“Don’t waste a good crisis.” Continuing data breaches constitute a crisis, the latest example being LendingTree Inc., cloud-based data analytics firm Snowflake Inc., and MBS loan-level data. Headlines that talk about a “crisis” or something “plummeting” in price should be viewed skeptically, regardless of the topic. Here’s “Home Prices are Falling Fast.” Really? I say, much ado about nothing. Dropping 1-2 percent… really… plummeting? Are people jumping out of windows? How about looking at those markets like Austin over the last 10 years: Most were bound to take a breather after getting ahead of themselves. There is something that has garnered a lot of headlines in recent weeks, and that is the FHFA authorizing a pilot program for Freddie Mac to buy as much as $2.5 billion in second mortgages over 18 months, a shift that could ultimately make it cheaper for households to borrow against the equity in their homes. There are those, however, who say that this is much ado about nothing: more below. 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 Blue Sage’s Carmine Cacciavillani on his nearly four decades in the mortgage industry as a solutions provider creating complex software-based business solutions. Software, Products, and Services for Lenders and Brokers

May turned out to be a dismal month for home sales. Sales of existing homes dipped a modest 0.7 percent from April, but new home sales fared far worse. The U.S. Census Bureau and Department of Housing and Urban Development report that sales of newly constructed single-family homes were at a seasonally adjusted annual rate of 619,000 units during the month. This is 11.3 percent below the sales level in April and down 16.5 percent compared to May 2023. However, April sales, originally estimated at 634,000 units, was upgraded to 698,000. Analysts had expected a better performance. Those polled by Econoday had a consensus forecast of 650,000 units. On a non-adjusted basis, 56,000 homes were sold during the month compared to 62,000 in April. Inventories continued to improve. At the end of May, there were 481,000 homes available for sale, nearly 13 percent more than a year earlier. The increase in availability is more apparent in the context of current sales.  The inventory for May is projected to be a 9.3-month supply at the current sales rate. This is a 14.8 percent increase from April and 34.8 percent from a year earlier. The median price of a home sold in May was $417,400 compared to $421,200 in May of 2023. The average price rose, however, increasing from $495,800 to $520,000. May sales fell compared to the previous month in all four regions and rose year-over-year in only one. In the Northeast, sales plummeted 43.8 percent compared to both April and the prior May. Midwest sales were down 8.6 percent for the month but rose 12.2 percent on an annual basis. The South saw decreases of 12.0 percent and 17.7 percent, respectively, from the two earlier periods. Sales slowed by 4.5 percent in the West and were down 20.9 percent from May 2023.

The absence of relevant domestic market movers has been a theme all week.  While that has gone hand in hand with relatively uninspired bond market movement so far, today has been complicated by overseas developments.  Initial pressure came from sharply higher inflation numbers in Australia.  After that, runaway weakness in USD/Yen is fueling concerns over actual or potential intervention from Japan (i.e. selling Treasuries to buy Yen-denominated assets).  Big pops in Yen have indeed coincided with mysterious spurts of Treasury selling so far this morning, with a bit of a delay.

North American firm Voxtur Analytics said a U.S. mortgage investor group backing a new slate of board nominees hadn’t provided some information Canada requires.

The announcement comes as the bureau’s director regularly voices doubts about whether algorithmic models can be entirely nondiscriminatory and warns companies of potential enforcement from violations.

Cook expects three- and six-month inflation rates to continue to move lower on a “bumpy path,” with monthly data similar to the “favorable” readings seen in the second half of 2023 for the rest of the year.

The head of data and digital at Ally Bank came up with protective measures governing the use of generative AI and organized “AI Days” for employees to learn about Ally’s progress.

A national measure of prices rose 6.3% from a year earlier, less than the 6.5% gain in March, according to data from S&P CoreLogic Case-Shiller.

Decent 2yr Auction, But No Major Inspiration For Bonds

We’ve increasingly revisited the concept of the “inside day” recently and with 2 days down, we could actually shift gears and to an “inside week.”  In other words, both yesterday and today’s trading ranges can be easily contained inside the trading range established last week.  In fact, everything fits in last Tuesday’s range, and we’d have to go back yet another week (to CPI/Fed week) to see any actual volatility.  That’s not a bad thing.  It’s just a thing.  It will change eventually, but it didn’t change today.  The biggest market mover was Canadian CPI of all things–something we basically never watch or mention, but those are the lengths one must go to on inside weeks.  Tomorrow’s 5yr Treasury auction could be a bigger player than today’s 2yr although the latter did help bonds hold the line without losing more ground.

Econ Data / Events

Philly Fed Non-Manufacturing Index

15.1 vs 7.3 previously

Canada CPI

0.6 vs 0.2 month over month

Case Shiller Home Prices

1.4 vs 1.6 prev

FHFA Home prices

0.2 vs 0.3 f’cast, 0.1 prev

Consumer Confidence

100.4 vs 100.0 f’cast, 101.3 prev

Market Movement Recap

08:25 AM Modestly stronger overnight.  MBS up 2 ticks (.06) and 10yr down 2bps at 4.212

08:51 AM Some weakness after data.  MBS down 1 tick and 10yr up 1.2 bps at 4.244

10:42 AM Off the weakest levels.  10yr up just under 1bp at 4.24 and MBS down only 1 tick (.03)

02:05 PM Modest bounce back after 2yr auction, but still in negative territory.  MBS down 2 ticks (.06) and 10yr up 0.8bps at 4.241

03:05 PM Slightly stronger in Treasuries with 10yr now unchanged at 4.234.  MBS still down 2 ticks (.06).

Mortgage rates have been flatter than the earth according to the flat earth society.  Much like the actual earth in many areas in the middle of the country–and especially Florida–things can be flat for as far as the eye can see, but the farther one moves along, the more they’ll see the contour. For now, though, mortgage rates are in Florida (or IL, ND, MN, etc…).  Conventional 30yr fixed rates inched up 0.01% from yesterday–effectively unchanged and in the same tight range of 7.01 to 7.04 seen since last Monday. Much like the actual geology of the planet, this isn’t a conspiracy.  It’s just the way things are relative to what we can see around us.  It will change, but not until markets are forced to confront mountains of more important economic data and events.   Tomorrow’s events have only a slightly better chance of forcing the bond market (and thus, mortgage rates) to make bigger moves.  Friday continues to be the biggest risk/opportunity, but it’s really the following 2 weeks of data that are almost certainly destined to deliver peaks and valleys.