One of the downsides of rates being very close to the highest levels in months is that it doesn’t take much of nudge to hit new highs.  That was ALMOST the case today as the average lender moved just slightly higher compared to yesterday’s latest levels.  The average borrower might not see much of a detectable difference in loan quotes in the past 24 hours, but it was just enough to push 30yr fixed rates very close to the highest levels since November 2023.   There were no interesting or obvious catalysts for the move, nor would we expect there to be when it comes to the level of volatility seen on almost any day of the past 2 weeks.  A top tier, conventional 30yr fixed scenario is now well into the 7% range for the average lender.  While this is still far below the multi-decade highs seen in October, it’s noticeably higher than the end of 2023 when lenders were closer to the 6.625% level. While we’ll have to wait until next week for the most important economic data (the stuff with the biggest chance of causing rates to rise or fall) the next few days provide a few supporting actors.  These economic reports could create a bit more movement than we’ve seen in the past two weeks, but that depends entirely on how far they fall from forecasts.

Despite the upward path of interest rates, both the CoreLogic Case-Shiller indices and the Housing Price Index (HPI) published by the Federal Housing Finance Agency (FHFA) showed continued appreciation in home prices last year, although not at the double-digit rate seen during the pandemic and its immediate aftermath. While all indices showed annual gains, all also indicated a softening of the market in recent months.   The Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, reported a 5.5 percent annual gain in December, a half-point more than the annual gain in November. The 10-City Composite was up 7.0 percent compared to 6.3 percent the prior month and the 20-City Composite posted a year-over-year increase of 6.1 percent, up from 5.4 percent in November. San Diego reported the highest year-over-year gain among the 20 cities, 8.8 percent, It was followed by Los Angeles and Detroit, each at 8.3 percent. Portland showed a 0.3 percent increase this month, holding the lowest rank and reported the smallest year-over-year growth, however, this reversed 11 consecutive monthly losses. Non-seasonally adjusted month-over-month changes were all negative. The U.S. National Index was down 0.4 percent while the 20-City and 10-City Composites dipped 0.3 percent and 0.2 percent, respectively. After seasonal adjustment, all three indices eked out gains of 0.2 percent. “U.S. home prices faced significant headwinds in the fourth quarter of 2023,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices. “However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs in 2023. Ten of 20 markets beat prior records.

A correction to yesterday’s Commentary regarding the next holiday (Memorial Day) being two months out. Several emailed that Memorial Day is actually three months away! Overheard here in Texas the hallways at the TMBA Secondary Conference: “So if we don’t let athletes bet on games that they have the ability to influence, why do we allow Congress to invest in companies they regulate?” Here at the conference, the wise use of technology is definitely an important topic (today’s Mortgages With Millennials focuses on this), as are the desirability of better mortgage regulations rather than more regulations, how many politicians seem more focused on their reelection prospects rather than bettering things, and the role of Ginnie Mae, Fannie Mae, and Freddie Mac going forward. (Found here, this week’s podcast is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products – nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics – unite the people, systems, and stages of the mortgage process. Today’s has an interview with Polunsky Beitel Green’s Peter Idziak on the U.S. Treasury Department’s proposed rule that would require real estate professionals involved in closing and settlements to disclose the names of people behind the anonymous limited liability companies.) Lender and Broker Services, Products, and Software “Is your loan origination system (LOS) helping you maximize efficiency and meet the needs of every borrower? Taking the time to assess the health of your operations today will help you set yourself up for success in the year ahead and beyond. Read our recent blog to learn which LOS features can have the biggest impact on your business and how Encompass® helps you maximize these important components.”

The volume of active for-sale condo listings in the Sunshine State increased by 40% last month compared to a year earlier, Redfin said.

While mortgage volume should rise this year, the government-sponsored enterprise expects slightly less activity than it did back in January.

Sales of new homes in the U.S. edged higher in January as builders and buyers capitalized on lower mortgage rates at the start of the year.

New American Funding, Lower and FirstSun Capital among purchasers in recent M&A deals within the mortgage space.

Despite limited inventory and rising prices, buying interest appears robust heading into peak season, but lenders are likely to find a more discerning consumer.

Mortgage rates moved moderately higher to begin the new week, but they remained just under the highest recent levels seen last Thursday.  Many lenders were closer to ‘unchanged’ at the outset but were then forced to issue mid-day increases in response to weakness in the bond market. Bonds directly dictate the day to day movement in mortgage rates.  When bonds change enough during the day, lenders have to react, although they prefer to set rates only once a day for operational reasons.  Neither the movement over the weekend or during the day was very significant in the bigger picture.  We continue waiting on the more important economic data due out in the coming weeks for the biggest potential impact on rates.  Some of this week’s data could have an impact, but next week’s data represents a much bigger risk (or opportunity).

Auctions Caused Modest Weakness, But Mostly in Advance

As the bond market looks at the 5yr Treasury auction in the rearview, there’s a figurative sigh of relief.  Granted, it’s not enough to get Treasuries or MBS back into positive territory, but it does seems to confirm the “anxiety” trade driving the weakness earlier in the day.  That conclusion is further supported by the Treasury outperformance of MBS in the afternoon after the underperformance earlier in the day.  Despite the intraday volatility, none of of the bigger picture range boundaries were threatened and there were no interesting implications for bond market momentum.  “Generally sideways since CPI and waiting on the next big data” has been a good recap for nearly 2 weeks now.

Market Movement Recap

09:48 AM Initially stronger overnight, but losing ground modestly into domestic hours.  MBS are still up 1 tick (.03).  10yr up 1.4bps at 4.262.

10:49 AM Some selling heading into the 10am hour.  MBS down 2 ticks (.06).  10yr up 3.2bps at 4.28

01:06 PM Modest additional weakness before and after 5yr Treasury auction.  10yr up 5.5bps at 4.303.  MBS down 5 ticks (.16).

03:48 PM Recovering a bit after getting the auctions out of the way.  MBS down 5 ticks after being down nearly a quarter point a short while ago.  10yr up only 3.3bps at 4.281.