The Daily Tearsheet

Stocks are flattish as oil continues to work its way higher. Bonds and MBS are up small.

The US Treasury said it would increase its repurchases of long-term US debt. Treasury Secretary Scott Bessent said the US would at least double its purchases of long-term debt from $2 billion to $4 billion. “This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations,” the department said in a statement.

The operation will start September 9 and last through November 4. The average daily volume of the US 10 year note is about $1.2 billion. So the buyback isn’t insignificant. US bond yields fell on the news. Still the fundamentals of the US bond market are unchanged – the US is running big deficits and there is a deluge of supply in the bond market in general.

Judging by the reaction in the bond market, investors are skeptical this will move yields down by much. Since the government is running a deficit, the funds to purchase longer-dated bonds will have to come from issuing shorter-term bonds. If the yield curve was particularly steep relative to history, this could make sense (I am steelmanning the policy here, not necessarily agreeing with it).

Relative to history, the yield curve is not all that steep. The chart below is the difference between the 10 year Treasury yield and the 3 month T-bill yield. The higher the number, the steeper the curve, and the more the flattening trade makes sense.

The current difference between the 3 month and the 10 year is 79 basis points. Historically that number has been around 150 basis points. So it is hard to make the argument that the yield curve should be flatter, which is what this trade is actually trying to accomplish. This appears to be a gambit to lower interest rates going into the midterms, and the initial reaction to the market is that it isn’t going to work. Note it isn’t just US Treasuries that are getting slammed – global sovereigns are worse across the board, including Japan, the UK, the Eurozone. Global sovereigns generally do correlate, so moving down US yields is going to be a Sisyphean task.

The FOMC minutes were released yesterday for the July 28-29 FOMC meeting. At that meeting, the Fed maintained rates at current levels however there were 3 dissenters who wanted to hike rates.

On the subject of inflation:

Participants acknowledged that inflation remained elevated. They noted that estimates based on available data indicated that, on a 12-month basis, total PCE inflation moved down in June, largely reflecting a sharp drop in energy prices, and that core inflation edged down. Several participants noted that price increases over the past year were broad based, spanning various categories of goods and services. Some participants remarked that price increases remained elevated in core services excluding housing. Some participants noted that, even after excluding prices of items most directly affected by tariffs and energy prices, underlying inflation appeared to be elevated. Some participants observed that materials for data centers, such as chips and steel, had registered large price increases and that consumer items such as smartphones, computer equipment, software, and electricity had also been subject to price pressures.

Most participants anticipated that inflation would step down over the rest of the year as the effects of tariffs and earlier energy price increases wane, but many participants noted the possibility that inflation might be more persistently elevated. Several participants assessed that the pass-through of past increases in tariffs into the level of prices was now largely complete and that the effects of recently announced tariffs on measured inflation would likely be modest. A couple of participants reported that their business contacts had been largely absorbing elevated input costs by compressing their profit margins, but that continued conflict in the Middle East or new supply shocks could make it difficult for them to avoid raising prices charged to consumers. A couple of other participants noted, however, that some of their business contacts judged that consumers would resist further price increases.

On the subject of policy going forward:

Many participants assessed that policy tightening would likely be necessary if inflation did not decline. Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent. Various participants suggested that financial conditions had tightened over the intermeeting period and that this development was partly a reflection of strong economic growth and market expectations that the Committee would adopt a more restrictive policy stance before long. A few of the participants who favored raising the target range for the federal funds rate at this meeting judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage.

Suffice it to say that if the Iran war drags on and keeps oil prices elevated the Fed is going to act. Companies are getting tariff refunds, and some (like WalMart today) said they are going to use the money to keep prices low for consumers. This should be good for inflation going forward, though it does put an asterisk by second quarter earnings numbers.

Pending home sales fell 2.3% last month according to NAR. All four regions in the US declined. “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 Dr. Lawrence Yun. “Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago, though there are large local market variations.”

Yun continued, “Job gains should bring more buyers into the market, especially if mortgage rates stabilize or decline, though that impact takes time to show up,” Yun said. “Right now, pending contracts are 30% below their pre-pandemic 2019 level, while payroll employment is 5% above. That gap points to sizable pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves.”

Industrial production rose 0.2% in as did manufacturing production. Capacity utilization increased to 76.3%.

Stocks are flattish this morning after a couple tough days for tech stocks. Bonds and MBS are up.

