The most interesting analysis we can offer today is a simple reminder that the word “idiosyncrasy” has an “S” at the end instead of the “C” that we’re all thinking it should have.  Speaking of idiosyncrasies, holiday weeks–particularly those for Thanksgiving and X-mas–tend to have some! At the simplest level, this just means that we shouldn’t read too much into any seemingly counterintuitive volatility. Bonds can go either direction for what seems like no real reason.  Lighter volume and liquidity make it easier for any given trade to move the market.  So far today, of the 3 people trading bonds, 2 are sellers, so yields are higher even though econ data came out weaker.

Those who spend any time digging into home construction and home sales figures in the U.S. know that, of the 4 census divisions, the South accounts for about twice as much activity as the other 3 regions combined.  For example, in data released today for the month of November, the South accounted for an annual pace of 417k new home sales out of a nationwide total of 664k ( 62% of the total) Two months earlier, the South accounted for 472k out of 736k (64% of the total). But in October, it was only 366k versus a 627k (58% of the total). In other words, the South wasn’t pulling its typical weight in bolstering new home sales. There’s no need to overanalyze a simple phenomenon.  Major weather events and/or natural disasters routinely show up in housing market data.   The following table shows the regional breakdown with the obvious drop-off in October in the south.   While it was only a 13.9% improvement from October, the outright numbers are so large in the South that they more than made up for the 41% decline in the Northeast and the 7.5% decline in the West, ultimately helping the national numbers bump back up by 5.9%. In outright terms, the 664k annual pace matches the 2nd lowest level of the year seen in January.  October was the only month that was lower.  But even then, October and every other month of the past 1.5 years have fallen inside a narrow sideways range. This lukewarm bowl of porridge is emblematic of much of the data pertaining to new home construction and sales recently.  Activity is down from the post-pandemic peak, not making any moves for better or worse, but still in respectable territory relative to pre-pandemic levels.

Steady Selling in Bonds. ‘Tis The Season?

Bonds began the day in weaker territory and continued to sell off through 2pm ET despite an absence of any obvious justifications.  That said, ’tis the season for bonds to move whichever way they want without any obvious justifications.  Volumes were as low as you’d expect for X-mas week, if not slightly lower. Treasuries are in a cautious stance, having been tasked with underwriting several huge shorter term auctions on X-mas week, and less than one week after a big dust-up with the Fed.  It’s basically the bond market version of “sell in May and go away,” except May is December. 

Market Movement Recap

08:39 AM modestly weaker overnight, mostly after Europe opened.  MBS down 2 ticks (.06) and 10yr up 3.5bps at 4.549

10:16 AM Weaker over the past 45 minutes.  MBS down 7 ticks (.22) and 10yr up 5bps at 4.564

03:03 PM Weakest levels of the day with MBS down 10 ticks (.31) and 10yr yield up 7.7bps at 4.592

Why do ducks have feathers? To cover up their butt quacks. Why did Congress pass a three-month, stopgap funding bill? To cover their… never mind. But the government continues to function, and the good news for borrowers and lenders is that the NFIP (National Flood Insurance Program) is extended until March. (If you’d like to know the difference between private and public flood insurance, here you go.) Yes, Congress acted. Congress could act by doing away with Dodd Frank, and therefore the CFPB, but that is highly doubtful. No one knows what may happen at the CFPB. Hopefully, plenty of FAQs and publishing guidelines, more implementation guidance and not regulatory guidance; advisory opinions, arguably, can change the rules. FAQs to clarify the rules: Notice and comment is a very important process. Perhaps a pause in enforcement cases, although no one wants a regulator that does nothing. Action against individual broker shops is unlikely because there are so many of them. The loans are going to organizations that are monitored by the CFPB. Brokers don’t have the resources to put up a fight. The CFPB won’t randomly sample brokers, since it doesn’t have the resources. (Today’s podcast can be found here and is sponsored by Gallus Insights, the go-to reporting and analytics platform for mortgage lenders and servicers. Gallus makes it easy to access real-time data, create custom reports, and uncover actionable insights, all with a user-friendly design. Simplify your reporting, streamline your decisions, and drive profitability with Gallus Insights. Hear an interview with Gallus Insights’ Augie Del Rio on data trends in the industry and specific case studies that highlight the importance of data.)

The legislation went to Biden early Saturday morning after the Senate voted 85 to 11 to approve the measure, which sailed through the House hours earlier.

The so-called core personal consumption expenditures price index, which excludes food and energy items, increased 0.1% from October and 2.8% from a year earlier, according to Bureau of Economic Analysis data out Friday.

Flood insurance could hold up some home sales and lending, while major bank regulatory agencies will remain funded even if the government is unable to pass the necessary legislation before funding runs out.

Activity from smaller mom-and-pop investors dominates the segment, but their impact on overall housing prices might be overstated, Corelogic’s research found.

The fiscal condition at the government agency is much healthier today than when the Department of Housing and Urban Development put the policy into effect back in 2013.

The residential market is expected to face challenges from stubbornly high mortgage rates and limited supply in 2025, particularly after Fed Chair Jerome Powell’s comments on Wednesday indicating fewer rate cuts are coming.