Builder sentiment remains deeply subdued, as the National Association of Home Builders (NAHB) and Wells Fargo’s Housing Market Index (HMI) dipped one point in August to 32—its 16th straight month below the key 50 mark, and matching the lowest level since December 2022.
Current sales conditions fell one point to 35
Sales expectations for the next 6 months remained steady at 43
Buyer traffic ticked up two points to 22
High mortgage rates (hovering around 6.58%), elevated new-home prices, and affordability pressures continue to weigh heavily on builder sentiment. In August, 37% of builders reported price cuts averaging 5%, while 66% offered sales incentives—the highest share seen in the post-COVID era. Affordability and demand remain persistent challenges, and despite slight improvements in buyer traffic, the overall outlook remains weak. Builders are leaning more on incentives than confidence to attract buyers. Regionally, confidence was weakest in the West, where affordability pressures are most acute and sentiment fell to its lowest since late 2022. The South also declined but continues to hover near the national average, while the Midwest held steadier and the Northeast was little changed. The divergence highlights that high-cost markets are bearing the brunt of buyer hesitation, while lower-cost regions remain relatively more resilient.

Mortgage rates are based on bonds and bonds, and bonds have some seasonality to them.  This doesn’t necessarily mean there’s a reliable seasonal pattern for the direction of rate movement.  Rather, it means that several weeks in August tend to be fairly forgettable in terms of excitement, volatility, and methodical movement.  The 2 most recent weeks arguably fit that bill.  Bonds (and, thus, rates) are still operating in the range seen in the 24 hours following the August 1st jobs report.  Mortgage rates have been in an even narrower range than the broader bond market.  For example, 10yr Treasury yields (often viewed as a benchmark for mortgage rate movement) are well over halfway back up to the levels seen before the jobs report.  Mortgage rates, meanwhile, aren’t even a quarter of the way back. Specifically, 10yr yields were around 4.40% and fell to around 4.20% after the jobs report.  They’re now back up to 4.30% and were as high as 4.35% yesterday.   Mortgage rates were 6.75% before the jobs report and fell as low as 6.53% afterward.  They’re at 6.59% today (top tier scenario, average). There have been no major influences for rates so far this week and there aren’t any major threats on the calendar of scheduled events until Friday at the earliest.  This doesn’t mean rates can’t move until then, only that they are not going to be moving in response to scheduled economic data.

Slow, Steady, Modest Improvement

Bonds are in the throes of the summertime “blahs.” In other words, excitement and high-conviction trading are in short supply. Instead, prices and yields are drifting in a broadly sideways path with minimal day to day movement. Motivations are non-existent and the numbers on the screen are incidental byproducts of non-data-driven hedging and position squaring.  It’s easier to just say “the blahs.”  Thankfully, the blahs aren’t always bad.  Today’s blah were pretty OK with 10yr yields hitting the 3pm close with a few bps of improvement and MBS holding a 1 tick (.03) improvement for most of the day. Motivations remain in short supply in the near term.  Wednesday’s Fed Minutes won’t have any revelations that haven’t already come to light in Fed speeches. Powell’s Friday speech at Jackson Hole is the only scheduled event with teeth, and those teeth are nowhere near as sharp as something like the jobs report.

Econ Data / Events

Building Permits (Jul)

1.354M vs 1.39M f’cast, 1.393M prev

Housing Starts (Jul)

1.428M vs 1.29M f’cast, 1.321M prev

Market Movement Recap

09:30 AM modestly stronger overnight.  10yr down 1.7bps at 4.319. MBS up 1 tick (.03)

12:51 PM 10yr down 2.7bps at 4.309 and MBS still up 1 tick (.03)

04:10 PM 10yr down 2.9bps at 4.307.  MBS still up 1 tick (.03).

If yesterday was marked by incidental weakness, today is shaping up to be the opposite.  In fact, yields and MBS prices are right in line with Friday’s latest levels in early trading (now moving lower), as if Monday never even happened.  “Incidental” remains a valid theme for most of the week.  Fed Chair Powell’s Jackson Hole speech is just about the only event with any reasonable volatility potential.  Other than that, we’re counting the hours until the next jobs report (almost 2 weeks away) and generally forgiving any bond market movement that remains inside a 10yr yield range of 4.2 – 4.4.

Most of the pool, 68.6%, is in the repayment phase, while 19.1% of the loans in the pool are in deferment.

The Office of Management and Budget under President Donald Trump has not apportioned any discretionary awards to financial institutions in the fiscal year of 2025, according to new documents released by the agency.

The tests modeled how Fannie Mae and Freddie Mac would fare after absorbing losses like a total $36.1 billion provision in credit losses in a severe downturn.

Among the nation’s 50 largest metropolitan areas, 25 had annual price increases in July, while the others recorded price declines, Zillow found.

The since-defunct lender, which was purchased by Newrez in 2021, agreed to pay a $1.8 million penalty and has refunded over $550,000 to borrowers.

Mortgage rates are as high as they’ve been on almost any other day this month.  You’d have to go back to August 1st to see anything higher.  On the other hand, rates are still noticeably lower than almost any other day of the past 10 months.  It’s really only the past 2 weeks that have been any better and the gap between recent highs and lows is very small. In other words, rates have been holding a narrow range near 10 month lows in August.  There’s been a modicum of upward drift over the past few days, but no material developments.  This week will be fairly light in terms of sources of potential volatility. Once upon a time, the market may have worried about the impact from the Fed’s Jackson Hole Symposium. While Fed Chair Powell could say something that causes a reaction in rates at the end of the week, it wouldn’t be on the same scale as something like a surprising result in the jobs report or inflation data.