Both the FHFA and Case‑Shiller released the latest update on home price appreciation this week. Actually, in the current case, it’s more like home price depreciation (at least in month over month terms). This is a bit confusing because average prices were higher versus the previous month, but that is virtually always true at this time of year.  Seasonal adjustments are very useful for data like home prices (which have a reliable cadence that follows the typical homebuying seasons).  It’s after adjusting for seasonality that we see emerging signs of weakness.  FHFA House Price Index (seasonally adjusted, MoM)
May: −0.2%; April was revised from −0.4% to −0.3%
YoY: +2.8% from May 2024 to May 2025
Monthly figures varied regionally: Middle Atlantic showed the steepest fall at −0.8%, while West South Central and New England saw modest gains of +0.3%. All nine census divisions remain positive YoY, ranging from +0.6% to +5.9%. Case‑Shiller National Index (unadjusted)
YoY: +2.3% in May, down from +2.7% in April
MoM (raw): +0.4%
MoM (seasonally adjusted): −0.3%
This marks the smallest annual national gain since July 2023 and the third consecutive monthly decline in seasonally adjusted data. Seasonally Adjusted Comparison Table: FHFA vs Case‑Shiller (May 2025)

Index
MoM (SA)
YoY

FHFA HPI
−0.2%
+2.8%

Case‑Shiller
−0.3%
+2.3%

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Mortgage rates went to bed last night knowing that the bond market would need to improve in the morning in order for prevailing levels to be maintained. In other words, bonds had begun losing ground yesterday, but not enough for mortgage lenders to go to the trouble of re-issuing rates (something they prefer to do as little as possible). Thankfully, this morning’s economic data was close enough to expectations that bonds managed to hold onto modest overnight improvement. With that, the average lender was able to set today’s rates right in line with yesterday’s.  Incidentally, these are the lowest levels since July 3rd, when the last jobs report came out and caused a quick but fairly tame increase. Tomorrow morning brings the next installment of the jobs report.  As far as bonds/rates are concerned, this is the most important scheduled economic data on any given month. The market is positioned as well as it can be for a stronger or weaker outcome. If job growth is stronger, it would likely result in rates moving higher and vice versa.

Month-End Volatility Erodes Modest Gains

Bonds were slightly stronger in the overnight session and this morning’s economic data did little to change that.  The initial reaction may have involved a modicum of selling, but it was fully erased by 11:15am.  The PM hours saw both stocks and bonds paring long positions for July’s final marks. The typical closing bells (3pm and 4pm) accounted for most of the losses. Bonds ultimately gave up all of the overnight gains, but remain close enough to ‘unchanged’ heading into Friday’s big jobs report. 

Econ Data / Events

Challenger layoffs (Jul)

62.075K vs prev 47.999K

Continued Claims (Jul 19)

1.946M vs f’cast 1.960M, prev 1.955M

Core PCE (m/m) (Jun)

0.3% vs f’cast 0.3%, prev 0.2%

Core PCE Inflation (y/y) (Jun)

2.8% vs f’cast 2.7%, prev 2.7%

Employment costs (Q2)

0.9% vs f’cast 0.8%, prev 0.9%

Inflation-Adjusted Spending (Consumption) (Jun)

0.3% vs f’cast 0.4%, prev 0.0%

Jobless Claims (Jul 26)

218K vs f’cast 224K, prev 217K

Personal Income (Jun)

0.3% vs f’cast 0.2%, prev -0.4%

Market Movement Recap

08:34 AM Little changed from stronger overnight levels after data.  MBS are up just over an eighth and 10yr yields are down 3bps at 4.345

11:49 AM resilience into late AM hours.  10yr down 4bps at 4.335 and MBS up an eighth

02:40 PM 10yr yields still down 1.6 bps at 4.359, but at highs of day. MBS are still up 2 ticks (.06), but at the lows of the day.

04:04 PM weakest levels.  MBS unchanged and 10yr down only half a bp at 4.369

While jobless claims and the Employment Cost Index can be market movers, today’s biggest ticket in the 8:30am slot was the monthly PCE Price Index for June. Forecasters are generally more accurate when predicting these numbers because previously released reports reveal a majority of PCE components. That means we have to dig a little in order to find surprises. In today’s case, core monthly PCE was 0.256 unrounded versus a median forecast of 0.320 (which looks better than the conventional 0.3 vs 0.3). That good news was tempered by increasingly visible goods inflation along with the knowledge that actual tariff impacts lag the announcement. 

In light of that fact as well as the lower jobless claims and higher employment costs, bonds are doing a good job by holding modest overnight gains.

As hundreds of attendees add Bob Seger, Madonna, Eminem, and Stevie Wonder to their playlists in preparation for the MMLA conference starting this weekend in Michigan, and my son Robbie hunkers down in the rain in Sheboygan, WI., I received this note. “We’re a nationwide lender and have begun the hunt for a new AMC. Any suggestions?” Nope, but a solid place to start is at this Marketplace, a free centralized hub for vendors and service providers across the mortgage industry to be viewed by lenders. You may be nationwide, but all real estate is local, with different pros and cons. For example, at the MBA Hawai’i conference, HOA and insurance costs are weighing heavily on their markets. Inventory levels have crept up, the fire damage in Maui is a multi-year exercise in figuring out what to re-build and how to do it with limited manpower and materials. Interest by Japanese, Chinese, and Canadian buyers has plummeted. But there is opportunity: 38 percent of Hawaiian residents are renters. (Today’s podcast can be found here and this week’s are sponsored by nCino. nCino Mortgage unites the people, systems, and stages of the mortgage process into a seamless end-to-end solution embedded with data-driven insights and intelligent automation. Hear an interview with nCino’s Tyler Prows on how automated workflows provide a seamless experience for the borrowers and streamlined app intake for LOs in an end-to-end solution.) Products, Services, and Software for Lenders and Brokers