Some things in life are fleeting, like a frosty glass of rose, enemy troops singing Christmas carols in the trenches during WWI, or the time when lenders couldn’t hire people fast enough because rates were at 3 percent. I mention this because Krispy Kreme’s Strawberry Glazed Donuts, a flavor not seen in two years, is back today but only through Monday, in participating Krispy Kreme shops nationwide. Fleeting for donut aficionados. (Who says this commentary never has anything newsworthy?) Also fleeting are some astronomical events. Some will tell you that NASA doesn’t have much else going on besides coming up with the names of moons every month or two. Along those lines, thank you to Eric D. who pointed out that the common definition of a “blue moon” (the second full moon in any month) is wrong. It is the third full moon in a season that has four full moons per NASA. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with Canopy Mortgage’s Tim Davis on why he signed on with an emerging fin-tech mortgage company and the role innovation and technology will play in shaping the mortgage industry’s future.) Non-Agency and High LTV Products Most lenders offer programs besides conventional conforming and government loan types. Of course, the cost of originating loans has been challenging for the jumbo and non-QM segment, where it takes more effort to underwrite a mortgage. Many programs don’t have industry-standard underwriting automation tools like Fannie Mae’s Desktop Underwriter and Freddie Mac’s Loan Prospector, which increases the cost of doing business. Meanwhile, on the demand side of the equation, banks and credit unions have pulled back on TPO platforms and products, exiting mortgage and warehousing, which creates an opportunity for LOs and brokers to take share from the banks who follow the puck to where it’s going and get in front of these changes.
Source: Mortgage News Daily
Today’s mortgage rates remain at levels that are much higher than most of the past few decades, but refreshingly lower than most of the past 3 weeks. The average lender was just a hair higher, officially, but the average borrower will not see any difference in today’s vs yesterday’s rate quotes. As for culprits behind the bigger picture surge and the smaller picture recovery, most of the measurable blame falls on data. Sure, we can talk about Fed stimulus and fiscal issues as root causes, but ultimately it’s the measurable increase in inflation and the measurable resilience in the economy that is keeping rates high. It’s also been the measurable cooling in the same data that has allowed rates to ease off those highs in recent weeks. This began most noticeably with last week’s PMI data (“purchasing managers indices,” which are like mini GDP readings that come out every month), but it has continued this week due to several important economic reports. The most important report is yet to come. Tomorrow morning brings the big jobs report at 8:30am ET. That’s before the time that mortgage lenders set rates for the day, and the data has the power to drastically change trading levels in the bond market. Bottom line, rates could be significantly higher or lower tomorrow, depending on the outcome of the data, and this particular data has a long history of surprising outcomes in both directions.
Source: Mortgage News Daily
Pssst. Some People Think NFP Could be Even Weaker Than Forecast
This morning’s economic data came out slightly stronger than expected, on balance, and bonds rallied anyway. Granted, Core PCE inflation was 0.2 vs 0.2, but excluding housing, core PCE was higher for the 2nd straight month and the annual tally remains way too high and very flat. Add the lower jobless claims number (and the beat in Chicago PMI if you want) and the most logical reaction would have been to sell. In the market’s defense, shorter term rates DID sell, but not too much. One is forced to conclude that month-end trading distorted the day OR that there’s a fair amount of belief in the whisper number on NFP being lower than forecast due to labor strikes. We’d emphasize that such whisper numbers do not matter in a world where NFP routinely surprises by 100k+ and where the whispers are only thinking of a 30-40k delta.
Econ Data / Events
Jobless Claims
228k vs 235k f’cast, 232k prev
Core PCE Inflation m/m
0.2 vs 0.2 f’cast, 0.2 prev
Challenger Job Cuts
75.15k vs 23.69k prev
Market Movement Recap
08:50 AM Flat overnight and flat after data. 10yr down 0.6 bps at 4.106. MBS up 1 tick.
11:32 AM Modest strength continues for long end. 10yr down 1.8bps at 4.094. MBS up an eighth.
03:02 PM Off the best levels in the PM hours. Not much volatility surrounding month-end 3pm closing bell. 10yr down 2bps at 4.09, but up from lows of 4.077. MBS still up 2 ticks (.06), but down 3 ticks (0.09) from highs.