The minutes from the July FOMC meeting are due out at 2:00. They probably won’t be market-moving however be aware locking around that time.

Housing starts fell 12% MOM to a seasonally adjusted annual rate of 1.239 million units. This is down 13.5% on a YOY basis. Building permits rose 5% MOM and 3% YOY to 1.443 million units.

The MOVE Act, which aims to help housing affordability, is expected to increase demand for modular homes. Modular homes are built in a factory but are sturdier than the typical trailer-type manufactured home and sit on a permanent foundation. One of these requirements, which mandated a permanent steel frame could save $10,000 or more on a new manufactured home.

The act also directs HUD to look at financing barriers and to implement building standards similar to what they already do for manufactured housing. Note that modular homes generally have framing similar to a stick and brick built house with stronger headers and roofing. They don’t use panels and are full drywall inside.

Modular homes could be a big solution to the affordability crisis – a typical modular costs around $120 per square foot compared to $22o per square foot for a single family detached. This puts a 1500 square foot starter home comfortably below $200k and within reach of a lot more people.

“America’s really, really behind, and this is a huge, huge opportunity in America, especially with the roughly around seven million home-unit shortage that the country faces right now,” said Mark Turnbull, the founder and chief executive of St. Louis-based Module Building Systems.

Manufactured homes still dominate the space, but that represents a huge opportunity for modular homes. I could see modular subdivisions as a great investment, where the developer sells enough properties to get the capital back and keeps enough rentals to have a steady cash flow. These would sell like hotcakes in the Midwest.

Given that modulars sit on a permanent foundation and the owner generally buys the land parcel, these properties can be financed with a typical conforming loan and not a chattel loan which finances mobile homes.

Manufactured homes will go a long way towards addressing the affordability issue.

Independent mortgage banking profits increased in the second quarter, according to the MBA. “Average net production profits remained positive for the fifth consecutive quarter, continuing the industry’s turnaround from widespread losses between 2022 and 2024,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Average production volume per firm was $689 million, the highest level since the second quarter of 2022. While production revenues dropped from the previous quarter as gain-on-sale margins narrowed, production expenses also decreased, reaching their lowest level in basis points since the third quarter of 2021.”

The average pretax profit rose to 25 basis points and average volume rose to $689 million. Production revenue fell from 353 basis points to 333 bp.

Luxury homebuilder Toll Brothers reported lower earnings per share as revenues fell. Gross margins decreased to 23.9%. The K-shaped economy means that luxury should be doing well, but the affordability issue means that many homeowners in starter or move-up properties are stuck either because their mortgage rates are low (the rate lock-in effect) or because they can’t find buyers for their current properties.

To give you sense about how Toll Brothers sees the immediate future, they bumped up their share repurchase target. The promotional environment for builders (i.e. price cutting) means they would rather spend resources returning cash to shareholders over investing in the business.

Home improvement retailers Lowe’s and Home Depot reported that things remain tough for their sector. “We continue to operate in what I call ‘frozen housing market conditions,’ but we also know that we’re taking share and that we’re serving our customers better every day,” [Home Depot] CFO Richard McPhail told CNBC. “It’s a reflection of the continued investment we’ve made and the focus on executing our strategy.”

Lowes reported disappointing numbers, citing “pressure” on customers.

Stocks are lower this morning as tension continue to brew in the Persian Gulf. The 60 day ceasefire officially expired yesterday and there is the potential for hostilities with Oman. Global bonds are down this morning with the 10 year hitting 4.75%, the 30 year seeing the highest yields since 2007, and UK gilts topping 5%. Even the Japanese Government Bond is pushing 3%, the highest in 30 years.

Meanwhile, oil continues to tick higher and North Sea Brent crude is now trading over $91 a barrel.

Homebuilder sentiment inched up in August according to the NAHB Housing Market Index. That said, sentiment is relatively subdued given the affordability challenges. “While builder sentiment edged higher in August, builders continue to contend with high construction costs and broader economic uncertainty,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines. However, the Midwest remains a bright spot for the home building industry, with new home sales up in that region more than 2% so far in 2026.”

“Our latest builder survey continues to show signs of weakness in the home building market,” said NAHB Chief Economist Robert Dietz. “August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40. Custom home builders continue to report stronger market conditions than spec builders, reflecting better conditions at the higher end of the market. Smaller, less dense markets are also outperforming larger metropolitan areas, and smaller builders report relatively stronger conditions than larger builders.”

