Mortgage rates moved nicely lower on Tuesday with the average lender very close to the 2025 lows seen in late October. These levels are effectively right in line with the lowest since late 2022. If today’s drop seems abrupt, that’s because it is. In fact, it’s a bigger drop than the underlying bond market justifies. There’s a reason for this and we covered it in detail back in September: Why Rates Seem to Drop More Quickly as They Approach Certain Thresholds. Rather than credit any of the recent underlying events, the improvement in rates/bonds has more to do with idiosyncratic trading conditions that are often seen on major holiday weeks. That said, some of today’s data and events contributed. These include another week reading in weekly employment numbers from ADP as well as a reaction to rumors that rate-friendly Kevin Hassett will be the next Fed Chair. [thirtyyearmortgagerates]

Best Closing Levels in Nearly a Month

Bonds improved only moderately on Tuesday in a move that’s just as easily chalked up to random holiday-week volatility as any of the day’s data/events.  If we’re determined to give credit to particulars, we can cite things like the 13.5k decline in weekly ADP payrolls, or the market’s favorable reaction to rumors that Kevin Hassett is the front-runner to be the next Fed Chair (Hasset is assumed to be extremely dovish). Most notably, bonds took no damage from another day of upward momentum in stock prices. Yields closed out with 10s right at 4.0%–the best end of day marks since the day before the October 29th Fed announcement (6th lowest close in more than a year).

Econ Data / Events

ADP Employment Change Weekly

-13.5K vs — f’cast, -2.5K prev

Core Producer Prices MM (Sep)

0.1% vs 0.2% f’cast, -0.1% prev

PPI YoY (Sep)

2.7% vs 2.7% f’cast, 2.6% prev

Producer Prices (Sep)

0.3% vs 0.3% f’cast, -0.1% prev

Retail Sales (Sep)

0.2% vs 0.4% f’cast, 0.6% prev

Retail Sales Control Group MoM (Sep)

-0.1% vs 0.3% f’cast, 0.7% prev

FHFA m/m home price change

0.0 

Consumer Confidence 

88.7 vs 93.4 f’cast, 94.6 prev

Pending Home Sales

76.3 vs 74.8 prev

Market Movement Recap

08:35 AM Lots of data but no reaction.  MBS up 2 ticks (.06) and 10yr down 0.7bps at 4.02

10:04 AM holding best levels after more data. MBS up 3 ticks (.09) and 10yr down 2.3bps at 4.005

12:22 PM Rates rallying on Hassett Fed Chair rumors. MBS up 6 ticks (.19) and 10yr down 3.5bps at 3.993

04:24 PM Heading out with MBS still up 6 ticks (.19) and 10yr down 2.6bps at 4.001

ADP’s weekly employment report showed another contraction at -13.5k, but unlike last week, no one seems to care. We also got the delayed release of Retail Sales with a notably weak -0.1 vs 0.3 control group, and backlogged PPI that was just a hair cooler than expected. There too, zero bond market reaction. Thanksgiving week trading vibes are in full effect.  Fortunately, the trading that immediately preceded the data was moderately stronger, leaving MBS to start the day up nearly an eighth of a point and 10yr yields down nearly 2bps at 4.011.

Before the day is done, we’ll get the home price update that includes new conforming loan limits, several other reports, and a 5yr Treasury auction.  

Want better affordability? Lower house prices certainly helps, and this article states that more than half of homes in the United States have fallen in price in the last year. Forget interest rates: Certainly, there are fewer willing buyers when they know ahead of time that they may face increasing insurance, tax, or condo fees. (Lenders are doing what they can to control costs, and a recent STRATMOR piece is titled, “Rates Drop, Pipelines Pop: Don’t Let Fulfillment Flop.”) The strain is being seen and felt. CNBC reports that foreclosures rose in October signaling some type of distress. (Or delinquency and foreclosure numbers were really low to begin with, right?) As broker veteran Brian B. writes from Florida, “This is one reason for the popularity of DSCRs. Companies looking to buy real estate can buy the DSCR mortgages, and then the foreclosures are quicker because they are non-owner properties.” The foreclosure moratorium coming off is a likely source. Foreclosure activity is returning to normal ranges after years of artificially low volumes (Covid-era forbearance programs, etc.), according to ICE’s First Look report. However, FHA-backed loans are driving roughly half of foreclosure starts. FHA loans saw a 44-bps rise in non-current rates, while other loan types improved. Foreclosure starts hit 103,000 in Q3, up 23 percent over the same period YoY. FHA loans now account for 38 percent of all active foreclosures nationwide. Overall foreclosure volume remains historically low, with Q3 foreclosure sales at ~half of 2019 levels. (Today’s podcast can be found here and this week’s are sponsored by The Big Point of Sale, which delivers a fast, flexible, and low-cost mortgage POS that gets lenders up and running in hours (not months) while empowering loan officers and consumers to collaborate seamlessly from any device. Hear an interview with The Big Point of Sale’s Matthew VanFossen on the evolution of technology in the mortgage industry and how all parties privy to a mortgage transaction can be included on the same workflows.)

A federal judge threw out the criminal charges against former FBI Director James Comey and New York Attorney General Letitia James, ruling that the prosecutor who brought the cases had been illegally appointed.

The Natural Treasury Employees Union has asked a district court to clarify whether Russell Vought, the acting director of the Consumer Financial Protection Bureau, has complied with a preliminary injunction.

Social media posts point to a 40% to 100% price hike this year, the latest in a series of hikes started in 2023, when for some lenders prices rose 400%.

The government-sponsored enterprise took its first look at what new loan volume might be like in two years and found it could rise closer to pandemic levels.

While the tone is still generally upbeat, the market is mired below October’s price highs and yields are range-bound.

Thanksgiving weeks can be weird for mortgage rates. This has to do with the fact that rates are dictated by the bond market and the bond market depends on real live people who can actually be out of the office on holiday weeks. The lighter levels of participation can increase volatility and cause random movement for no apparent reason. We’ll cross that bridge if we come to it. As far as Monday is concerned, there’s no drama or weirdness to report. Bonds improved modestly throughout the day, thus allowing mortgage rates to move modestly lower.  Because rates were closer to the higher end of their recent range at the end of last week, the small drop means we’re still very much inside the prevailing range. The next two days bring some backlogged economic data. Combined with the typical holiday-week caveats, volatility risk will thus be higher through Wednesday.