Contract closings declined 3.3% to a 4.16 million annualized pace, roughly in line with economists’ forecasts, National Association of Realtors data showed Thursday.

As affordability worsened for prospective buyers, owners saw their first quarterly rise in proceeds in almost a year.

The proposed legislation would automate access to information and require faster responses to requests for title status that have been a longstanding concern.

Not Too Soft, Jerome

Bonds began the day in weaker territory but up until the AM econ data, yields were no higher than yesterday’s highs.  After data, it was off to the races for sellers, but not in a straight line.  Jobless Claims data was the big issue as it came in much lower than expected and on NFP survey week to boot.  The implication is a higher risk of a big NFP number in 2 weeks.  Bonds progressively traded that in, but weren’t exactly sure how to go about it given the state of flux for the Fed’s rate hike outlook after the most recent CPI data.  Looked at another way, CPI argued for a softer stance from the Fed next week whereas today’s data says “not too soft, Jerome!” 

Econ Data / Events

Jobless Claims

228k vs 242k f’cast, 237k prev

Philly Fed

-13.5 vs -10 f’cast, -13.7 prev

Existing Home Sales

4.16m vs 4.2m f’cast, 4.3m prev

Market Movement Recap

08:54 AM Weaker overnight with Treasuries selling more aggressively than EU bonds. More weakness after data.  10yr up 7.7bps at 3.825.  MBS down 3/8ths

10:18 AM Additional weakness.  10yr up 10.4bps at 3.852.  MBS down almost 3/4ths, but illiquidity is magnifying apparent losses.

03:11 PM Modest gains for MBS heading into the close.  5.5 down 11 ticks (.34).  10yr up 10.8bps at 3.856.  MBS outperforming 

05:27 PM MBS closed with only a 3/8ths point loss.  10s underperformed, up 11bps at 3.858.

Almost everyone has said it or heard it: Existing Home Sales are in the toilet because there’s no inventory and there’s no inventory because no one wants to give up their 3% mortgage when rates are 7%.   “There are simply not enough homes for sale,” according to NAR Chief Economist Lawrence Yun. “The market can easily absorb a doubling of inventory.” To be sure, more inventory would be a good thing in almost every regard.  A doubling of inventory would likely keep prices in check or push them slightly lower, but it might not conjure up as much buying demand as you might assume.  Two separate stats in today’s Existing Home Sales data illustrate the point.  The first is for inventory in terms of UNITS. This chart makes it seem as if inventory is in line with all time lows and not building as quickly as it normally does at this time of year.  But the takeaway changes a bit when we look at inventory in terms of “months of supply.” Since it’s not incredibly easy to quickly glean the takeaway from the two charts above, here you go: in terms of units, inventory is nowhere near mid-2020 levels while “months of supply” is well above.  Let’s zoom in: All that to say: inventory alone is only part of the problem.  There’s also definitely a demand problem in the housing market, likely due to rates, program availability, and other lesser factors.  After all, sales aren’t doing great since attempting to bounce at the beginning of the year.

Some of today’s news says mortgage rates are much lower than last week.  And here I am telling you they’re higher. Who should you believe? Easy one!  Believe me.  What I just told you is accurate.  The other stuff is stale info.  I’m sorry that rates went higher.  The end. For those who want a bit more context, read on. Today’s rates are noticeably higher than yesterday’s with the average lender back up to 7.0% for a top tier conventional 30yr fixed scenario.  When our index is at 7.0%, it means that many lenders are quoting rates in the mid to upper 6’s, but with the addition of upfront costs (origination and/or discount points).  We update our rate index every day, but the industry’s longest-running index from Freddie Mac is updated once a week.  It came out today, showing a sharp drop in mortgage rates.  Freddie isn’t lying to you.  You just have to read the fine print. First off, Freddie’s index covers the 5 weekdays leading up to last Wednesday.  During that time, rates were indeed much higher than the 5 days leading up to yesterday (the time frame for the number reported today).   Also, Freddie doesn’t account for discount points or other upfront costs in its index.  That means a quote of 6.625% with 1% discount paid upfront is simply 6.625%, whereas it’s closer to 7.1% without the extra point upfront. Many market participants view today’s rate spike as a bit overdone relative to the underlying justifications.  Chief among those would be economic data this morning that showed the labor market remains much more resilient than expected, but rates were already set to move higher before that data came out.

Ever see the movie “Cocoon”? Is there an X-rated version? Seven of the 10 fastest-growing metro areas over the past year are in Florida. The Census Bureau tells us there was population growth for about two-thirds of U.S. metro areas during this time, but The Villages, Florida, had the greatest percent increase at 7.5 percent. (Yes, as in the “STD Capital of America” Villages!) The metro area of Myrtle Beach-Conway-North Myrtle Beach, South Carolina-North Carolina came in second and saw population climb by 5.0 percent. The metro area of Dallas experienced the largest numerical population increase, seeing its population climb by 170,396 or by 2.2 percent from July 1, 2021, to July 1, 2022. The metro area of Houma, Louisiana, had the greatest percent decline over this time range, and two other metro areas in Louisiana were among the 10 fastest-shrinking metros. (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. To experience how Richey May can help you transform your mortgage business, visit richeymay.com. Hear an interview with NAR’s Jessica Lautz on the latest inflation figures and the Fed’s calculus moving forward.) TPO Channel Products Now is the time to become an approved Newrez Correspondent partner. A partnership with Newrez Correspondent provides access to an extensive product menu, delegated/non-delegated underwriting, multiple delivery methods, and professional experience needed to ensure success in an ever-changing market. With exciting enhancements such as the recently added Bulk AOT and soon to be released Appraisal Alternatives, there is no better time than now to become a Newrez Partner. Every week new lenders are joining the Newrez family of nearly 1000 approved correspondent clients, and are enjoying the many benefits of partnering with a top Correspondent Investor when efficiency, cost reduction, and profitability are critical. Newrez Correspondent understands the importance of personalized service and strives to exceed our client’s expectations at every turn. Contact us today to schedule a meeting at the Western Secondary Conference August 21st to 23rd for an in-person discussion on how a Newrez Correspondent Partnership can optimize your business.

Watching the bond market in real time can be stressful if you work in a highly rate-sensitive industry.  There’s a tendency to get caught up in the intraday movement on any given day as if it had a big impact on the bigger picture.  That said, it usually doesn’t.  Take this morning for instance.  Seemingly out of nowhere, 10yr yields are 10bps higher.  It’s the biggest sell off in–what?  Only 2 weeks?  And there have been 5 other days with similar losses in the past 3 weeks? And bonds are still in the same old trading range–one that is quite narrow in the bigger picture.  

The recent conversion marked one of the final steps in the $8 billion acquisition, first announced in 2021. U.S. Bank still anticipates up to $900 million in cost savings and a breadth of opportunities to expand revenue from the transaction.

Several community banks noted an uptick in problem loans in second-quarter earnings reports. Small lenders should brace for more of this, industry observers noted.