The war with Iran is escalating, crude oil this morning +$2.14, stock indexes under pressure. The recent CPI and PPI declines in June were one offs, real inflation is higher than those releases and Warsh insists the Fed will cut inflation.
June housing starts estimates 1.320 million increased 1.427 million; building permits thought to be at 1.400 million slipped to 1.367 million. Starts up 19% the highest in three months. Permits down 3.0%; permits for buildings with five or more units slipped 4.9% to 445,000, and single-family permits fell 2.4% to 871,000.
June import and export prices: import prices +0.3% with forecasts of -0.3%, year/year +7.1%, export prices +7.1% as expected, year/year -0.6% with estimates at +0.8%, year/year +10.2%.
June industrial production estimates month/month 0.2%, reported +0.1%; capacity utilization forecasts +0.2%, reported 0.0%.
At 10 am June mid-month University of Michigan consumer sentiment index, thought to be 51.3 from 49.5 in June.
PRICES @ 10:00 AM
10 year note: 4.52% -4 bp
5 year note: 4.24% -4 bp
2 year note: 4.13% -3 bp
30 year bond: 5.05% -3 bp
30 year FNMA 5.5: @9:30 am 99.96 +13 bp (+18 bp from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.79 +6 bp (+9 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.18 +3 bp (+9 bp from 9:30 am yesterday)
Dollar/Yen: 162.39 unch yen
Dollar/Euro: $1.1435 -$0.0010
Dollar Index: 100.80 +0.04
Gold: $3,988.60 -$3.50
Bitcoin: 62,501 -1719
Crude Oil: $81.50 +$2.58
DJIA: 52,488 -64
NASDAQ: 25,509 -372
S&P 500: 7478 -55
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.
Weekly jobless claims last week were better than forecasts, 208K against estimates of 220K. The 4 week average 214.25K down from 219K the previous week. Continuing claims, which are seen as a gauge of outstanding unemployment in the US, fell by 16,000 to 1,805,000 on the week to July 4th, under expectations of 1,820,000. The improvements indicated that the labor market remains robust. Yesterday and Tuesday inflation reports on consumer prices and wholesale prices were lower than forecasts showing inflation slowed in June.
June retail sales expected +0.3%, month/month were +0.2%, ex autos thought to be -0.1%, reported -0.2%. Sales marked the smallest increase in five months, as lower gasoline prices weighed on receipts at gas stations while consumer spending remained resilient in general.
At 10 am July NAHB housing market index was expected unchanged at 35, it dropped to 34. Current sales conditions fell one point to 37. Sales expectations in the next six months dropped two points to 43 and the gauge for traffic of prospective buyers posted a two-point decline to 23. Meanwhile, there were signs of market cooling. 37% of builders cut prices in July, up from 35% in June and 32% in May. The average price reduction was 6% in July, the same rate as the previous month. The use of sales incentives was 63%, up slightly from 62% in June, and marking the 16th consecutive month this share has reached 60% or higher.
Also at 10 am June pending home sales were expected unchanged from May, fell 5.4% month/month. The drop was far steeper than market expectations for a 0.5% decline, with contract signings falling across all four major regions: the Northeast (-3.0%), Midwest (-8.9%), South (-4.1%), and West (-4.7%). Compared with a year earlier, pending home sales slipped 0.3%, reflecting weakness in the South and West.
10 year note: 4.58% +3 bp
5 year note: 4.30% +3 bp
2 year note: 4.18% +3 bp
30 year bond: 5.12% +4 bp
30 year FNMA 5.5: @9:30 am 99.78 -15 bp (-12 bp from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.70 -9 bp (-6 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.09 -16 bp (-18 bp from 9:30 am yesterday)
Dollar/Yen: 162.30 +0.11 yen
Dollar/Euro: $1.1456 -$0.0007
Dollar Index: 100.57 +0.09
Gold: $3,990.80 -$60.60
Bitcoin: 64,157 -771
Crude Oil: $80.02 +$0.42
DJIA: 52,638 -20
NASDAQ: 26,023 -246
S&P 500: 7545 -28
This morning June wholesale prices (PPI) beat forecasts on both core and overall. The year/year core inflation forecasts +0.4% month/month +0.2%, May revised from +0.4% to +0.1%. Overall PPI year/year thought to be +6.2% from +6.5% in May dropped to 5.5%, month/month core +0.1% against estimates of +0.4% and +0.8% in May reported at +0.1%, year/year core unchanged from May at +5.5%.
Initial reaction at 9 am ET, the 10 year note 4.57% -2 bps, the 2 year note 4.17% -4 bps. MBS prices at 9 am +12 bps from yesterday.
