“People make their wealth out of one investment. People keep their wealth by diversifying their investments.” Owning mortgage servicing rights has created wealth for many companies, and STRATMOR’s current blog is, “Those Monthly Payments Go Somewhere.” I am glad that all my 401(k) isn’t in Agency shares: Fannie Mae’s stock is down 42 percent this year, and Freddie’s is down 45 percent. Although there is a steady stream of informal communication, things have been somewhat quiet formally from the Director of the Federal Housing Finance Agency Bill Pulte and the FHFA in recent weeks. Recall that before he left his post at the Office of the Director of National Intelligence, he made another round of personnel cuts. (Pulte was tapped to lead ODNI following the departure of DNI Tulsi Gabbard.) That ended last week as Fannie Mae parted ways with at least 10 high-ranking officials. Pulte’s FHFA is mum, but word of the senior departures spread across the industry Friday, creating worries that Fannie’s ability to provide stability to prices and activity could be hampered. Our housing market doesn’t need instability. (Today’s podcast can be found here. This week’s ‘casts are sponsored by Experian. From lenders and landlords to employers and consumers, Experian helps connect the housing ecosystem with the data and insights needed to make faster, confident decisions. Lead a smarter housing journey with Experian. Today’s has an interview with Tidalwave’s Chris McLendon on why the question lenders should ask isn't "does it use AI?" It's "can you prove the answers are right?")
Once again, Treasury is out with news about bond buying plans with two officials saying the Treasury General Account (TGA) could be used to fund long-end buybacks. TGA is Treasury's bank account. It gets money from taxes, Treasury issuance, tariffs, etc. Therefore, any way you slice it, Treasury bond buying = government spending, unlike Fed QE. At best, it can influence the yield curve, but it can't artificially suppress yields overall. This is why the bond market won't embark on a big, sustained rally in response to Treasury bond buying, no matter how big a deal financial media makes of the news. In today's case, it could be contributing to yield curve flattening, but the modest rally seen in the bond market is far easier to attribute to a decent drop in fuel prices overnight.
Incidental Weakness. Bigger Considerations on The Horizon
Without any data or compelling market movers, bonds came into the day light on inspiration. Low volume/liquidity left the door open for any determined traders to have a bigger-than-normal influence on the market. That arguably happened between 9am and 10:30am ET with both stocks and bonds losing ground simultaneously. This coincided perfectly with an uptick in Fed rate hike expectations seen via near-term Fed Funds Futures.
Market Movement Recap
08:34 AM Sideways to slightly stronger overnight. MBS up 1 tick (.03) and 10yr down half a bp at 4.697.
10:34 AM MBS down an eighth and 10yr up 2.7bps at 4.728
01:47 PM MBS down 5 ticks (.16) and 10yr up 3.9bps at 4.741
For all practical purposes, Friday's mortgage rates were unchanged versus Thursday's, but if we're splitting hairs, the average lender rose 0.01% to 6.77% for a top tier 30yr fixed. While many news outlets continue focusing on the mid-week announcement regarding Treasury's bond buyback program, today's bond market volatility was unrelated. Current levels are close to where they were before Wednesday's announcement and that makes sense to anyone who Wednesday's market reaction as 'overdone.' The upcoming week offers much more economic data in addition to potentially relevant comments from Fed Chair Warsh at the Fed's annual Jackson Hole conference.
Residential construction pulled back in July as housing starts and completions declined from June levels, while building permits rebounded. The latest Census Bureau data suggests builders remained cautious about active construction, even as the increase in permits pointed to somewhat stronger activity ahead. Privately owned housing starts fell 12.4% to a seasonally adjusted annual rate of 1.239 million , down 13.5% from the July 2025 pace. Single-family starts declined 9.9% to 808k , while starts for buildings containing five units or more fell to 421k . Building permits reversed course as well, increasing 5.0% from June to an annual rate of 1.443 million , and were 3.1% above the July 2025 rate. Single-family authorizations rose 2.5% to 894k , while permits for buildings containing five units or more increased to 490k . The divergence between permits and starts highlights the uneven pace of residential construction. After June's strong rebound in starts, activity pulled back in July, particularly in the single-family sector. At the same time, the increase in permits suggests builders were still authorizing new projects despite the weaker pace of actual construction. Multi-family starts remain in an uptrend, but they tend to lag major changes in single family starts by roughly 6 months.