04:20 PM Some illiquidity-driven weakness making for a 1 tick (0.03) loss in MBS. Some organic weakness bringing 10yr up to 4.104 (but still down .8bps on the day).
Source: Mortgage News Daily
Another morning, another set of economic reports with the power to move markets. Today’s examples included jobless claims coming in at 228 vs 235k, core PCE inflation hitting its target at 0.2% month over month, and Chicago PMI at 48.7 versus a forecast of 44.1. Notably, despite PCE being on target, some internal components remain troubling. Core services inflation has been moving UP over the past few months.
Same chart in year-over-year terms. Both lines remain well above target levels and there’s been little–if any–progress in core services.
How about Claims data? Simply put, 228k NOT consistent with labor market slack.
In other words, the “decency” of this data is debatable, but bonds are rallying modestly nonetheless. The only obvious way to reconcile the mismatched reaction would be to point out the extra weakness in shorter-term yields. Perhaps there’s some fear about being on the wrong side of the trade for tomorrow’s NFP, or perhaps month-end trading constraints are keeping things a bit better bid.
Source: Mortgage News Daily
The great thing about inflation is if you spend the same on groceries, the bags are lighter and easier to carry home. Restaurants and food companies react to higher prices either by reducing their portion sizes or passing the cost on to the consumer. In real estate, does the modern definition of an “affordable” house mean 350 square feet for $130,000? Lennar thinks so. Owning a home has long been considered the quintessential American dream, but even with 84 percent of Americans saying they’d like to own a home one day, 51 percent who don’t own today worry they’ll never get there. 94 percent of consumers say owning a home is part of the American dream, but 49 percent say they can’t afford a down payment and 40 percent say home prices are too high in their area. Student loan debt weighs heaviest on millennials, with 19 percent citing it as a roadblock to homeownership. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with Black Knight’s Andy Walden and John Holbrook on the tappable equity market.) Lender and Broker Software and Services Get a discount on sponsoring THE event at ICE Experience 2024! Lender Toolkit’s Supercar Experience last year was fantastic and promises to be just as great in 2024! It will be held right before the opening of the ICE show next March. Lender Toolkit is offering early bird pricing on sponsorships, but only until September 29. As a sponsor at the March 18, 2024, event, you’ll be at the center of the most talked-about event of the conference. Just check out these photos from the 2023 Supercar Experience to see how much fun was had! Take advantage of the low rates now! For more info, contact Lender Toolkit or simply download the sponsorship form to apply. And Lender Toolkit and Lodestar are hosting the ultimate MBA Annual kick-off event in Philly. The Independence Block party, complete with ping pong, food, and drinks, takes place from 7:30-9:30 pm on Oct. 15. RSVP here.
Source: Mortgage News Daily
Bond Rally a Victim of Its Own Success
This morning’s economic data was bond-friendly, but not as unequivocally as yesterday’s JOLTS data. The heavy lifting came courtesy of the 1st GDP revision for Q2 with the total dropping to 2.1 from 2.4 and some softening in PCE inflation for good measure. Bonds turned solidly stronger on the data and then spent the rest of the day loosing a very small amount of ground very slowly. The net effect is still a victory in the bigger picture, but there were several negative reprices among lenders who’d aggressively passed along recent market improvements. That aggression proved to be too fragile even for what could only be considered to be a modest pull-back in bonds.
Econ Data / Events
ADP
177k vs 195k f’cast, 324k Prev
GDP, Prelim (1st Revision)
2.1 vs 2.4 f’cast, 2.0 prev
GDP, Core PCE
3.7 vs 3.8 f’cast/prev
Market Movement Recap
08:39 AM GDP got bonds back to unchanged (or better). 10yr down .4bps at 4.116. MBS are a tick or two from unchanged, but should also turn slightly green momentarily as liquidity improves.
01:24 PM Modest additional gains in AM hours and flat since then. 10yr down 1.8bps at 4.102. MBS up an eighth.
03:50 PM Weakest levels since AM data with MBD down 2-3 ticks (.06-0.09) and 10yr yields still down 0.4bps at 4.116, but up 3bps from the lows.
Source: Mortgage News Daily
On a week fraught with important economic data, the results continue coming in on the weaker side of forecasts and bonds continue to like it. While yesterday’s JOLTS data was quite a bit lower than forecast, today’s relevant reports came in closer to home. As such, it’s no surprise to see smaller gains. But even if today’s tame data merely served to solidify the gains seen yesterday, it’s a win.
