Mortgage News Daily

Today's ISM Manufacturing report was the only top tier economic data this week. While we wouldn't say it was "strong" by any means, it wasn't weak either. More importantly, it was higher than the previous reading and the median forecast, both for the headline PMI and the "prices paid" component. That's a decent enough result to prevent bonds from getting any crazy ideas about rallying back toward the week's best levels. Trading levels went from modestly stronger to modestly weaker after the data.

The Mortgage Bankers Association (MBA) didn't publish updated weekly application numbers last week, which meant that this week's data had to play catch up with any changes in market conditions. Even as early as December 18th--the last time the application data came out--the writing was already on the wall due to the rate spike that followed the Fed announcement.

Blessings, curses, enigmas, paradoxes, etc... The state of home price appreciation in the U.S. is all of the above. The positive case for home prices is as simple as glancing at the most recent update on the two major home price indices (HPIs) released this week by FHFA and Case Shiller. Both agree that homes continue to appreciate at a historically elevated pace.

The official holiday dates may be in the rearview, but as far as interest rates and underlying bond markets are concerned, this was the last day of the winter holiday season. The same logic would put the start of the holiday season at December 23rd--a day where the average top tier 30yr fixed rate was exactly the same as it was today.

2 weeks ago today, we assumed the bond market would leave the office for the holidays and reassess during the first full week of 2025. For the most part, that's how things went down. 10yr yields could have ended the week anywhere between 4.5 and 4.6 depending on this morning's data. The higher levels got the nod due to slightly stronger ISM reading. The end. Bigger movement was always most likely to be on hold until and unless the early January data makes a strong, unified case for or against the economy. The early January data in question starts to roll in throughout the week, but as always, the biggest ticket is Friday's jobs report.

Treasuries made modest gains in overseas trading, but yields are heading higher during domestic hours. There are two things working against us this morning. The first is more of a general backdrop created by Treasury auction supply. It's rare to see bonds take a bullish lead-off ahead of an auction cycle these days. If anything, it's more common to see more selling at first and then some relief after the Wednesday or Thursday auction. The second headwind is the absence of "help" from this morning's econ data. The "miss" in the S&P Services PMI is a bit misleading. In addition to being a small miss, it left PMI at the highest levels since early 2022. The business confidence component is at an 18 month high and the employment component rose for the first time in 5 months. In that light, it's no surprise to see bonds shy away from a favorable reaction.

It is right around now that people give up saying “Happy New Year” to others, mostly because they’ve lost track to whom they’ve said it. Welcome back to a 5-day workweek, despite storm severity increasing, the first since mid-December. Oh, and happy 45²! Yes, 2025 = 45² is a “perfect square” year, and is represented by the square of the sum of all the digits: (0 + 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9)² = 2025. It also represents the sum of the cubes of all the digits: 0³ + 1³ + 2³ + 3³ + 4³ + 5³ + 6³ + 7³ + 8³ + 9³ = 2025. Continuing on in the “fun with numbers” vein, be careful who you focus on in the real estate agent world. Now that 2024 is over with, a good question is “How many deals did you close last year?” If you ask, “How was 2024?” you might hear “Fine” with the agent closed no deals. If you go back to 2023, nearly half of real estate agents sold 0-1 house! We’re still waiting on the 2024 stats, but it doesn’t make a lot of sense to spend time catering to an agent that isn’t doing any business. (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. CoreLogic is giving mortgage professionals the tools they need to establish long-term relationships with their clients, helping them keep future business in-house and transforming the way they do business. Today’s has an interview with Freedom Mortgage’s Stan Middleman on his multi-decade career in the mortgage industry and how to maintain success regardless of market conditions.)

The bond market and interest rates have arrived at the first full week of the new year almost exactly where they left off before the X-mas/New Year holiday weeks. There was a small amount of underlying volatility in bonds today, but not enough to translate into volatility for mortgage rates. This kept the average lender near 7.125% for a top tier conventional 30yr fixed rate.

Bonds lost ground this morning despite a weaker S&P PMI headline. While there were some mitigating factors beyond the headline, we could just as easily conclude that traders are erring on the side of caution heading into a week of Treasury auction supply with another big jobs report on Friday--all while being forced to wait an unknown amount of time to find out where the rubber meets the road on fiscal policies that could further affect the outlook for the economy, inflation, and Treasury issuance. All told, today's volatility was mild at best and we didn't learn anything new about the bigger picture.