Pending home sales declined again in July as elevated mortgage rates and record-high home prices continued to weigh on buyer demand. The National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI), which tracks signed contracts on existing homes, fell 2.3% from June and was down 2.2% from a year earlier, reaching its lowest level since January 2026. The latest report points to continued affordability challenges for prospective buyers. Higher borrowing costs and elevated home prices are keeping many buyers on the sidelines, while homes are taking longer to sell and fewer buyers are bidding above asking prices compared with a year ago. “The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” said NAR Chief Economist Lawrence Yun. He noted that record-high home prices are also contributing to longer marketing times, though conditions vary considerably across local markets. Yun added that job gains could bring more buyers into the market if mortgage rates stabilize or decline, although the effects of stronger employment take time to show up in housing activity. Pending contracts are currently 30% below their 2019 level, while payroll employment is 5% above its pre-pandemic level, suggesting a significant amount of potential demand remains on the sidelines. Contract activity declined in all four major regions during July. The Northeast posted a 2.0% monthly decline, while the Midwest fell 0.7% . The South decreased 2.2% , and the West recorded the largest decline at 4.7% . Compared with a year earlier, pending sales increased 1.7% in the Midwest but declined 0.2% in the Northeast, 3.0% in the South and 7.1% in the West.
Builder sentiment improved slightly in August, but confidence in the market for newly built single-family homes remained subdued as elevated mortgage rates, rising construction costs and broader economic uncertainty continued to weigh on the industry. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased one point to 35 , marking the 16th consecutive month the index has remained below 40. This latest reading reflects all the familiar challenges facing builders, including affordability pressures, elevated material costs and weak demand for spec homes, with rising gas and diesel prices emerging as a new face among the usual suspects. Current sales conditions improved two points to 39 , while sales expectations over the next six months held steady at 43 . Traffic of prospective buyers also remained unchanged at 23 , indicating that buyer activity continues to lag despite the modest improvement in overall builder sentiment. “While builder sentiment edged higher in August, builders continue to contend with high construction costs and broader economic uncertainty,” said NAHB Chairman Bill Owens. Owens noted that rising gas and diesel prices are pushing up material costs, while spec home building remains weak. He also pointed to the Midwest as a bright spot, with new home sales in the region up more than 2% so far in 2026. NAHB Chief Economist Robert Dietz said the latest survey continues to show signs of weakness in the home building market. He noted that custom home builders continue to report stronger conditions than spec builders, while smaller markets and smaller builders are also outperforming their larger counterparts.
Mortgage application activity was little changed last week as higher mortgage rates continued to weigh on purchase demand. The Mortgage Bankers Association (MBA) reported a 0.4% decrease in total application volume on a seasonally adjusted basis for the week ending August 14. Purchase applications decreased 2% from the previous week on a seasonally adjusted basis and were 3% below the same week one year ago. MBA Deputy Chief Economist Joel Kan said affordability difficulties have reemerged as a reason for some homebuyers to delay purchase decisions, citing the impact of higher mortgage rates on monthly payments. Refinance activity provided a modest counterpoint, with the Refinance Index increasing 2% from the previous week. Despite the weekly gain, refinance applications remained 18% below year-ago levels. The average refinance loan size fell to $282,200 , the lowest level since June 2025, as borrowers with larger loan balances remain less likely to refinance at current rates. "Mortgage rates and applications changed little last week, with just a slight increase in refinances for conventional and VA loans, while FHA refinances were lower," said Joel Kan, MBA’s Vice President and Deputy Chief Economist. The refinance share of total mortgage activity increased to 41.9% from 40.7% the previous week, while the adjustable-rate mortgage (ARM) share decreased to 7.7% from 7.9%.
LOs tell me that they are counseling potential borrowers. “If you’re in the market for a home, focus on the things you can control. Save for your down payment which can be less than 20 percent, but the more you can put down, the less you have to borrow and the lower your monthly payments. Consider your priorities. Can you live further from the city and save a little money? Do you need a fourth bedroom or will three do for now? Understand clearly your ‘wants’ and ‘needs’ and be ready to compromise. Shop around for your mortgage. Don’t just go to your primary bank or get a loan from the credit union your real estate agent recommends. Do the legwork to search for the best mortgage rate you can qualify for. Lower rates aren’t going to fix everything, but it never hurts to get one as low as possible.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by JazzX, the first true end-to-end AI platform built for mortgage. From application to close, JazzX is a new operating model that helps you scale growth, boost productivity, and transform how your team performs. Today’s has an interview with NonQMVerifi’s Danny Flucke on how lenders can make faster, better-supported underwriting decisions without relying on hard-to-obtain CPA letters for non-Agency borrowers.) Lender and Broker Software, Products, and Services Affordability pressure doesn't disappear when the loan closes. It comes back later as repurchase risk. Your borrowers are stretched, leaving less room for errors in the file. Truework, a Checkr company, verifies income, employment, and assets before you close, replacing error-prone processes with fast, automated reports pulled directly from sources. Lenders see up to 50 percent cost savings on verifications, with faster turn times and higher accuracy. Learn more.
Bonds were a hair stronger overnight and are now a hair weaker at 9:15am ET. They may flip back and forth a few more times before the close. Ultimately, data-free summertime Fridays are fairly random events. If no big players have big intentions, they can fizzle sideways. But due to lower participation, if big trades come through, they can have a bigger impact than normal. As long as yields remain in the prevailing consolidation pattern, nothing of high consequence is happening.