Of the two reports, it’s quite clearly GDP that’s helping bonds maintain the gains. There wasn’t much of a reaction to ADP employment data, and it was potentially weaker to boot. GDP, on the other hand, was unequivocally helpful (2.1% vs 2.4% f’cast, and a modest decline in the price index).
Source: Mortgage News Daily
Studies have shown that women who have large backsides live much longer than the men who comment on them. Studies also show that there are three basic groups of people in the United States: homeowners with 3 percent mortgages who don’t want to move, wannabe homeowners who don’t want 8 percent mortgages, and renters who don’t care. A growing number will tell you that the actions of the Federal Reserve have had a huge impact creating those groups, and creating the hiring/firing roller coaster that our industry is on. Although there are exceptions, many lenders have gone, or are quickly heading, back to 2018 or 2019 staffing levels and there’s little use in not being aggressive from a bottom-line perspective, unfortunately. Anyone displaced can post their resume for free here, where potential employers can view them for several months for only $75. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with Voxtur Analytics’ Stacy Mestayer on Attorney Opinion Letters, title insurance alternatives, and title waivers.) Lender and Broker Software and Services Is your focus to do more with less? A business intelligence solution should highlight where there are opportunities to incorporate efficiencies and reduce costs. The most forward-thinking industry leaders are turning to Richey May’s RM Analyze to learn what they need to know now more than ever: how to operate even leaner. It’s half the cost of a full-time employee, and you gain access to a strong bench of talent with a rich background in the mortgage industry and access to hundreds of reports, including real-time peer benchmarking data, in no time. With these insights you can make meaningful decisions for your business and do more than just survive. Learn how to operate leaner.
Source: Mortgage News Daily
After falling for five straight weeks, mortgage applications finally gained a little ground last week. The Mortgage Bankers Association (MBA) said its seasonally adjusted Market Composite Index, a measure of mortgage loan application volume, increased 2.3 percent during the week ended August 25 and was 1 percent higher before adjustment. The Refinance Index was up 3 percent week-over-week although it still lags August 2022 levels by 28 percent. The refinance share of mortgage activity increased to 30.1 percent of total applications from 29.5 percent the previous week. It was the largest share for refinancing since mid-February. [refiappschart] The seasonally adjusted Purchase Index rose 2 percent and eked out a 0.3 percent gain before adjustment. Purchasing was 27 percent lower than a year earlier. [purchaseappschart] “Mortgage rates were mostly unchanged last week, with the 30-year fixed rate remaining at 7.31 percent – the highest since December 2000. Treasury yields peaked early in the week and did move lower by the end, which may have spurred some activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications for home purchases and refinances increased for the first time in five weeks but remained at low levels. Purchase applications increased but were still 27 percent lower than a year ago, as elevated mortgage rates and tight housing inventory continue to weigh on home buying activity. ”
Source: Mortgage News Daily
Is The Top In?
No one had much to say or think about JOLTS (the Job Openings and Labor Turnover Survey) over the past few decades, but it has risen to an increasingly prominent market moving role in the 2023. Today was the latest example as a big miss resulted in a big win for the bond market. Taken together with last Wednesday’s PMI-driven gains, 10yr yields are a full 25bps off last week’s highs. That’s the kind of reversal that makes people start thinking about longer term tops. So was that the top? The answer depends on the extent to which you can accept the Fed’s “data dependent” thesis (and if so, it depends even more on how the upcoming data actually comes out).
Econ Data / Events
Case Shiller Home Prices
m/m = 0.9 vs 0.6 f’cast, 1.5 prev
y/y = -1.2 vs -1.3 f’cast, -1.7 prev
FHFA Home Prices
m/m: 0.3 vs 0.7 prev
y/y: 3.1 vs 2.8 prev
JOLTS
8.827m vs 9.465m f’cast
Market Movement Recap
08:51 AM Stronger in Asia, but steady selling in Europe. 10yr up 2.8bps at 4.232. MBS down just over an eighth, but some weakness is due to illiquidity.
10:15 AM Big gains after JOLTS. 10yr down 5.3bps at 4.151. MBS up 7 ticks (.22).
Source: Mortgage News Daily
