Contract closings increased 4.8% to an annualized rate of 4.15 million in November, the most since March, according to data released Thursday by the National Association of Realtors.

Lawmakers asked the company’s founder and CEO to provide details ranging from arrangements being made for former customers to his own executive compensation.

A Congressional Budget Office report updating one from four years ago finds 60% of its 250 scenarios will result in the Treasury getting fully repaid, up from 12%.

Fairly Uneventful Follow-Up to Fed Day

Considering everything that transpired yesterday, today’s follow-up was about as calm as we could have hoped for.  Bonds lost ground, but the losses were focused on the long end of the curve.  That limited the damage for MBS, which have been hanging out with the middle of the curve these days.  AM econ data was a mixed bag despite appearing to be unfriendly at first glance. If it had any ill effect, it was minimal.  In the bigger picture, Thursday simply represented a leveling-off after Wednesday’s rout.  Friday brings monthly PCE inflation, which is certainly capable of causing a big reaction, but it almost never lives up to that potential. 

Econ Data / Events

GDP 

3.1 vs 2.8 f’cast, 3.0 prev

Philly Fed Index

-16.4 vs 3.0 f’cast, -5.5 prev

Philly Fed Prices

31.2 vs 26.6 prev

Jobless Claims

220k vs 230k f’cast, 242k prev

Continued Claims

1874k vs 1890k f’cast

Market Movement Recap

09:14 AM Sideways to slightly weaker overnight and little-changed after AM data.  MBS down 1 tick (.03) and 10yr up 2.3bps at 4.537

02:08 PM Modest additional weakness into 1:30pm.  MBS down 3 ticks (.09) and 10yr up 3.7bps at 4.552

We received some anonymous feedback regarding recent rate commentary that serves as a good reminder that not everyone may be picking up what we’re putting down, or worse yet, picking up things that we never put down in the first place.   We spend a lot of time talking about how the bond market prices in the impact of Fed rate cuts on the occasions where those rate cuts are expected with a high probability–as was the case with yesterday’s cut.  Specifically, Tuesday’s rate commentary said: ” The market is already well aware that the Fed is cutting rates tomorrow and those expectations are already 100% reflected in the mortgage rates that are available today.” The hiking/cutting of the Fed Funds rate is the only variable under consideration in that comment.  The following paragraph said:  “If rates rise or fall tomorrow, it would be due to other components of the Fed announcement, such as the Fed’s quarterly rate outlook survey (officially, the dot plot in the Summary of Economic Projections, released concurrently with the rate announcement at every other Fed meeting) or the press conference with Fed Chair Powell that begins 30 minutes after the rate announcement.” This brings us to the point because, indeed, it was definitely all that “other stuff” that caused rates to surge higher yesterday. Those who want to dig into that in detail can read the full coverage here.

Just in time for the big jump in interest rates seen after yesterday’s Fed announcement, the latest Existing Home Sales data from the National Association of Realtors (NAR) shows sales at the highest seasonally adjusted pace since March.  Compared to the same time last year, sales are up 6.1%–the best year over year improvement since June 2021. To be fair to the data, it is definitely looking better than most of the past year and a half. It’s also true that adding 1 to 1 is a 100% increase while adding 1 to 100 is only a 1% increase. In other words, it’s great that we’re up 6.1% year over year–no objections there–but in broader context, we’re really just muddling through home sales purgatory. Much like our assessment of things like mortgage applications, this sideways grind at long-term lows could also be seen as a “can’t get any worse” moment.  Therefore, it can only get better. NAR’s Yun agrees, saying “Home sales momentum is building. More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%.” It remains to be seen how home sales will react now that rates are back over 7%–a development is perhaps too recent to have been considered in Yun’s assessment. 

When I see a headline with “housing” and “crash” in it, I think it is merely clickbait, and the author is trying to attract readers. For example: The Office of the Comptroller of the Currency (OCC) reported on the performance of first-lien mortgages in the federal banking system during the third quarter of 2024. The OCC Mortgage Metrics Report, Third Quarter 2024, showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, a slight increase from 97.3 percent one year earlier. Borrowers have the ability to repay, there’s equity, and the majority of existing rates are low. If want to fret, target renters who want to own. It seems like the best time to buy a home has always been in the past, and now affordability is not good. ATTOM released its fourth-quarter 2024 U.S. Home Affordability Report showing that median-priced single-family homes and condos remain less affordable in the fourth quarter of 2024 compared to historical averages in nearly every county. The latest trend continues a three-year pattern of home ownership requiring historically large portions of wages as U.S. home prices keep reaching new heights: View Q4 2024 U.S. Home Affordability Heat Map. (Today’s podcast can be found here and this week’s podcasts are sponsored by Visio Lending. Visio, which has a top-notch broker program, is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview with Visio Lending’s Jeff Ball on the DSCR underwriting space and how the mortgage industry can qualify more eligible borrowers.)

The takeaway from yesterday’s Fed announcement was twofold.  First, the Fed is much closer to being done cutting rates than it anticipated in September. This accounts for the sharp sell-off in bonds and stocks.  The second takeaway is simply a confirmation of our recent change of heart regarding inflation data.  Powell noticeably downplayed the need to obsess over the labor market, thus placing the main focus on inflation yet again. The shift in the Fed’s inflation outlook for 2025 confirmed the concern.
In short, the takeaway continues to be that rates can’t move meaningfully lower without a meaningful drop in inflation.  To sum things up, we have one takeaway pushing yields higher and another that prevents them from moving lower.
Today’s chart focuses on yesterday’s market movement in light of the ramped-up news coverage of the government funding bill.  If you’ve been wondering if that played a role in yesterday’s weakness, consider that the spending bill news broke before the Fed announcement (the first white line in the chart below).  There was no detectable surge in volume nor any movement in the bond market.  Is it possible that markets were fixated on the Fed and that fiscal considerations added to weakness throughout the day?  Technically, but that raises a separate issue: a government shutdown has historically been good for rates.

US new-home construction unexpectedly fell in November as a drop in multifamily projects mitigated a rebound in starts of single-family houses, solely in the storm-ravaged South.

Homeowners experiencing a death in the family, divorce or domestic violence complained of being strong-armed into costly refinances, facing long delays or simply not being helped.