Price cuts did decrease somewhat, with 35% of builders cutting prices versus 37% last month. The typical price cut was unchanged at 6% and 63% of builders reported using incentives.

Speaking of affordability, Redfin reported that the it takes an income of $110,000 to afford the median home. The gap between this number and median income is shrinking however, which is good news.

“The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn’t mean homes are affordable to the average American,” said Redfin Senior Economist Yingqi Xu. “There’s still a double-digit gap between what the typical household earns and what they need to comfortably buy a home, leaving many prospective first-time buyers stalled on the sidelines. But even if the market isn’t becoming much more affordable, it is becoming a bit more manageable for house hunters. It’s a buyer’s market in most of the country, especially places that were once pandemic homebuying hotspots like Nashville and Austin, giving buyers lots of options to choose from and strong negotiating power.”

The hottest markets from the pandemic years are struggling with extended days on market as home sellers wait for prices to return to where they were a few years ago. Meanwhile in the Midwest buyers are bidding up homes as many MSAs simply became too cheap to ignore.

Stocks are higher this morning on no real news. Bonds and MBS are down small.

The week ahead will contain some real estate data, with the NAHB Housing Market Index and housing starts. We will also get the minutes from the July FOMC meeting and leading indicators. We will get earnings from WalMart, the Home Despot and luxury homebuilder Toll Brothers.

Consumer sentiment fell 8% in August according to the University of Michigan Consumer Sentiment Survey. Expected business conditions drove the decline. Older and low income consumers saw the biggest declines in sentiment. Year-ahead inflation expectations ticked up from 4.2% to 4.3%. Long-run expectations held steady at 3.3%.

Chicago Fed President Austan Goolsbee said he hopes improving inflation data can get us back to the Fed’s 2% goal. “If we can get some of this stuff into the rearview mirror then I think we get back on what I was calling the golden path, which is inflation heading back to 2%.” He said that the current 3% level is too high.  “For a couple of months, we’ve been getting a little bit better readings and hopefully that will continue,”

Goldman Chief Economist Jan Hatzius thinks the Fed is unlikely to hike rates at the September meeting. He believes there are at most 4 or 5 members inclined to hike and that number isn’t going to increase further given the economic data. The September Fed Funds futures see only a 30% chance of a hike.

Interesting article in the Wall Street Journal about abandoned homes in Baltimore being the subject of bidding wars. Baltimore is one of the country’s most depressed housing markets, with high crime and limited job opportunities having driven residents away over the past 50 years. The area has been plagues by blocks of vacant homes which became magnets for crime. The cost of renovating these homes is higher than the eventual sale price of the property, which kept them vacant despite a housing shortage. Now this seems to be changing.

Interestingly, Baltimore is one of the places that most correspondent lenders will not lend, at least not DSCR loans for row houses. The area was ground zero for a massive fraud last year and is a no-go zone for most non-QM loan buyers. In addition, a rehabbed home in a neighborhood of vacant properties will be hard to appraise out. You often see massive jumps in appraised values after a rehab and that jump is a red flag for RMBS buyers. It may be justified, but it will get increased scrutiny. Most DSCR investors are happy to just avoid the place.

Stocks are flattish this morning on no real news. Bonds and MBS are flat.

Retail sales fell 0.6% MOM in July according to the Census Bureau. This was up 5% on a YOY basis. Note that Census does not adjust retail sales for inflation, so sales were up modestly on a YOY basis despite the big monthly drop. If you strip out gasoline and vehicles, sales were down 0.2% MOM and 4.4% YOY.

The decline in retail sales and the jobs report will probably take down the Atlanta Fed GDPNow estimate from its torrid 5.8% pace to something more realistic.

Richmond Fed President Tom Barkin talked a little bit about the vibecession, where many feel like the economy is lousy despite good headline numbers. On the labor market, he said: “How can unemployment be so low when the news feels so bad? In addition to the continuing low-hire, low-fire environment, the low unemployment rate is also a result of a different, delicate balance: slowing labor demand growth has been accompanied by slowing labor supply growth.”

Consumer spending remains robust, and business investment is strong, even after data center spend. Many businesses sat on the sidelines in 2025, waiting for the uncertainty regarding tariffs etc to dissipate. While that uncertainty is still there, they are to the point where they cannot afford to wait any longer.

