Stocks are higher this morning after SpaceX earnings. Bonds and MBS are up small. Not sure what caused oil to spike yesterday, but whatever it was, it is over.
As the air comes out of the AI stock bubble, Treasuries seem to be benefiting.
Housing starts fell 5.2% MOM and 11.5% YOY to a seasonally adjusted annual rate of 1.22 million units. The Street was looking for 1.3 million so this is a sizeable miss. Building permits were roughly flat MOM to 1.4 million units. Housing as an economic contributor continues to punch below its weight:
We will hear from a couple of homebuilders this week, and from the sound of it we will continue to see compressing gross margins as they cut price to move the inventory. I am not sure that offering below-market mortgage rates as a way to maintain the comps will work with rates up here. They probably will have to cut price, especially in developments where there are now existing homes coming for sale at lower price points.
Rising rates are impacting pending home sales as well, which fell 7.3% according to NAR. “Market conditions weakened in September due to fast-rising mortgage rates,” said NAR Chief Economist Dr. Lawrence Yun. “Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates. Given that mortgage rates have already risen much more than the Federal Reserve’s short-term interest rate hikes, mortgage rates could be topping out. Despite the difficulty of obtaining a mortgage, the limited number of distressed properties is ensuring steady home prices. Buyers and sellers may simply be holding back until mortgage rates move favorably.”
From Yun’s mouth to God’s ears about mortgage rates. As the 10 year stabilizes and bond market volatility eases we should see a tightening of MBS spreads which would move rates lower.
Mortgage applications fell 5.3% last week as purchases fell 7% and refis fell 2%. “Mortgage rates decreased for the first time in over two months, with the 30-year fixed rate dropping to 7.41%. However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “Purchase applications fell 18% behind last year’s pace, as higher rates are pricing buyers out of the market. The ARM share held steady at 10.5%, as ARM rates remained almost a full percentage point lower than the 30-year fixed rate, giving qualified borrowers a lower rate option to purchase a home.”
Mortgage REIT Annaly Capital reported a 11% decrease in book value per share as MBS spreads widened in Q3. “While the third quarter of 2026 was a challenging period for fixed income markets, which we were not immune to, we entered the quarter prepared for the volatility. Our cycle-low leverage and minimal duration exposure provided us with the flexibility to actively manage our portfolio while continuing to make attractive investments across our three strategies,” remarked Chief Executive Officer & Co-Chief Investment Officer David Finkelstein.
Annaly reported that AAA non-QM spreads widened out about 10 basis points during the quarter. They continue to build their servicing portfolio and are valuing it at 6.15x. MSR valuations have continued to march higher.
Western Alliance reported better than expected earnings of $2.45 per share. Credit performance was particularly strong, with nonaccrual loans falling 14% to 0.79% of loans held for investment. Revenues rose 1.9%.
Mortgage origination volume fell 4% YOY to $14.5 billion. Gain on sale margins of 27 basis points were flat QOQ and down 2 bps from last year.
