Stocks are higher this morning as we await the Fed decision. Bonds and MBS are down.
The FOMC decision is due at 2:00 pm this afternoon. Be careful locking around that time.
Iran fired missiles at US forces in Jordan overnight. The missiles were intercepted in the desert and there were no casualties.
Home prices rose 1.1% YOY in May, according to the Case-Shiller Home Price Index. Chicago led the charge with a 6.9% increase in prices. New York and Cleveland were leaders as well. Lost Wages brought up the rear, declining 1.9%. Home price appreciation continues to lag inflation and wage growth, which means that home prices are declining in real terms.
“The geographic dispersion of home price trends continues to persist,” Kaufman continued. “While major metropolitan areas in the Northeast and Midwest recorded year-over-year gains exceeding the national average, many metropolitan areas in the West and Sunbelt regions remain under pressure. This divergence may reflect shifting post-pandemic housing dynamics, including a growing return-to-office mandate that appears to be supporting traditional urban markets.
Affordability remains a significant headwind for the housing market,” Kaufman concluded. “Thirty-year mortgage rates increased to 6.5% in May, leaving the ultra-low 3% borrowing costs a distant memory. At the same time, stubbornly high inflation rates are keeping both the cost of home financing and the cost of living high for prospective buyers. Against this backdrop, housing demand remains constrained, elevated borrowing costs continue to discourage potential homebuyers, and housing values decline in real terms for existing homeowners.”
Separately, the FHFA House Price Index reported prices rose 2.2% on a YOY basis.
Consumer confidence edged down in July, according to the Conference Board. “Consumer confidence moderated slightly in July, continuing a general downward sloping trajectory since late 2021,” said Dana M Peterson, Chief Economist, The Conference Board. “The Present Situation Index was less positive for a third consecutive month while the Expectations Index remained in negative territory. Consumer appraisals of current business conditions and, to a lesser extent, perceptions of the current labor market both softened. Looking ahead, consumers anticipate little improvement in business conditions over the next six months, but expectations for the labor market were slightly less negative. Expectations for household incomes moderated but remained optimistic overall.”
Despite the decline in expectations, consumers are still increasing spending plans, particularly on durable goods and services / entertainment (like dining out). The only area they see declining is streaming, internet and mobile services.
Mortgage applications fell 6.4% last week as purchases fell 4% and refis fell 10%. Blame the spike in oil prices. “Following last week’s spike in oil prices, mortgage rates moved higher, with the 30-year fixed rate increasing to 6.76%, the highest rate since August 2025,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “This upward trajectory in rates continues to significantly impact refinance borrowers, with a 10 % decline in refinance applications, including a steeper drop in government refinances. Despite housing inventory increasing in certain markets, higher rates have added to ongoing affordability challenges for many homebuyers, which drove the decrease in purchase activity over the week.”
Rithm Capital reported earnings of $0.04 per share, a sizeable decline from the $0.12 it reported last year. New Rez originated $15.9 billion in volume during the quarter, which was a 3% decline from a year ago. Genesis, the residential transition loan arm, originated $1.9 billion. This was up 52% compared to a year ago. It looks like a negative mark-to-market hit on the MSR portfolio was a big driver of the negative YOY comparison.
