The National Association of Homebuilders/Wells Fargo Housing Market Index (aka “builder confidence”) hasn’t been in a purgatory of sorts, ever since the big interest rate spike in the 2nd half of 2022.  Builders aren’t nearly as downbeat as they were during the Great Financial Crisis years, but nowhere remotely as confident as the during the post-pandemic highs. The index has now spent more than 2 years muddling sideways in an increasingly narrow range.  The latest reading, reported this week, was worse than economists were expecting, largely due to a bigger decrease in buyer traffic. Even so, the headline confidence level remains in the same consolidation pattern (marked by the arrows in the following chart). Other details from this month’s survey noted by the NAHB:
Builders say tariffs should increase the cost of the typical home by $9200.
Policy uncertainty is contributing to indecision, both on the part of buyers and developers.
29% of builders cut prices in March, up from 26% in February.
The prospect of regulatory relief has helped offset the negative implications from new fiscal policies to some extent.

The Census Bureau released its New Residential Construction report this week, frequently referred to by its principal component “housing starts” (a term for the start of the first phase of new home construction, aka “breaking ground”). In addition to housing starts, the data also logs building permits as well as completions. As we often note, building permits are more even-keeled while housing starts and completions can experience much more month-to-month volatility.  February was the latest example of that as permits came in right in line with forecasts while housing starts surged higher. Single family homes accounted for the vast majority of the improvement, rising to their highest levels in a year, and close to the highest levels since early 2022. There’s often quite a bit of variation across geographies in housing starts. This time around, 2 regions did most of the heavy lifting with the Northeast surging 75% from last month, bringing the annual pace for single family homes up to 84k from 48k. The South only posted a 19.6% gain, but because it’s a much larger housing market, that resulted in an annual pace increase of more than 100k units. In contrast, the Midwest slid backward by 34k units, or about 25% from last month’s annual pace.   The West was the most uneventful region, with a modest 1.8% increase, or 5k units in terms of annual pace. The full text and tables of the release are available at the Census Bureau’s site, here: https://www.census.gov/construction/nrc/pdf/newresconst.pdf

The Mortgage Bankers Association conducts a weekly survey on the level of mortgage applications, both for purchases and refinances.  Both data series continue to be a tale of two decidedly different eras for the mortgage market.  If we focus on the present era, for a moment, refi demand continued to enjoy a relative boom thanks to rates that remain much lower than they had been several weeks ago. The most recent levels were logically a bit lower as the average lender’s rates were a bit higher this time around.  If you were overcome with indignation at seeing someone refer to refi demand with the word “boom” in 2025, don’t worry.  We know about the context.  The present era is a barren wasteland compared to bygone eras when a boom meant roughly 5 times as many refis as today. The “2 era” phenomenon is less extreme when it comes to purchases, which tend to respond to rates only very gradually.  This has made for a much steadier level of purchase demand over the past few years.  In addition, the boomier era only saw twice as many purchase apps.  Other highlights from the data:
Refis accounted for 42% of apps, down from 45.6% last week
MBA’s survey showed a conventional 30yr fixed rate increase from 6.72 from 6.67 the previous week
FHA rates rate about 0.30% lower
ARM rates were 5.84% but only account for 6.7% of applications 

The bipartisan co-chairs of the Community Financial Development Institution caucus sent a letter urging the Trump administration to continue supporting the CDFI Fund after it was slated for cuts in a recent executive order.

Kind Lending has big plans to grow its retail channel and is signaling this by putting industry veteran Tammy Richards in charge of the operations.

The head of operations at the Federal Housing Finance Agency and two C-suite leaders at the government-sponsored enterprise are out, according to Semafor.

ICE Mortgage Technology announced additions for its Encompass LOS, while Mortgage Cadence is bringing out a new version of MCP aimed at mid-sized depositories.

The Fed’s wait-and-see approach on what will happen to the U.S. economy, while not directly impacting mortgages, will likely keep those rates elevated.

It was actually a rather uneventful day for the bond market. That means it should have been an uneventful day for mortgage rates (because they’re driven by changes in the bond market). To be fair, it was far from an exciting day, but the average mortgage lender was nonetheless able to inch closer to potentially exciting milestone. Rates have generally been flat at levels that are just a bit higher compared to the longer-term low seen in early March.  Before that, you’d have to go back to mid-October to see anything lower.  Today’s mortgage rates ended up 0.05% lower than yesterday’s, despite the bond market indicating no change.  The discrepancy comes down to timing. Yesterday saw a nice improvement in bonds late in the day.  Not every mortgage lender went to the trouble to improve their rates. Now today, bonds are falling back to the same levels, but they were in better shape this morning when most lenders decided their rates for the day.  The average lender has, once again, not gone to the trouble to raise their rates in response to the bond market movement.   If you’re wondering if there’s a tacit implication about tomorrow’s rates being a bit higher if nothing changes between now and then, you’re exactly right.  That would be the mathematical conclusion anyway. As for this afternoon, the average lender is only 0.01% above the “lowest since October” rates seen on the morning of March 4th.

Uneventful Trading Day, But That’s a Win

There’s not much to say about today’s trading session.  MBS and Treasuries both ended exactly in line with yesterday’s latest levels, and there wasn’t much fanfare in between.  Well, maybe “fanfare” depends on one’s perspective. 10yr yields managed to fall 6bps by 9:30am and pushed 6bps higher over the next 3.5 hours before flat-lining in the afternoon.  A 6bp swing is somewhat interesting, but even if we only had the flat-line, today would still be a victory due to yesterday’s gains and the fact that bonds haven’t been bothered by the moderate recovery in stocks.  Granted, today’s stock market bounce occurred at the same time as the bond yield bounce, but the correlation didn’t even make it through the day before breaking down again.

Econ Data / Events

Jobless Claims

223k vs 224k f’cast, 221k prev

Philly Fed Index

12.5 vs 8.5 f’cast, 18.1 prev

Market Movement Recap

08:30 AM No major reaction to ho hum data after overnight gains.  MBS up 5 ticks (.16) and 10yr down 3.9bps at 4.195

11:37 AM MBS up 2 ticks (.06) and 10yr down half a bp at 4.228.

03:10 PM sideways at weaker levels.  MBS up 1 tick (.03) and 10yr up 0.2bps at 4.236