There were no major economic reports or news headlines in play today.  Movement in the bond market (which underlies mortgage rate changes) was orderly and moderate.  There were no major changes in high level lending costs or any other costs that would impact mortgage rates.  Despite all that, rates improved appreciably compared to recent days, ultimately hitting the best levels in almost exactly 3 months. For some context, those levels from 3 months ago were very close to multi-decade highs at the time.  After that, rates simply added insult to injury through the end of October.  November, on the other hand, has moved reasonably quickly to push top tier 30yr fixed rates back into the high 6% range. Officially, we’re not there yet.  The average lender is still in the low 7% range, but that is a huge improvement from several weeks ago.  If tomorrow were to turn out as good as today, the index would break below 7%. Whether or not tomorrow is as good as today is completely unknowable.  Actually, perhaps it’s somewhat knowable.  We can say that, all other things being equal, it is tremendously uncommon for two successive days to be as good as today.  It does happen, but typically only with obvious motivations.   The bigger questions, risks, and opportunities remain in the week ahead when we’ll have multiple opportunities to see obvious motivations among several highly consequential economic reports. 

Shifting Trends, Shifting Strategies?

Another day of modest to moderate gains, but this time without the same sort of obvious cause and effect relationship seen with yesterday’s Waller comments.  That’s not to say that Fed comments weren’t helpful–simply that they put in more of a team effort as opposed to an individual standout performance.  The gains mean that a sideways trend is now becoming a downtrend in rates. That is a welcome development, but should it change anything about how you interact with the rate market? The answer can depend on how strong that relationship is currently.  Either way, it’s a short-term consideration.  Next week’s data has the potential to influence longer term considerations.

Econ Data / Events

GDP, 1st revision, Q3

5.2 vs 5.0 initial

GDP Final Sales

3.7 vs 3.5 initial

Market Movement Recap

09:02 AM Slightly stronger overnight with a micro bounce on the GDP revision.  10yr still down 2bps at 4.305.  MBS up 2 ticks (.06).

10:31 AM Solid gains into the 10am hour but giving some up now.  10yr down 3.5bps at 4.29 and MBS up an eighth.

02:48 PM Broadly sideways at best levels.  MBS up 5 ticks (.16).  10yr down 4.3bps at 4.278.

The “base case” of a narrower, more sideways range between CPI and NFP is increasingly being disproven by a more bullish reality.  Especially after the past two days, it’s beginning to look a lot like a downtrend.

Of course we’d like to see more than 2 days of movement to confirm a new theme.  We should also continue to place most of our focus on next week’s economic data because it won’t care if the trend has been sideways or directional (rates will move in the direction the data suggests regardless).
But how weak would the data need to be in order to confirm a trend toward lower rates?  Perhaps not excessively… There is a certain measure of electricity in the air as markets once again begin buying into a big picture rate reversal.  The last two examples were false starts, but maybe the third time’s the charm?

While the most recent example of a fledgling rally is currently the shortest, it is also the only one accompanied by a marked shift in tone from the Fed and–for now–in the economic data.

Despite the three-day week observed by most businesses last week, purchase mortgage applications more than held their own. The Mortgage Bankers Association (MBA) said its seasonally adjusted Purchase Index gained 5 percent for the week although it lost 31 percent on an unadjusted basis. It was 19 percent lower than the same week in 2022, also a holiday week. [purchaseappschart] The Refinance Index did not fare nearly as well. It was down 9 percent from the previous week and was 1 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 30.6 percent of total applications from 32.4 percent the prior week. [refiappschart] As a result, the Market Composite Index, a measure of all mortgage application volume, eked out a 0.3 percent gain on a seasonally adjusted basis from one week earlier and fell by 33 percent before adjustment. “Mortgage rates decreased for the fourth time in five weeks, with the 30-year fixed rate dipping to 7.37 percent, the lowest level in 10 weeks. There was a slight increase in applications overall, driven by a five percent increase in purchase applications, but refinance applications decreased over the week,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Rates have declined more than 50 basis points over the past six weeks, which has helped to spur a small increase in purchase applications, but activity last week was still around 20 percent lower than a year ago. The purchase market remains depressed because of the ongoing, low supply of existing homes on the market. Similarly, refinance activity will likely be muted for some time, even with the recent decline in rates, as many borrowers locked in much lower rates in 2020 and 2021.”

There is always non-mortgage financial news. Mark Cuban is both selling his share in the Dallas Mavericks and leaving Shark Tank. Berkshire Hathaway’s Vice Chairman Charlie Munger has died. When I want something bougie to give as a Christmas present, I go to… Alabama? U.S. airlines lose 2 million suitcases a year, and they all go here along with the contents up for sale. Will Rogers came up with, “Things will get better… Despite our efforts to improve them.” Things certainly aren’t getting better in the credit & verification world. Costs keep going up. Blame the CRAs (credit reporting agencies), Fair Isaac, or the bureaus (Experian, Transunion, or Equifax). Lenders of all shapes and sizes have a renewed interest in managing those costs… At this point, why wouldn’t you charge the borrower up front? Meanwhile, originators are continuing to scramble for business, despite rates having dropped somewhat in recent weeks. (STRATMOR’s current blog is titled, “Listening to Real Estate Agents Can Pay Off for Originators”.) $766,550 is the base conforming loan limit for 2024. Today’s podcast can be found here, and this week’s is sponsored by MCT. MCT’s technology and know-how continues to revolutionize how mortgage assets are priced, locked, protected, valued, and exchanged, offering clients the tools to thrive under any market condition. Hear an interview with Argyle’s John Hardesty on the company’s recent case study with NFM Lending. Lender and Broker Products, Programs, and Services

The Federal Reserve’s vice chair for supervision said new definitions around community development activities and the ability for banks to invest outside their immediate assessment areas could be a boon to Native Americans and their communities.

Of the top five factors influencing a home buying decision, an Assurance IQ survey of real estate agents said price and affordability was at the top, followed by financing & mortgage options.

The hike was driven by modest home price gains this year, following a larger conforming loan limit boost in 2022 in reaction to then-double-digit home price growth.

Financial firms claim a proposal by the Consumer Financial Protection Bureau would restrict lending, raise borrowing costs and result in more denials of credit to consumers.

At least 400 loan officers working for Bank of America violated the requirements of the Home Mortgage Disclosure Act by failing to collect the race, ethnicity and sex of mortgage applicants and then falsely reporting that the applicants had chosen not to respond, according to the Consumer Financial Protection Bureau.