Saturday was George Thorogood’s 74th birthday, and fans know that he wrote the classic tale of rent collection, land ladies, and payment avoidance. Time flies, but that may change. We’re faced with an actual five-day workweek this week, with no Federal holidays until Memorial Day, May 27th, two months away! Yikes. Here in Houston at the TMBA’s Southern Secondary Conference, the attendees are already making use of what time they have, discussing best execution procedures, warehouse tactics, management strategies, economic trends, the market for servicing, and operational efficiencies. I’m a capital markets guy, so arguably learned math good. But I didn’t learn math like this! MBS versus cash sales pick-ups is always a favorite topic, although last year the market was deluged by excess servicing trades. Flow and bulk purchasers of HELOCs and 2nds is search being undertaken by some, as well as climate change and insurance cost increases. (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 Yardsworth’s Matt Lucido on creative ways that homeowners can leverage their tappable equity, and how we can see more supply hit the market.) Lender and Broker Services, Products, and Software

With the market for existing homes struggling amid a lack of inventory, New Home Sales continue doing the heavy lifting for the housing market.  Rather, New Home Sales are doing more to show a stronger relative performance to the pre-pandemic years.  The market for existing homes is still far bigger, even at its weakest levels. But existing home sales data is so “last week.”  Today’s release is specific to new homes, so let’s zoom in.  When we do, we can see new home sales remaining in the 2017-2019 range for nearly two years now.   In other words, new residential sales continue chugging along without much fanfare since the initial supply glut and demand surge that followed covid-related lockdowns.  There was quite a bit of variation depending on geography, which is often a result of ebbs and flows of weather events at this time of year.  Here’s how the chips fell in January by region:
The Western region saw a huge 38.7% increase, moving from the lowest levels in 10 months to the highest levels in more than a year
The Northeast saw and even larger 72% increase, but that’s not saying as much given the vastly smaller unit count in that region
The Midwest ticked up 7.7% month over month but remained well under July’s peak
The South decreased by 15.6%  to the lowest levels in more than a year, but only slightly below November

While it may not prove to be the most relevant market mover of the week, the upcoming Treasury auction cycle is at least in the running.  This particular example is condensed in the first two days of the week (as opposed to the typical Tue/Wed/Thu schedule) due to the calendar.  Treasury assumes easier investor participation if the auctions can all be part of investors’ February balance sheets.  Early trading suggests the auction cycle is indeed a consideration if for no other reason than the modest underperformance vs MBS–something often seen heading into an auction cycle. 

In some ways, this is also a test for the short end of the curve, which is a bit closer to breaking technical ceilings than the long end (i.e. 2yr yields are 2bps below their 2 month highs while 10yr yields have at least a 6bp cushion).

Federal Reserve Bank of New York President John Williams said the economy is headed in the right direction, and it will likely be appropriate to cut interest rates later this year

Some large mortgage companies reportedly have high retention rates, but the industry average is a different story, according to Mortgage Bankers Association data.

Across the nation, over 700,000 Black families are “income mortgage-ready,” or able to spend 30% or less of their income on a home loan for the typical house in their local market.

A financial services veteran, Peter Akwaboah joins the government-sponsored enterprise after serving as a managing director for Morgan Stanley, where he led technology and innovation strategy.

The mortgage lender is suing James Hecht, now CEO of OneTrust Home Lending, for organizing a ruse in which he fired a group of managers and then rehired them at his new company.

One of the upsides of these weeks with boring, sideways movement in the rate market is that it doesn’t take much of an improvement to undo several days of damage.  Today brought just such an improvement, and not for any compelling or interesting reasons either! The average lender began the day at lower levels–already close to the best levels of the week.  But as the bond market improved throughout the day, most lenders were able to make mid-day changes to their rate offerings.  After incorporating those changes into our daily average, it easily dropped to the best levels of the week. Volatility could increase slightly next week amid the presence of much more economic data.  The MOST relevant data won’t show up until the first week of March, however, and that’s when volatility risks are the highest, for better or worse.

It was destined to be a mostly boring, sideways week (to whatever extent “destiny” actually has any predictive value).  Perhaps it’s more fair to say that “boring and sideways” is the least surprising outcome in light of the incredibly sparse event calendar.  European data and policy speeches have been in far greater supply, generally hurting bonds on Wednesday and now helping today.  The net effect restores Treasuries to Wednesday AM levels and sets the week on track to end almost perfectly unchanged vs last week.