’s worth noting that the “selling the news” part of the current bond market weakness isn’t exactly the best way to look at things, largely because short term rates haven’t seen much selling. In fact, when it comes to the yield curve, we could simply say that the curve steepening (2yr doing better than 10yr) has continued apace both before and after the rate cut.  Before Fed day, it was bull steepening (2yr falling faster than 10yr) and after Fed day, it’s bear steepening (2yr rising less than 10yr). 

This week, Federal Reserve Gov. Michelle Bowman cast the first dissenting vote at an FOMC meeting in years. On Friday, she explained why the economic data she’s seen didn’t convince her of the need to cut rates as much as her fellow governors thought.

Ally customers are blaming the bank for data breaches at its vendors, arguing that basic cybersecurity measures would have prevented the thefts.

The Federal Housing Finance Agency has agreed to more regular checks on the government-sponsored enterprises’ flood compliance, which impacts mortgage companies.