If you think that everything is great in the U.S. economy, maybe it’s not. At least in New Jersey. While many residents are frolicking on the Jersey Shore, Toms River schools, one of New Jersey’s largest districts, voted to file for Chapter 9 bankruptcy after refusing to raise property taxes another 12.9 percent. This comes after last year’s 9.3 percent increase, totaling a crushing 22 percent hike over two years for homeowners. When you talk about affordability or the Fed controlling inflation, think about issues like this. State officials had ordered the district to either pass this budget or shut down all programs immediately. Over seven years, New Jersey’s school funding changes slashed $175 million from Toms River’s budget. Residents already pay some of America’s highest property taxes, with schools consuming over 50 percent of local tax bills in many towns. Meanwhile, multimillion-dollar home sales in NJ will be subject to a tax under the New Jersey “mansion tax” as part of a new bill that was passed in tandem with the state’s $58.78 billion fiscal year 2026 budget. Taking effect on July 10, this new bill shifts the burden of the mansion tax, as well as the state’s controlling interest transfer tax for commercial properties, from property buyers to sellers. It also maintains the original 1 percent fee for home sales worth $1 million to $2 million, but now also implements higher fees for increasingly expensive properties. It seems everything is going up in cost.

Mortgage application activity bounced higher last week following a drop in rates to the lowest levels in 3 months. The Mortgage Bankers Association’s (MBA) weekly survey showed a 9.4% increase in the seasonally adjusted Composite Index for the week ending July 4, 2025. The results included an adjustment for the July 4th holiday. “Mortgage rates moved lower last week, with the 30-year fixed rate decreasing to 6.77 percent, its lowest level in three months,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “After adjusting for the July 4th holiday, purchase applications increased to the highest level of activity since February 2023 and remained above year-ago levels. Homebuyer demand is being fueled by increasing housing inventory and moderating home-price growth.” Refinance applications were up 9% from the previous week and are now 56% higher than the same week last year, with VA refinances jumping 32%. Purchase applications rose 9% on a seasonally adjusted basis and are now 25% higher than last year. The average loan size for purchase apps dropped to $432,600, the lowest since January. The average 30-year fixed rate fell to 6.77% while most point levels shifted only modestly. Jumbo rates posted a larger drop, but points increased more noticeably. Mortgage Rate Summary:
30yr Fixed: 6.77% (−0.02) | Points: 0.62 (unch)
15yr Fixed: 6.04% (−0.02) | Points: 0.63 (−0.04)
Jumbo 30yr: 6.69% (−0.09) | Points: 0.65 (+0.25)
FHA: 6.51% (−0.02) | Points: 0.80 (+0.04)
5/1 ARM: 6.01% (+0.02) | Points: 0.73 (+0.13)

Anyone who’s spent much time around MBS Live knows about our favorite mantra regarding predictions.  Specifically, they are for suckers–at least in the context of predicting future interest rate movement. Occasionally, though, there are conditions that result in somewhat reliable patterns or “paths of least resistance.” 
Any time the bond market has been rallying with regularity–especially when we see several successive days at the lowest yields in many weeks–and then encounters a big data flash point that prompts a sell-off (like last  week’s jobs report), the path of least resistance is to undergo a bit of a correction. Subsequently, that correction tends to show signs of leveling-off, as we noted yesterday afternoon. From there, the path of least resistance is a broadly sideways range trade as we wait for more meaningful data/events to make a case for a breakout.
Today’s supply of such events is still light even though it includes Fed Minutes and a 10yr Treasury auction (we don’t see either being up to the task of stoking any sort of large or sustainable momentum).

US Treasuries fell for a fifth day as demand for long-term government debt across the globe wanes amid a flurry of bond auctions this week.

Lenders and other businesses active in the state also stepped up with large donations and charitable campaigns in the days following the flooding disaster.

Although the high court order isn’t designed to be the final word in the case, it marks a significant milestone in Trump’s campaign to transform the federal workforce.

California-based Dunmor said it is launching a wholesale division, which will be led by a former Newfi executive.

The move their regulator Bill Pulte announced introduces competition for one metric but charges from three credit bureaus will remain in place.

Bad news first: mortgage rates have been moving steadily higher in July with the average top tier 30yr fixed scenario rising from 6.67% to 6.81% in just 4 business days.  This isn’t an incredibly abrupt move, but it’s slightly brisk compared to the average day of rate movement. The good news is twofold. First off, we often tend to see slightly brisk movement in the opposite direction after experiencing a consistent trend in the other direction. The month of June was arguably such a trend, and it took rates to their lowest levels in several months.  Secondly, and more simply, apart from the last few days of June, today’s rates are still the lowest since late April.  [thirtyyearmortgagerates]

Correction Starting to Level Off?

Even though very little changed during the course of the trading day, one potentially important thing happened.  Rather than start weaker and continue to lose ground throughout the session, bonds managed to stop the bleeding early and then push back toward unchanged levels by the end of the day. This is the kind of thing typically seen when a corrective trend is running out of steam in the short term. While this doesn’t make the bond market immune from another motivation to sell, it suggests that the market is now open to suggestion from either bulls or bears, and that’s an upgrade from the selling bias seen on Monday.

Market Movement Recap

10:04 AM Moderately weaker overnight with some additional selling early.  MBS down an eighth and 10yr up 3.8bps at 4.419

01:36 PM sideways all day.  MBS still down an eighth and 10yr up 2.1bps at 3.877

03:33 PM Very slight recovery, but very low volatility.  MBS down 3 ticks (.09) and 10yr up 1.3bps at 3.869