Do you know the interest rate on your loan? How about the age of your roof? Here in Austin, a big concern is too much growth: Austin has gained 1 million people in the last 15 years. Sprawl, traffic, and new construction have become the name of the game. As well as mounting property tax and insurance costs. Insurance agents and companies seem to be controlling homeowners, remodeling, landscaping, and…roofing. Property and climate risk platform ZestyAI conducted a 27,000-property advanced AI and aerial imagery survey on roof age, which found a surprisingly high proportion of properties have misreported the age of the roof as a result of out-of-date, or self-reported data. 17% of roofs are older than reported by an average of 8 years, and 63% of homeowners do not know the age of the roof, which creates significant risk for insurers and homeowners. “Many insurers still rely on self-reported roof ages, leading to inaccuracies that delay quotes, compromise customer experience, and inflate losses.” (Today’s podcast can be found here and this week’s is sponsored by Calque. White-labeled buy-before-you-sell solutions powered by Calque help you increase purchase volume and increase realtor business by helping them differentiate with a better process. With coverage in the 48 contiguous states, what are you waiting for? Hear an interview with Polly’s Adam Carmel on disruption in the mortgage industry and how companies should evaluate PPE providers.) Lender and Broker Services, Software, and Products

After having a great day yesterday, mortgage rates were able to add another “good” day today.  The net effect brings the average lender’s top tier 30yr fixed rate back down to levels last seen on January 2nd, exactly 2 weeks ago.   Yesterday’s key motivation was the palatable inflation data in the Consumer Price Index (CPI).  Today’s economic data wasn’t nearly as pertinent to the outcome although a slightly softer reading on Retail Sales didn’t hurt this morning.  Rather, it was comments from a member of the Federal Reserve (Waller) and the Treasury Secretary nominee (Bessent). Waller said he sees inflation continuing to fall into line along with the possibility of more Fed rate cuts in the first half of the year. Rates didn’t have a huge reaction to that, but it was a friendly one nonetheless.  Bessent fielded questions during his confirmation hearing and bond markets were pleased to hear his level of austerity with respect to government spending–something that contributes to higher rates indirectly, but significantly. 

2 Straight Days of Gains?!

Not only have bonds managed to pull off a feat rarely seen in recent memory (back to back days of solid gains), but the total drop in yields is the biggest since August 2024.  Today’s improvement wasn’t nearly as big as yesterday’s CPI-driven rally, but it would have been very strange if it had been.  The data and events on tap didn’t have the street cred to drive such craziness.  Modestly weaker retail sales helped yields level off after overnight weakness, but comments from Fed’s Waller and Treasury Secretary nominee Bessent accounted for most of the day’s downward movement in yields. 

Econ Data / Events

Retail Sales

0.4 vs 0.6 f’cast, 0.7 prev

Retail Sales excluding autos

0.4 vs 0.4 f’cast, 0.2 prev

Jobless Claims

217k vs 210k f’cast, 201k prev

Continued Claims

1.859m vs 1.870m f’cast, 1.867m prev

Philly Fed Index

44.3  vs -5 f’cast, -16.4 prev

Market Movement Recap

10:01 AM Slightly weaker overnight with a bit of a recovery after the data.  MBS down only 1 tick (.03) and 10yr up 1.8bps at 4.671

11:53 AM Additional gains after Waller comments and Bessent confirmation comments.  10yr down 4.2bps at 4.611.  MBS up a quarter point.

02:57 PM MBS up 6 ticks (.19) and 10yr down 4.4bps at 4.608

Gov. Gavin Newsom modeled his latest order on a similar ban imposed in Hawaii following the 2023 Maui wildfire that aimed to protect community wealth.

Wells Fargo CEO Charlie Scharf validates some of the optimism, telling analysts he feels “really great about our progress.” But he said executives “don’t want to get ahead of ourselves.”

The incoming Trump administration’s ‘agency review team’ has landed and is expected to name an acting director of the Consumer Financial Protection Bureau. Republicans on the Federal Deposit Insurance Corp. or the Federal Trade Commission are among the most likely candidates.

Without admitting wrongdoing, Equifax agreed to pay $725,000 because of a three-week error which lowered credit scores for 77,000 New Yorkers.

The Supreme Court heard oral arguments in Thompson v. United States, which could decide whether the federal government can prosecute “misleading” in addition to “false” statements to the Federal Deposit Insurance Corp.

There hasn’t been meaningful change in economic data that measures activity in the housing and mortgage markets. In a nutshell, activity has been drifting along at long-term lows.  The weekly survey of mortgage application activity from the Mortgage Bankers Association (MBA) is no exception, for the most part.  Refinancing picked up in the summer months as rates fell, but not to historically strong levels, by any means. Purchase applications appear to be more volatile, but that’s a factor of a narrower overall range.  They’ve been even more sideways. As of last week, both purchase and refi applications were effectively at the lowest levels of the year.  We knew the application landscape would be challenging due to the big jump in rates that hadn’t yet been captured in last week’s data.  The saving grace was the potential for seasonal distortions surrounding the New Year holiday.   Holidays that fall on specific dates can create inconsistencies in seasonal adjustments in economic reports. Last year saw New Year’s Day fall on a Monday, which was less of a disruption to the business week compared to this year’s Wednesday holiday. Perhaps the applications that tend to come in after the holiday were delayed by few days as a result, thus helping explain why applications rose for both purchases and refis despite the higher rates. Purchase activity was actually the highest in nearly a year.

We knew that today’s Consumer Price Index (CPI) was a hotly anticipated economic report that at least had the potential to give rates a big push, and it didn’t disappoint. Any time we’re dealing with an important economic report that gives rates a big push, there’s generally an equal chance of getting pushed in either direction.  We can know this with confidence because rates are based on financial markets and traders wouldn’t wait to make their move if they already knew what that move would look like. All that having been said, there are occasionally situations where these pushes end up being more likely to be bigger in one direction vs the other.  Today could be argued to be benefiting from such a phenomenon simply because rates were at the highest levels in 8 months over the past few days.  Some of the biggest single day rate drops we’ve seen have followed a similar formula (i.e. rates at long term highs followed by an obviously rate-friendly economic report). The past examples of this have only tended to involve 2 economic reports: the jobs report (which hurt us last week) and the Consumer Price Index (CPI), which helped us today. Long story short, the relevant components of the CPI data were lower than the market expected.  Bonds improved immediately and lenders were able to move rates back down to the levels seen earlier last week. Granted, the levels seen earlier last week were still the highest in many months at the time, but any move back toward lower rates has to start somewhere.  We won’t know how long this one will last until we see the extent to which additional economic data supports the same conclusion.