Good Afternoon!
I hope you had a great weekend! I started off the weekend a little early on Friday by picking my son Noah up from school early and doing a scavenger hunt on South Pearl Street looking for Waldo’s hidden in some of the local small businesses. The local bookstore does a fun promotion every July and I wanted to do some important 1 on 1 time with my son.
Sunday was a low key as our youngest had a slight cold, but Saturday was a blast. We went celebrated one of our closest friend’s 40th birthdays. I was able to see and spend time with my friends and their wives. I’ve known most of my best friends for over 20 years, and some over 30+ years. We all have kids now, and while we still make it a point to see each other often, schedules often get tough. Anyway, there was a great band playing great music and the drinks were free! Shoutout to Brittany Brennan for telling me she likes to read my Newsletters 😊
Onto rates. Par for the course on the 10 YR. Stuck between 4.20% on the low end and 4.50% on the high end. I am not sure what will take the 10 YR over 4.5% moving forward unless we get huge growth or inflation via tariff deals. This would come in the form of higher job creation and from inflation from the deals the administration is making. We have yet to see either increase in a meaningful way, and I don’t expect inflation to be an issue since we are on month 4 of tariffs and have yet to see any meaningful step up in inflation. Any upside to the goods part of inflation will be nullified by the drop in the services side, more specifically the shelter component which is dropping quickly and expected to continue to do so.
Anyway, I see more downside in the 10 YR and mortgage rates than I do upside. Part of this is coming from the mortgage spreads narrowing, albeit still over 60-80 basis points from their historical average. Most of what I see helping rates is the private sector employment. June showed us -33k in job creation in this sector of the economy. Should we get another poor number on Wednesday, and it then also be confirmed on the BLS’s data on Friday, then rates will see a meaningful drop on Friday morning.
1 Year Look at the 10 YR Yield for today:
Last Week’s Market Commentary:
- Existing Home Sales Drop to 9-Month Low
- Existing home sales fell 2.7% in June, reaching a seasonally adjusted annual rate of 3.93 million units—the slowest pace since September of last year and well below the 0.7% decline economists had forecast.
- Lawrence Yun, Chief Economist at the National Association of REALTORS®, noted that the record-high median price is a sign of rising homeowner wealth. In fact, the average homeowner has seen their net worth increase by $140,900 over the past five years, according to Yun.
- He also emphasized that long-term undersupply is a key driver of elevated prices. While total inventory rose to 1.53 million homes in June (up 16% year-over-year), only 1.08 million were active listings—the rest were already under contract. Inventory remains well below pre-pandemic norms.
- New Home Sales Tick Up in June, But Price Drop Reflects Sales Mix
- New home sales edged up 0.6% in June compared to May, reaching an annualized pace of 627,000 units. While slightly positive, the figure came in below expectations and represents a 6.6% decline from June 2023.
- The median new home price fell to $401,800, down nearly 5% from May’s $422,700. The median price simply reflects the midpoint of homes sold, which shifted lower due to fewer high-end sales and more activity in lower price ranges. Specifically, June saw 5,000 fewer sales over $500,000 and 5,000 more between $300,000 and $399,000, skewing the median downward.
- New home inventory rose to 511,000 units at the end of June, the highest level since 2007. However, only 119,000 homes are completed and move-in ready. The rest are either under construction (271,000) or not yet started (121,000).
Deeper Dive on Existing Home Sales Report – with help from David Rosenberg
- Nationwide existing home sales fell 2.7% in June, dropping to a seasonally adjusted annual rate of 3.93 million units—below the consensus estimate of 4 million. This marks the lowest level in nine months and puts sales below the pace seen during the last three recessions, a telling sign of the market’s weakness.
- Over the past year, housing demand has shown zero growth, yet available supply has surged by nearly 16%. The May–June period also saw the highest level of unsold inventory since spring 2020.
- The months’ supply of homes for sale—a key indicator of market balance—has climbed steadily:
- 3.5 months in February
- 4.0 in March
- 4.4 in April
- 4.6 in May
- Now 4.7 in June
- This rising trend reflects a clear shift away from a seller’s market, something not seen since the summer of 2016. However, the rates in the summer of 2016 were sub 5%. Now, they are 6.5-7.5%, which is why we are in the 3rd calendar year in a row of lowest existing home sales since 1995.
This Week’s Market Commentary:
- This is probably the busiest news/data week I have ever seen. We have the Fed Meeting & rate decision, the first reading of Q2 GDP, the Fed’s favorite measure of inflation in PCE, and then the BLS Jobs Report on Friday. Anything can happen, but based on the last few jobs reports, I am not holding my breath. It will probably beat expectations, only to be revised down in later months. The only way we are going to get a drop in mortgage rates is if the jobs data comes in well below expectations for 2 months in a row.
This Week’s Reports:
- MON – 2-Year Note Auction, 5-Year Note Auction
- TUES – JOLTS, Case-Shiller Home Price Index, FHFA House Price Index, 7-Year Note Auction
- WED – MBA Mortgage Applications, ADP Employment, Q2 GDP, Pending Home Sales, Fed Meeting & Rate Decision
- THURS – Jobless Claims, PCE (Personal Consumption Expenditures), Challenger Job Cuts
FRI – BLS Jobs Report, ISM Manufacturing PMI, Michigan Consumer Sentiment
