HUD has rolled out its 90-day foreclosure moratorium and the government-sponsored enterprises are providing up to a year of forbearance with fees or penalties.

Loans to buy newly constructed properties increased by 0.2% from June and was up 35.5% compared to the year prior, the Mortgage Bankers Association found.

All six companies reported a shift on a quarter-to-quarter basis, and most were still off from a year ago.

The verdict ends a decade-long lawsuit over the Federal Housing Finance Agency’s amendment to a stock repurchase agreement in 2012.

Have you heard the one about higher mortgage rates?  It’s not a joke, sadly.  It’s just a thing that keeps happening.  The week began with the average 30yr fixed rate inching into the highest territory since November 2022.  There’s still some ground to cover before eclipsing those highs, but today’s rates moved another few inches in that direction. The average borrower may not notice much of a change considering our index is only higher by 0.02%.  Not every lender changes their quoted terms in response to that level of movement, but the current state of rates has been a death by a thousand cuts.   Today’s specific “cut” happened against an interesting backdrop.  The bond market (which dictates day to day rate movement) was geared up to react to this morning’s Retail Sales data.  In general, stronger data pushes rates higher and vice versa. Retail Sales crushed expectations, instantly forcing bonds to their worst levels since 2022.  Less than 1 hour later, the market had more than recovered.  This could be a sign that investors are increasingly starting to see value in the increasingly high yields in the bond market. By the end of the day, the net effect from the Retail Sales data was much less damaging than we would have expected based on the headline.  The coming days bring more economic data and there will almost certainly be more opportunities to observe the market’s appetite for higher bond yields (aka higher rates).

One disclaimer is in order before anything else: Retail Sales data is not a consistent top tier market mover–especially in the past few years.  Sometimes it has a big impact when it doesn’t seem like it should and sometimes it has no impact after a big beat/miss.  File today under the latter.  In fact, file today under “paradoxical reaction.”  Sales hit 0.7% vs a median forecast of 0.4%.  For a bond market worried about a “no landing” scenario, this should be an obvious nail in the coffin.  So why are rates lower since the data came out?
One may be tempted to look at surrounding data for an explanation.  Other reports were out at 8:30am ET.  These included Import/Export Prices and NY Fed Manufacturing.  We can throw out the other price data immediately because both sides of the coin showed higher prices (i.e. not bond friendly).
NY Fed, on the other hand, is tempting.  It came in at -19 vs -1 f’cast.  Internals were softer as well.  Could this explain the quick reversal after the initial selling?

Probably not.  NY Fed’s survey is not a reliable market mover–certainly not on par with Retail Sales.  Moreover, it is notoriously volatile.  The -19 reading may seem big, but it’s been lower on multiple recent occasions.  It is also notoriously hard for economists to predict (so we’re not reading much into the “miss”).

Perhaps the best thing to consider is that 10yr yields are near 4.2%!  That’s really high.  And they briefly crested 4.25% after Retail Sales.  I don’t know about you, but 10 years of guaranteed returns at 4.25% sounds a whole lot better than the prospect of owning government bonds at any other time in the past decade.  Recall that yesterday’s analysis focused on the notion that the selling trend in bonds would increasingly result in organic buying demand among investors “buying the dip” in bond prices.  Maybe that explains some of the resilience.
Even from a technical standpoint, a case can be made via various momentum metrics diverging from the price action.  This is a common technical signal (i.e. bearish/bullish divergences) and not a completely worthless one, unlike many technical signals, even though they’re fairly broad and big-picture.  They occur when peaks/valleys in momentum metrics are trending in one direction while peaks/valleys in the underlying security are trending in a different direction.  At the moment, yields may be making higher highs over the past few months, but momentum is actually cooling off.

Please don’t use the chart above as something predictive.  It is merely offered as an explanation for willingness of bond buyers to come out of their shell a bit at these higher yields.  Sustained momentum continues to depend on a sustained shift in the data and Fed’s interpretation of the data.

Paradoxical Data Reaction, But it Didn’t Last

Yesterday we examined last week’s paradoxical bond sell-off in response to inflation data that should have helped.  Today’s paradoxical shoe was on the other foot.  Retail Sales crushed the consensus and although bonds sold off initially, they rallied back to stronger levels in short order.  Granted, that recovery didn’t last, but by the time bonds hit weaker territory, the Retail Sales trade had long since passed.  The initial resilience may speak to some buying value buying demand from traders who think 10yr Treasuries yielding over 4.25% are worth owning.

Econ Data / Events

Retail Sales

0.7 vs 0.4 f’cast, 0.3 prev

Empire State

-19 vs -1 f’cast, 1.1 prev

Market Movement Recap

09:00 AM moderately weaker overnight with more selling after AM data.  MBS down 3/8ths and 10yr up 3.2bps at 4.233

11:24 AM Decent bounce into 10am hour. leveling off since then.  10yr down .8bps at 4.193.  MBS down 1 tick (.03).

03:21 PM Losses gradually mounting into PM hours.  10yr up 2bps at 4.221.  MBS down just over an eighth of a point.

Rising rates took a toll on builder confidence in August. The National Association of Home Builders (NAHB) said the NAHB/Wells Fargo Housing Market Index (HMI) dropped 6 points as rates neared 7 percent. The HMI, a measure of home builder confidence in the market for newly constructed homes, had risen for seven straight months but is now at 50. Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three major HMI indices posted declines in August. The HMI index gauging current sales conditions fell 5 points to 57, the component charting sales expectations over the next six months declined 4 points to 55, and the gauge measuring traffic of prospective dropped from 40 to 34. Deitz said that declining customer traffic is likely a result of the 7.7 percent rise in shelter inflation over the last year. It accounted for a striking 90 percent of the July Consumer Price Index reading of 3.2 percent. “The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units,” he said.

Sorry the commentary is a little late this morning. I received an email from my IT department that I needed to change my username and password. It took me a few minutes to remember that I didn’t have an IT department. Beware of those phishing expeditions! Technology… if it weren’t for my pets or grandparents, I don’t know what I’d do for passwords. There are obviously pluses from technology, of course, and thank you to Steve Richman who told me about Canva, a marketing website that appears darned easy to use. How about the darker side of tech, even including today’s “joke” about how card shuffling machines can be influenced and hacked into. (Do you really think virtual Wonder Woman slot machines are random?) Thank you to those who passed along this story about the aftermath of a cyberattack on a Southern California data host for property listing information, Rapattoni Corporation, freezing up real estate transactions and valuations. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. Hear an interview with Servbank’s Sherri Higuera on how the servicing industry is investing in technology and innovation.) Lender and Broker Software, Products, and Services FHA proposes to eliminate face-to-face default requirements…. Driven by the success seen during the COVID-19 pandemic, HUD introduced a rule to align “electronic communication technology and mortgager engagement preferences” while eliminating loss mitigation requirements that entail face-to-face borrower engagement. Read our recent blog, “Digitizing Mortgage Default,” to find out how you can experience the future of borrower-centric communications with CLARIFIRE®. Offering a powerful servicing solution, bridging modern communication tools and borrower engagement, CLARIFIRE modernizes your servicing operations and reshapes your organization’s future. Access game-changing capabilities that incorporate personalized borrower interactions delivered through mobile process automation technologies and accessed 24/7 through a user-friendly self-serve portal. CLARIFIRE® is Truly BRIGHTER AUTOMATION®.

Former employees claim the company made staffers attend pre-shift meetings before permitting them to clock in, according to a suit filed in a U.S. District Court in Michigan.