“What did people from the Midwest call a small can of pop? A Minnesota.” (Say it out loud to your 3 rd grader.) While we’re on a “pop,” lenders in the nation’s midsection are cheering the numbers as large cities in the Northeast and Midwest popped in 2023, reversing earlier population declines, according to Vintage 2023 Population Estimates from the U.S. Census Bureau. The South still rocks, however. Cities with populations of 50,000 or more grew by an average of 0.2 percent in the Northeast and 0.1 percent in the Midwest after declining an average of 0.3 percent and 0.2 percent, respectively, in 2022. Those in the West went up by an average of 0.2 percent from 2022 to 2023. Cities in the South grew the fastest, by an average of 1.0 percent, and 13 of the 15 fastest-growing cities were in the South, with eight in Texas alone. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a warranty, eliminating repurchase worries. Hear an interview with American Pacific’s Bill Lowman on motivating people, change management during M&A, and retaining origination staff.) Software, Products, and Services for Lenders and Brokers With Truv, Revolution Mortgage saves 70 percent on verifications (+5 BPS savings per loan). What does Femi Ayi, EVP Operations, Revolution Mortgage, have to say about Truv? “Since we started our partnership, we’ve taken our costs for verifications from 8 basis points per loan down to 3 basis points per loan.” Truv has helped hundreds of lenders, from the biggest banks, IMBs, and Credit Unions, to the smallest, greatly improve their income, employment, asset, and insurance verifications strategy. You could be one of them: Get started!

Mortgage rates rose at the fastest pace in 2 weeks yesterday, but that wasn’t a very tall order considering an almost perfect absence of movement leading up to that.  Now today, a good amount of that small amount of damage has been undone. Bonds responded favorably to this morning’s economic data, which suggested the labor market could be in the process of softening a bit, and that companies were less likely than expected to make big purchases in May (not including aircraft and defense spending). Bonds thrive on bad news for the economy (and bonds drive interest rates).  While this wasn’t the worst news in the world, it was far enough from forecasts to spur a modest rally in bonds and rates.   The top tier conventional 30yr fixed average remains just a hair over 7% for most lenders.  Bigger changes are possible in the coming days/weeks as more important economic data will be released. 

It’s been an odd morning for the bond market, but not in an objectionable way.  In not so many words, bonds are rallying somewhat nicely despite an absence of obviously compelling data.  We can make a case for it, but it takes some doing due to the sheer amount of 8:30am line items.  Those can be whittled down by removing the stale Q1 numbers (GDP, PCE, corp profits, etc).  Of the remaining reports, only Durable Goods emerges as a solid scapegoat.  Headline readings remain low and the “core” (excluding defense and aircraft) was much lower than expected.  Even so, the rally is a bit bigger than we’d expect, but we’re not complaining. 

At this time of month, we can always consider the month/quarter-end trading environment, which can cause relatively big swings regardless of data.  But if that were this morning’s x factor, it’s extremely unlikely that the movement and volume would be substantially concentrated at the 8:30am mark (when all the data came out).

It comes as investors begin to reshuffle their portfolios at the mid-year mark, while traders earlier this week embraced bets on 3 percentage points of cuts over the next nine months.

Across the country over the past two years, the share of homes affordable to a first-time home buyer has fallen to 29% from 34% in 1Q23 and 45% in 1Q22, First American Financial said.

New York Mortgage Trust’s 9.125% notes due 2029 may help fund new purchases of mortgages and securitizations in the private or agency markets.

The sales pace is now at the low end of the range seen over the past year, suggesting limited momentum amid a lack of affordability.

Almost two-thirds of those aged 55 or over said they are sentimental about the house they have occupied long-term.

After operating in an exceptionally narrow range since the beginning of last week, mortgage rates finally started doing something a bit different today.  Unfortunately, the differences result in a more noticeably move higher. Rates often respond to major economic data and other important developments that have a bearing on the bond market (rates are ultimately primarily a function of bond trading levels).  That said, there were no great examples of the typical “important developments” behind today’s move.  That’s one of the reasons that the move was fairly small relative to other notable examples. Top tier conventional 30yr fixed rates only moved up a few hundredths of a percent and not every borrower would see much of a difference from yesterday.  The next two days bring data and events that stand a bit better chance of inspiring a reaction, but we don’t really get to the biggest risks/opportunities until the first two weeks of July.

Sideways Trend Looking Shifty

Using Treasury yields as a road map, the past week and a half has been excruciatingly sideways for the bond market.  Yields haven’t been over 4.29 during domestic hours for more than a few minutes and never far under 4.21.  Of those two levels, it’s the 4.29% “ceiling” that’s seen more activity and today brought a breakout–albeit a modest one.  Yields were just under 4.32% at the 3pm close, but not for reasons that are inspiring or significant as far as the classic bond-watching playbook is concerned.  It’s not that they don’t matter, only that things like Japan’s potential currency intervention and high Australian inflation are the smallest potatoes next to things like big ticket U.S. economic reports such as this Friday’s PCE, or several of the key reports in the first 2 weeks of July.  A shift in trends in response to that data would be more of a concern.  This is just an unlucky break on a small scale for now.

Econ Data / Events

New Home Sales

619k vs 640k f’cast, 698k prev

Market Movement Recap

10:08 AM moderately weaker overnight with additional selling around 9:15am.  10yr up 4.7bps at 4.296 and MBS down an eighth.

01:03 PM No major reaction to 5yr auction.  10yr currently up 6bps at 4.308.  MBS down 5 ticks (.16).

02:30 PM gradual losses since 1:30pm.  Weakest levels now with MBS down 7 ticks (.22).  10yr up 6.6bps at 4.315

03:52 PM Heading out near weakest levels with both MBS and Treasuries right in line with the last update.