Mortgage Bonds have had a tough go of late, but we are seeing a little relief this morning as they attempt to hold the line at an important support level. The 10-year is down 3bp and testing an important support level as well.
Earlier today the US imposed new tariffs of 10% and 12.5% on goods from 60 trading partners, including the EU and China, on the basis that those countries failed to curb imports made by forced labor. These tariffs have a much greater chance of sticking and likely will or take years to overturn.
There are some fears that this could cause more inflation, but it comes just as the temporary 10% global tariffs expired, so this will by and large just be replacing them and not cause additional inflation. We will not, however, see the deflationary pressure we would have if the tariffs were to have just rolled off.
New Home Sales
New Home Sales, which measure signed contracts on new homes, rose 1.6% in June to a seasonally adjusted annualized rate of 628,000. This was stronger than estimates and comes after May was revised much higher. From the originally reported May figure, sales rose 8.3% in June.
Some are pointing to the drop in oil prices and rates in June as a reason for the increase in sales. But remember, rates in some parts of May were lower than in June and we did not really see rates fall that much. Oil prices fell, but gasoline and rates did not really catch up. Additionally, someone would have likely had to have already been shopping, as most would not just wake up one day and sign a contract because of a small dip in rates.
Bottom line: Some of the increase could have been due to lower rates, but we think this report shows some resilience in the new home sales market.
Most of the sales were driven by lower-priced homes, which caused the median home price to dip 3.3%. But remember, this is the middle priced home that sold, not appreciation, and is influenced by the mix of sales.
News Next Week
Monday: Durable Goods Orders
Tuesday: ADP Weekly, Case-Shiller and FHFA appreciation reports
Wednesday: Mortgage Applications, Fed Meeting
Thursday: Personal Consumption Expenditures, Q2 GDP, Jobless Claims
Friday: Employment Cost Index
Technical Analysis
Mortgage Bonds closed right on support at 98.99 yesterday and are now rebounding higher from it. This is a very important level: If Bonds were to break beneath it, there is a very long way down.
The 10-year closed above 4.667% yesterday and is now back testing it today. If yields can get under this level, there is room to improve until reaching 4.588%. If yields are turned higher, the next ceiling is at 4.80%.
Get notifications when agents you follow schedule open houses, complete a transaction with another loan originator, post a new listing, or share content on social media.Start your trial now so you never miss an opportunity to connect with new or existing referral partners.
Create 60 second videos for clients with Social Studio, and take advantage of social share assets that help you start conversations and highlight the benefits of buying.
Show clients how they can take advantage of a cash-out refinance or restructure their debt to save them years of mortgage payments, or demonstrate how debt consolidation can bridge the gap in payment differential on a more expensive home. With personal debt balances at an all-time high, use Debt Consolidation to help your clients achieve their financial goals and gain a better position to build wealth for their family.
Demonstrate how delaying a purchase for even a year or two could cost buyers thousands in appreciation, amortization, equity and more. Increase deal flow by showing clients how delaying their purchase could have more of an impact on their long-term wealth than they realize.