“Today, you could argue the fog still hasn’t lifted. Tariff rates are still uncertain. The conflict in the Middle East continues. Borrowing rates are up. And yet, in the first half of 2026, real private nonresidential fixed investment grew at an annualized rate of 9.5 percent. For comparison, the average growth rate in the much more stable decade prior to the pandemic was 5.8 percent…It’s not only data centers, however. I am starting to hear investment momentum elsewhere, too. Bank pipelines are healthy. Mergers and acquisitions are active. Leases are being signed. Factories are being built. The defense sector is booming. Many business leaders explain they’ve concluded high uncertainty is the new baseline. They can’t afford to wait any longer.”

Mortgage delinquencies decreased to 4.37% in the second quarter according to the MBA. This was down 7 bp from Q1, but up 44 from the same quarter a year ago. The number of loans in the foreclosure process rose 3 basis point to 0.67%. “Mortgage delinquencies decreased slightly across all loan types in the second quarter of 2026. Nonetheless, the broader trend is that both delinquencies and foreclosures have increased over the past year,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “The mortgage delinquency rate rose 44 basis points and the foreclosure inventory rate increased by almost 20 basis points from last year’s second quarter.”

Added Walsh, “Some loans are continuing to move to later stages of delinquency. The seriously delinquent rate – the non-seasonally adjusted percentage of loans that are 90 days or more past due or in the process of foreclosure – increased for the fourth consecutive quarter. Furthermore, FHA serious delinquencies are becoming pronounced, increasing more than 225 basis points from the previous year.”

Note the Wall Street Journal had an editorial about United Wholesale’s FHA delinquency rate, which made an astonishing claim that 21.5% of UWM’s FHA production went seriously delinquent within two years of origination. That is astounding.

The ICE Mortgage Monitor reported that delinquencies rose 5 basis points in June to 3.55%. Foreclosure starts were up 29% MOM and 44% YOY. Foreclosure activity hit a 6 year high, although it is rebounding from being artificially suppressed during the COVID years.

Increased DQ rates are being driven by FHA loans:

Stocks are higher this morning on no real news. Bonds and MBS are down small.

Inflation at the wholesale level was flat month-over-month and rose 4.7% YOY according to the Producer Price Index. The headline number was a little better than expectations. Ex-food and energy the PPI rose 0.2% MOM and 4.2% YOY.

Oil prices are moving lower after the International Energy Agency forecasted falling demand going forward. Saudi Arabia has also shifted delivery to Mediterranean pipelines to avoid Yemeni fire in the Red Sea. The longer oil stays elevated, the more supply will come on line. The cure for high prices is high prices.

UWM is suing Two Harbors over the failed bidding war alleging that Two Harbors undermined their deal. Two Harbors has responded by calling the lawsuit frivolous. The Two Harbors Board of Directors has a fiduciary duty to their shareholders to get the best price, and ultimately shareholders decided cash was preferable. Given the performance of UWM stock, that was the correct choice. Ultimately it was not Two Harbor’s fault that UWM hedged their MSR portfolio (when it doesn’t hedge its own) and lost money on the trade.

Mortgage lock volume declined 11% MOM but remained 5% above last year, according to Optimal Blue. “Mortgage rates moved higher across all major products in July,” the report noted. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate rose 26 basis points MoM to 6.72%, essentially unchanged from a year ago. The 10-year Treasury yield climbed 31 basis points to 4.75%, while the spread between the 10-year Treasury and the OBMMI 30-year conforming rate narrowed 5 basis points to 197 basis points.

“July was a clear reminder of how sensitive this market remains to rate movement,” noted Mike Vough, senior vice president of corporate strategy at Optimal Blue. “A 26-basis-point rate increase was enough to pull both purchase and refinance volume meaningfully below June’s pace.”

Interesting note for mortgage servicers: the OCC issued a rule in May that allows OCC-regulated banks to not pay interest on mortgage escrow accounts even if the customer lives in a state that requires them. This was a big issue during the days of 0% interest rates when servicers were statutorily required to pay a minimum escrow interest rate even though the underlying account was paying nothing.

At the margin, this should help MSR valuations by reducing the cost of servicing.

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are up.

