A federal judge granted a preliminary injunction that preserves the Consumer Financial Protection Bureau’s existence, reinstates fired employees, contracts, data and operational capacity.

The federal district court order in Mississippi allows allegations of servicer responsibility for insurance shortcomings and excessive costs to proceed.

While artificial intelligence can quickly analyze and compare products for consumers, social media and other online tools still serve to educate them.

First thing’s first before anyone gets too excited: yes, rates fell on Friday, but not significantly.  The average lender is still a bit closer to the higher end of the recent range. In addition, the recent range is quite narrow with average top tier 30yr fixed rates never straying too far from 6.75 since late February. What made today interesting was the fact that rates moved lower at all.  As we often discuss, rates take lots of guidance from key economic reports such as this morning’s PCE price index (a key inflation report). PCE arguably had more potential than any other economic data this week to cause a reaction in rates.  Conventional wisdom is clear on the reaction function: If inflation comes in higher than expected, rates are more likely to move up, all other things being equal.  In today’s case, rates dropped even though inflation rose.  What’s up with that? One mitigating factor is the fact that the unrounded PCE numbers were much closer to what the market was expecting.  In other words, inflation looked like it rose more than it actually did due to the custom of rounding the numbers to the nearest tenth of a percent.  Beyond that, it’s also plain to see that the stock market fell significantly today–something that’s recently been very likely to correlate with interest rates moving lower.  Last but not least, there are some advanced considerations that have to do with month and quarter end trading practices. A detailed explanation is beyond the scope of our coverage, but the gist is that month/quarter end can create rate movement in either direction without any motivation from economic data. With Monday being the last day of the month/quarter, we’re certainly seeing some influence from this type of trading.

This week’s update on refinance application demand accurately reflects the fact that rates came into the week near their recent highs, but managed to fall in line with recent lows several days later. The net effect for the Mortgage Bankers Associations (MBA) Refinance Index was a modest drop from last week while remaining elevated relative to the trend seen between November and late February. MBA’s purchase index is far less concerned with short term rate fluctuations, and managed to move up to the best levels since early February. In addition, purchase activity is holding in the upper portion of the range that’s been intact for nearly 2 years. “Purchase applications saw the strongest weekly pace in almost two months and were 7 percent higher than a year ago. Last week’s purchase activity was driven primarily by a 6 percent increase in FHA applications, as the combination of loosening housing inventory and slowly declining mortgage rates have presented this segment of buyers with more opportunities,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Additionally, VA purchase applications saw a modest increase over the week. Overall applications declined, however, as refinance applications were down 5 percent to its lowest level in a month.”

What’s Up With The Big Bond Rally Despite Higher Inflation?

It was one thing when bonds were only modestly stronger after this morning’s inflation data. But 10yr yields went on to drop 12.7bps to the day at the lowest levels of the week (4.235%) and MBS rallied nearly 3/8ths of a point. The magnitude of the additional improvement demands additional explanation. On a speculative note, it’s a strong possibility that we’re seeing month/quarter-end positioning play a role. On a more obvious note, stocks tanked and there’s a strong tendency for friendly spillover to bonds when stocks sell this much. 

Econ Data / Events

Core PCE M/M

0.4 vs 0.3 f’cast, 0.3 prev

Core PCE Y/Y

2.8 vs 2.7 f’cast, 2.7 prev

Market Movement Recap

08:43 AM Stronger overnight and improving after PCE.  MBS up 6 ticks (.19) and 10yr down nearly 6bps at 4.303.

01:30 PM Rally continues. Stocks swooning.  MBS up 10 ticks (.31) and 10yr down 11bps at 4.253

03:27 PM Sideways and just off best levels.  MBS up a quarter point and 10yr down 10.2bps at 4.259

The National Association of Realtors’ Pending Home Sales Index (PHSI) tracks purchase contract signings that have not yet turned into Existing Home Sales. Things haven’t been going well for either sales metric for more than 2 years now–a problem that can be blamed on a combination of factors led by it’s proximity to the sharpest interest rate spike in decades. That’s the bad news. The good news is that things actually haven’t gotten markedly worse after the initial swan dive in 2022. This, of course, means that the sales index is free to experience some ups and downs inside the broadly sideways, severely depressed range. The most recent installment amounts to a half smile on an otherwise perpetually sad face.  Well, maybe a quarter smile… According to NAR Chief Economist Lawrence Yun, “Despite the modest monthly increase, contract signings remain well below historical levels. A meaningful decline in mortgage rates would help both demand and supply—demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.” Here’s a regional breakdown showing the percent change in Pending Sales from the previous month:
Northeast: -0.9%
Midwest:   +0.7%
South:      +6.2%
West:        -3.0%
And now the percent change from the previous year:
Northeast: -2.5%
Midwest:   -4.7%
South:      -3.4%
West:        -3.5%

It’s not uncommon for certain medications to come with warnings about avoiding certain activities like driving or operating heavy machinery due to the risk of drowsiness. But medications aren’t the only causes of such sleepiness.  Just ask the latest New Home Sales report from Census Bureau! There are several ways to establish the soporific nature of this data. First off, the market is always most interested in data when it falls far from the consensus among economic forecasters. At an annual pace of 676k homes versus a median forecast of 680k, this one was about as close as they come. Perhaps more importantly, the sales count hasn’t been more than 70k higher or lower than that for the past 2 years.  70k might sound like a lot, but consider that it only took a few months to see sales jump more than 400k in 2020, or that the peak to trough move during the financial crisis was over 1 million homes per year. In other words, sales may be exhibiting some month to month volatility, but they’ve been almost perfectly sideways, on average, for just over 2 years now. In regional terms, The Midwest and the South did all of the heavy lifting, adding 13k and 27k homes respectively.  The Northeast brought the national tally down by 6k and the West did the most damage at 22k.  The latest news release from the Census Bureau is always available here: https://www.census.gov/construction/nrs/pdf/newressales.pdf

The typical homebuyer’s monthly mortgage payment reached a record high, up 5.3% year-over-year, but consumers are putting more money down, adding to equity.

Perspective homebuyers with work visas, asylum seekers and DACA recipients seeking the government-backed mortgage will be impacted by this sweeping change.