Monday – October 28, 2024
UMBS are in the red – again – to open the day. Down 6 bps. Stock futures are up 22.5 points.
No real economic data on the morning. You would think that rising escalations in the Middle East would drive a flight to safety. Nope.
Bond yields continue to work their way higher, presumably in anticipation of a Trump victory next week. I guess the betting is that Trump will be a bit more pro-growth, and his push for increased tariffs will be inflationary at the margin.
The WSJ has a piece this morning warning about Trump and inflation. “Put them all together, these levers are moving more in an inflationary direction. I’m legitimately worried about inflation worsening in 2025,” said Brian Riedl, a former Republican Senate aide now at the conservative Manhattan Institute.
Riedl is talking about Trump’s plans to increase tariffs (probably a valid reason), increase deportations (probably won’t matter) and to jawbone the Fed into cutting rates (probably won’t matter either). But regardless, the bond market is selling off in anticipation of a Trump victory.
For housing, a Trump victory will bring the privatization of the GSEs (Fan and Fred) back into the discussion. The government still holds nearly 80% of the GSEs and sweeps all profit into Treasury.
The November Fed Funds futures are pretty much locked in for another 25 basis point cut next week.
All-cash sales fell to 7.9% of new home sales in the third quarter. As mortgage rates have begun to move lower, we are seeing fewer cash sales. Part of the issue is that homebuilders with mortgage arms have been offering discounted mortgage rates in lieu of price cuts in order to drive volume.
The markets rose at the start of a pivotal week marked by corporate earnings, economic data, and anticipation of the upcoming U.S. election. While most sectors in the S&P 500 climbed, energy shares lagged due to falling oil prices. Notably, airlines and cryptocurrency companies, particularly Bitcoin, surged. Trump Media & Technology Group saw a notable rise, coinciding with increased betting odds of a Trump return to the White House, which is seen as favorable for stocks and Bitcoin. Market sentiment remained optimistic despite pre-election volatility, with no major 1% daily swings in the S&P 500, making this October unique compared to previous election years.
Analysts are closely watching the busy earnings reports and economic data, which could drive market movements more than election news. Meanwhile, bonds sold off amid concerns around Treasury auctions and pre-election positioning, with little direct correlation to major data releases.
UMBs closed the day down 25 bps at 98.99.
Mortgage market should improve to $2.3 trillion(!) in 2025, MBA says
The most challenging period for the mortgage industry appears to be in the rearview mirror, as the Mortgage Bankers Association (MBA) forecasts $2.3 trillion in origination volume for 2025—representing a robust 28.5% growth over 2024.
“We are in a much better place now than a year ago. Let’s keep that in mind when we look at this data. Looking at the originations forecast, the trajectory is up,” Marina Walsh, vice president of industry analysis, said at the MBA 2024 Annual Convention & Expo in Denver on Sunday. “It certainly is a purchase market, not a return to refis. That’s not going to be easy, but again, we are heading in the right direction.”
Purchase originations are forecasted to increase to $1.45 trillion in 2025, up 13% year over year. Meanwhile, with the 30-year fixed mortgage rates projected to decline from an average of 6.3% in 2024 to 5.9% in 2025, refis are estimated to represent 37% of the volume next year, increasing from 28% this year.