Inflation at the consumer level rose 0.1% MOM and 3.4% YOY according to the Bureau of Labor Statistics. Ex-food and energy, the index rose 0.2% MOM and 2.5% YOY. These numbers were in line with expectations. Shelter rose 0.1% in July and accounted for about 2/3 of the increase in CPI. Shelter inflation was 3.2% on a YOY basis.

Energy was the big driver of the YOY increase in headline inflation, with gasoline prices up 25% YOY. Food was up 0.1% MOM and 3.0% YOY.

Existing home sales fell 1.7% last month to a seasonally adjusted annual rate of 4.06 million units. Sales were up 0.7% YOY. “Home sales have been remarkably stable, even amid the rising mortgage rate environment of the past few months,” said NAR Chief Economist Lawrence Yun. “Year-to-date sales are up 2.4% and there’s no doubt that the housing market would be thriving if average mortgage rates were to return near 6%.”

“Though the national data shows stabilization, there are notable local market variations,” Yun said. “In smaller cities, and particularly in the Midwest, an annual household income of $60,000 would be sufficient to buy a median-priced home.”

The median home price rose 2% to $434,100, while inventory fell to a 4.5 month supply.

Mortgage applications increased 3.6% last week as purchases rose 3% and refis rose 5%. “After five consecutive weeks of increases, mortgage rates declined slightly last week as oil prices dipped briefly on the hopes of a sustained resolution to the war in Iran. The 30-year fixed rate decreased four basis points but remained close to its highest level in a year at 6.77% ,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “The reprieve in rates supported an increase in both purchase and refinance applications over the week, although the pace of applications has fallen below last year’s pace in recent weeks. As refinance incentives have dwindled with rates at current levels, the average loan size for refinance applications was down to its lowest level since July 2025.”

Stocks are higher this morning on no real news. Bonds and MBS are down.

Oil prices are working their way higher as optimism for a deal in the Strait of Hormuz fades. Markets are “confident that we can get to some sort of agreement, even if it may be a fudge,” Modupe Adegbembo, an economist at Jefferies, told CNBC’s “Squawk Box Europe” on Monday. “It may not be a great agreement, but it may be something that allows more oil and more things to flow through the Strait of Hormuz.”

If no deal materializes, we could see oil prices push higher, however the longer prices stay elevated the more marginal supply comes to market, especially in North America.

Small business optimism improved in July, according to the NFIB. The index rose above its highest level in a year. Hiring drove most of the increase, and eight of the ten components rose. Uncertainty rose, and expected sales fell. We got some good news on the inflation front – the net number of firms raising prices fell for the first time in four months. Labor quality / availability was listed as the number one problem, while fewer firms cited inflation.

Main Street has become a bit more optimistic about future economic
developments. The NFIB Small Business Optimism Index improved
significantly, managing to exceed the 52-year average. The gain was driven by a substantial improvement in hiring plans, accompanied by an improvement in plans to make capital expenditures. Capital investments have been driving economic growth, primarily AI investments in chips and structures to house them in. Although this is not primarily a small-firm activity, it looks like spillover business opportunities are reaching them.

The stock market has been rewarding shareholders very well, and this is supporting a lot of spending by the wealthier consumers who hold equity. Restaurants, car dealers, home improvement companies, etc., all benefit from the wealth being created in the tock markets. Enjoy it while it lasts. The unemployment rate is staying low, and the inflation rate is bothersome, driven primarily by oil prices. A favorable resolution of the war with Iran will significantly reduce oil prices when it finally happens. The world has plenty of oil.

There was a significant decline in the full suite of inflation metrics, led by the percentage of owners raising their average selling prices. This is an especially good sign since it occurred while consumer spending stayed solid and compensation was still rising. The Fed has turned its attention to managing the inflation rate, which is well above the 2% target. Interest rates respond to expected inflation using current experience as a guide. The Fed has indicated that it will pay close attention to developments. Uncertainty remains high, most likely due to the status of the war with Iran. A meaningful resolution will be a major plus for the economy and small business owners.

The part about the wealthy spending is interesting and it highlights the K-shaped economy, where the top end of the income distribution is doing fine, but the lower end is not. This phenomenon is driving some of the Democratic Party’s flirtation with socialism and this will not be a positive for small business, especially small businesses in deep blue cities like Seattle and New York City. I would expect to see the uncertainty index rise, driven by political risk as much as oil prices. This will be something to watch.

