The meals, which were more promotional than sales-oriented, shouldn’t make originators exempt from receiving overtime pay, an attorney argued.

A year that saw businesses express growing interest in the segment ended with a more subdued outlook due to interest rate trends, according to a new report.

Keefe, Bruyette & Woods expects a better year for originations than either Fannie Mae or the Mortgage Bankers Association, although volume will remain below the norm.

Freddie Mac shares rose to $4.14 at 12:30 p.m. in New York Friday, Fannie Mae’s stock climbed to about $4.23, each up 22% from the previous day’s close.

The share of waivers submitted with purchase mortgages sold to the government-sponsored enterprises accelerated just prior to a change that will make more loans eligible.

Holidays Came and Went Without any Bond Market Fanfare

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.

Econ Data / Events

ISM Manufacturing

49.3 vs 48.4 f’cast, 48.4 prev

ISM Prices

52.5 vs 51.7 f’cast, 48.4 prev

Market Movement Recap

09:29 AM Sideways to slightly stronger overnight, but giving up some gains early.  MBS up 1 tick (.03) and 10yr down 0.2bps at 4.561

10:07 AM Slightly weaker after ISM data.  MBS down 1 tick (.03) and 10yr up 1bp at 4.572

02:25 PM treading water at weakest levels.  MBS down 3 ticks (.09) and 10yr up 2.3bps at 4.587

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. If the index had been updated last week, we can safely assume that the index would have already been well on its way lower.  Either way, the most recent tally shows refi demand at the lowest levels since early 2024. Keep in mind, this data is seasonally adjusted, so we’re not merely witnessing a drop in application activity due to the holidays.  It’s a genuine response to the moderate-but-quick rate spike seen in the 2nd half of December.  There are a few silver linings, or at least a few qualifications.  First off, the rate spike leveled off by last week and we haven’t broken to new highs since then. Additionally, there’s no need to worry too much about volatility in refi demand in this range because the overall level of activity is still effectively bouncing along historical lows in the bigger picture.  Only two things will change this: time and/or a much bigger drop in rates than we saw in 2024. Purchase demand keeps chugging along.  Although it also dropped over the past 2 weeks, that drop represented a smaller proportion of the prevailing range–one that’s been relatively narrow and uneventful since bottoming out more than a year ago.

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. Note the extreme difference between the price correction seen in early 2023 and the outright price depression associated with the Great Recession more than a decade earlier.  It goes without saying that if appreciation is going to decline (or even briefly turn negative, in the case of Case Shiller), this is what we’d want things to look like if we’re interested in maintaining healthy levels of demand among buyers. The counterpoint is that 4-7% annual growth in home prices significantly outpaces growth in income.  In other words, it’s not sustainable.  Combine that with mortgage rates over 7% and it’s an easy recipe for extremely poor affordability.  What can help affordability?  Here’s a list:
Home prices could fall
Rates could fall
Homes could get smaller (this would effectively make prices lower, but not in a way that would show up in the home price indices due to what’s known as “repeat sales” methodology)
Builders could build more homes/apartments/etc, and at a faster pace
Multiple roommates/families under one roof sharing expenses
The balance of other expenses could go lower

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. Today’s rates had a chance to end up slightly lower, but the bond market responded to a decent showing in this morning’s only major economic report.  The ISM Manufacturing Index (one of many monthly economic reports that can influence day-to-day rate momentum) didn’t suggest any major surge in activity, but it did come in slightly stronger than the market expected. The reaction was logically mild, sending the average 30yr rate up by 0.03%. The stakes increase next week as market activity traditionally increases quickly on the first full week of the year.  We’ll also get several other economic reports including Friday’s big jobs report–consistently in a class by itself when it comes to its power to influence interest rates.