A proposed reduction in the amount of overall discretionary spending amounts would hamper both agencies’ ability to fulfill their affordable-homeownership missions, the consortium of housing industry advocates said.

Over 200 employees will be let go as of Feb. 16, 2024, according to an Illinois WARN notice.

Bostic said he expects the US central bank will cut rates twice in 2024 — in the second half of the year — as inflation continues to slowly decline.

The outstanding amount that people ages 62 and up hold represented a nearly $15.4 billion gain in property value offset by a record $2.32 billion in borrowing.

Loans for new homes are up 22% while overall purchase volume is down 20%, the Mortgage Bankers Association found.

When is interest rate momentum flatter than you can possibly imagine?  Today. We only break out the sarcastic and paradoxical juxtaposition of “sharply sideways” when things have really ground to a halt and with each of the past 3 days falling inside a 0.01% range, it’s that time again.   This happens, but it’s rare.  And it’s especially rare when rates have moved at one of the fastest paces on record in the preceding 6 weeks.   Does it mean anything significant?  It doesn’t mean anything bad. In fact, it’s arguably a good thing for rates to be able to hold a stable, sideways range that’s right in line with the lowest levels in 7 months WITHOUT any token attempt at a corrective bounce.   In other words, it wouldn’t be a surprise to see rates jump a bit after falling as much as they had by last Thursday.  If there’s an x-factor that helps explain the phenomenon, it could be as simple as the second half of December typically being a lower conviction trading environment.  A word of caution: a recent track record of low volatility is not a guarantee that it will continue.  The late December trading environment can also be prone to random volatility, but if that happens, it wouldn’t likely be on a grand scale.  Those sorts of bigger risks and opportunities would require input from the more important economic data in the first half of January.

Housing starts, which had risen modestly in September and October, soared last month, topping 1.5 million units for the first time in 2023 . The U.S. Census Bureau and the Department of Housing and Urban Development said construction began during the month at a seasonally adjusted annual rate of 1.560 million residential units. This was an increase of 14.8 percent from October’s rate of 1.359 million units. The November starts also topped those in November 2022 by 9.3 percent and were significantly higher than the consensus forecasts of both Econoday and Trading Economics at 1.360 million units. Construction started on single-family houses at an annual rate of 1.143 million units, an increase of 18.0 percent month-over-month and a whopping increase of 42.2 percent from the prior November. Multifamily starts rose 8.9 percent to 404,000 units, 33.7 percent fewer than a year earlier. Starts totaled 120,500 on an unadjusted basis, up from 113,700 in October. There were 86,100 single-family home starts compared to 80,800 the prior month. [housingchartall] Construction permits retreated from their October level.  Units were authorized at an annual rate of 1.460 million units, a 2.5 percent decline from September but 4.1 percent higher on an annual basis. Single-family permits rose 0.7 percent to 976,000 annual units, 22.8 percent higher than in November 2022, while multifamily permits were down 9.6 percent and 21.3 percent from the two earlier periods. [housingpermitschart]

Late December Sticking to The Script

The baseline is “boring” when it comes to Thanksgiving week and the 2nd half of December.  Things don’t always go according to those plans, but bonds are sticking to the holiday trading script this year.  For the 3rd straight day, 10yr yields are heading into the after hours session within 1bp of 3.92%, and they haven’t been far from there in intraday terms.  This is an exceptional absence of volatility and directionality relative to all the movement leading up to last week’s Fed rally.  As long as it stays that way, bonds are sticking to the script and there’s nothing to see here.  If it doesn’t stay that way, we’ll cross that analytical bridge if we come to it.

Econ Data / Events

Housing Starts

1.56m vs 1.36m f’cast, 1.36m prev

Building Permits

1.46m vs 1.47m f’cast, 1.498m prev

Market Movement Recap

09:22 AM Initially flat overnight, then slightly stronger with Europe.  10yr down 1.5bps at 3.92.  MBS up 3 ticks (.09).

01:20 PM Treasuries at weakest levels with 10yr down 0.7bps at 3.928.  MBS up 3 ticks (0.09).

03:04 PM Little changed from previous update.  MBS up an eighth and 10yr down 1.5bps at 3.92%.

Can you sense the analytical excitement that pervades MBS commentary posts in the 2nd half of December?
It’s not that we don’t see flat trading at other points in the year, but when it occurs on a relatively data-free, late December Tuesday, it’s somehow more annoying.
And yet, who could be annoyed by flat trading when it is situated thusly on the longer-term chart?

Actually, someone could find a way to be annoyed if they were focused on an even longer-term chart:

There’s very little of note on the calendar today (residential construction has already come and gone with no market reaction).  Fed’s Bostic is out at 12:30pm ET.  That’s not destined to be a market moving event, but with little else going on, it bears mentioning.
To reiterate the ongoing “2nd half of December” thesis, we’re generally waiting for the first week of January for data and trading activity to become more relevant.  

Change is constant: How ‘bout U.S. Steel, the Pittsburgh steel producer that played a key role in the nation’s industrialization, being acquired by Nippon Steel in an all-cash deal valued at approximately $14.1 billion? (Let’s not forget that GM and Ford have been dwarfed by Tesla, Mercedes, Toyota, and even Volvo.) I had my share of “hard hat” jobs growing up, so I noticed OSHA announcing a switch from traditional hard hats to safety helmets. Is that the politically correct term now? Speaking of terms, “smishing” is a term that combines “SMS” and “phishing” where hackers try to get your personal and banking information through unsolicited text messages on mobile devices by pretending to be government agencies, companies that you might have done business with, or a package delivery service. They’ll say something to get your urgent attention like a text about a free gift that you have to pay a small “shipping fee” to receive or they will send a warning about suspicious activity on your account. Be careful out there! Today’s podcast can be found here, and this week’s is sponsored by Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools. Get loans approved in under two minutes. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar. Listen to an interview with Arch MI’s Carl Tyree on mortgage insurance (MI) misconceptions and various product offerings that separate MI companies from one another.