Still it looks like business optimism is on the upswing, so this is some to watch

Cleveland Fed President Beth Hammack doesn’t think a quarter point increase in the Fed Funds rate will do much damage to the economy. “I don’t know exactly where we’ll end…in general one 25-basis point move probably doesn’t do a whole lot for the economy,” Hammack said Monday in an interview with Yahoo Finance. “It’s probably…some number of movement, but I don’t want to prejudge what that number is going to be.”

“When I’m talking to businesses, I’m not hearing that they’re sensing any restraint from investments in growth based on where interest rates are,” Hammack said. “So to me that says that now is the time to act.”

Mortgage credit availability increased in July, according to the MBA. “Credit availability in June increased to its highest level since July 2022, as greater availability and expanded guidelines for ARM and streamline refinance loans, including some with lower documentation requirements, drove most of the increase,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Jumbo credit availability has grown in almost every month this year and this month’s increase brought the jumbo index to its highest level since 2020. Additionally, non-QM loan programs continue to account for a substantial share of this growth.”

If the government wants to privatize the GSEs, it might want to pay attention to how much volume is going to non-QM. Fan and Fred market share will continue to erode.

Stocks are flattish this morning on no real news. Bonds and MBS are down small.

The week ahead will be dominated by the CPI on Wednesday and the PPI on Thursday. We will also get retail sales and existing home sales. Tom Barkin and Beth Hammack will also speak on Thursday. Earnings season is on the back nine, and most of the financials have already reported.

Richmond Fed President Tom Barkin said that the US economy may be entering a period of greater instability. “We may be moving into a world of greater instability,” Barkin said, according to prepared remarks. “Persistent shocks—whether from geopolitics, inflation, debt, cyber threats, or the AI transition—can challenge the economy’s resilience and complicate monetary policy.”

He remains concerned about inflation: “If inflation remains sticky and job growth stays strong, that could shift the risk outlook,” he noted, suggesting that the central bank might need to hold rates higher for longer or even consider hikes if shocks compound price pressures. We’re in a good place to respond to ongoing shocks,” Barkin said, “but we need to see how these forces play out.”

After the disappointing jobs report, the Fed Funds futures are now leaning towards no change in policy at the September meeting, however it is a close call: 55% versus 45%.

The Atlanta Fed GDP Now model sees the economy growing at a torrid 5.8% in pace in Q3. This number does not include Friday’s jobs report, so we will see how much that changes in the new model run coming out on Thursday.

The US housing market has settled into a slower pace this summer, giving buyers a bit more leverage. “Late summer—especially this one when the housing market favors buyers in most places—offers the chance for people who are motivated to move this year to negotiate,” Chen Zhao, Redfin’s Head of Economics Research, said. “Buyers should use this time to explore the market more seriously, while sellers should consider what they’re willing to sacrifice to make a deal happen.” 

Sales of starter homes (costing around $200k according to Zillow) fell 5.4% in May. Zillow estimates a starter home price is around 202k, which is up 2.3% YOY. That said, they aren’t flying off the shelves as buyers remain hesitant. Meanwhile, luxury sales rose.

Stocks are higher this morning on no real news. Bonds and MBS are up small.

The economy lost 23,000 jobs in July, according to the Employment Situation Report. The unemployment rate fell to 4.1%. The unemployment rate was driven by a 264k decrease in the labor force and a 178k decrease in the number of unemployed. The labor force participation rate fell 0.1% to 61.4% and the employment-population ratio fell 0.1% to 58.9%.

Healthcare and social assistance added the most jobs, while payrolls fell in government and leisure / hospitality.

This report will certainly challenge the Fed’s narrative that the employment side of the dual mandate is under control. That said, they are mainly concerned with managing the unemployment number, which did fall.

Average hourly earnings rose 0.1% MOM and 3.2% YOY. Bonds are reacting positively on the report. The September Fed Funds futures now see a 45% chance of a rate hike, down from 55% yesterday.

Rocket reported second quarter earnings of $0.08 per share compared to a loss of a penny a share a year ago. Volume was $49.1 billion, while gain on sale was 2.48%. The stock is down about a percent pre-open, which is much better than crosstown rival United Wholesale, which got taken to the woodshed for 35% yesterday.

Nonfarm productivity increased 1.4% in the second quarter as output increased 1.7% and hours worked rose 0.3%. Unit Labor costs rose 1.3%, reflecting a 2.7% increase in compensation and the 1.4% increase in productivity. The productivity number was better than expectations.