Yesterday the Fed chief Warsh appeared optimistic about inflation, saying inflation will be a thing of the past. This morning Warsh completes the required semi-annual testimony to Congress at the Senate Banking Committee.
NY Fed President John Williams today, “There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters,” “I expect overall inflation to decline to around [3.25%] percent by year-end, then continue on a glide path toward our 2 percent goal in 2027 and land on target in 2028,” there shouldn’t be “significant additional impulse” from tariffs as expiring duties are merely replaced by one ones. At the same time, the oil spike has “likely peaked and will come down closer to levels seen before” the fighting, he said.
Weekly MBA mortgage applications this morning -2.% from -2.2% the prior week. Purchase applications -7.3% from the previous week, re-finance applications increased 3.5%.
The US continuing attacks on Iran, yesterday and again this morning.
10 year note: 4.56% -3 bps
5 year note: 4.28% -5 bps
2 year note: 4.16% -5 bps
30 year bond: 5.08% -2 bps
30 year FNMA 5.5: @9:30 am 99.90 +10 bps (+27 bps from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.76 +8 bp (+11 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.36 +7 bp (+6 bp from 9:30 am yesterday)
Dollar/Yen: 162.24 -0.03 yen
Dollar/Euro: $1.1432 +$0.0011
Dollar Index: 100.85 -0.07
Gold: $4,068.00 -$1.70
Bitcoin: 64,911 +382
Crude Oil: $79.92 +$0.58
DJIA: 52,702 +193
NASDAQ: 26,252 +145
S&P 500: 7572 +28
This morning the June CPI (consumer price index) was reported substantially lower than forecasts, temporarily taking inflation down a notch. The report the most off the mark we have seen in months. The Fed likes the PCE (personal consumption expenditures) but the report today rocks the inflation worries, at least for now. The easing of prices came from a big decline in energy and an easing in services costs, particularly for housing. The decline, the most in six years with oil prices decline, the energy component fell 5.7%, the largest decline since April 2020.
Kevin Warsh is testifying to the House Financial Services Committee his morning, a comment from his prepared text, “The Fed’s number one objective is to get monetary policy right — or as near to it as we possibly can.” Warsh said in remarks to Congress set for delivery Tuesday. “That is our clear and constant aim, the star we steer by. And if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past.”
In other news this morning, June NFIB small business optimism index thought to be at 95.6 from 95.3 increased to 97.4.
Warsh still testifying, no other scheduled data today. The Iran issues very much alive, any increase in hostilities will over-ride this morning’s inflation report. The CPI drop is primarily driven by the decline in energy prices and may be a one off positive as oil prices have increased in July.
10 year note: 4.57% -5 bp
5 year note: 4.31% -7 bp
2 year note: 4.18% -10 bp
30 year bond: 5.08% -2 bp
30 year FNMA 5.5: @9:30 am 99.73 +26 bp (+7 bp from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.65 +23 bp (+8 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.30 +32 bp (+16 bp from 9:30 am yesterday)
Dollar/Yen: 161.93 -0.52 yen
Dollar/Euro: 1.1455 +$0.0072
Dollar Index: 100.69 -0.54
Gold: $4,089.60 +$83.90
Bitcoin: 63,776 +1567
Crude Oil: $79.77 +$1.67
DJIA: 52,552 +54
NASDAQ: 26,041 +168
S&P 500: 7534 +19
Neutral
Walkable neighborhoods? A good idea, but NIMBY
In Europe, it’s commonplace to want to live somewhere you can walk to a coffee shop, a park, or a market. But here in the U.S. of A., most people are okay with jumping in their cars with their reusable grocery bags. Seems, however, that they prefer not to any longer if all the stars align for a walkable neighborhood.
The latest Community and Transportation Preference Survey from the National Association of Realtors puts a number on it: 64% of respondents say they would pay more to live within walking distance of parks, shops, and restaurants. And when asked to make a real trade-off, 59% chose a smaller-yard home in a walkable neighborhood over a larger-yard home that requires more driving.
As Realtor.com's Allaire Conte reports, the numbers get complicated when walkability shifts from an abstract preference to a question of what actually gets built nearby. Support for small-lot single-family homes in respondents' own communities sits at 63%, which is reasonably strong. It drops to 51% for townhomes and duplexes, 44% for rental apartments, and 40% for condos. The same people who want walkable neighborhoods often balk at the housing types that make walkable neighborhoods financially viable to build. That contradiction sits smack in the middle of why so little progress gets made.
Gas prices are definitely a culprit. Up more than 40% in 2026 following the war in Iran's disruption of the global oil market, fuel costs have made car-dependent living measurably more expensive. New cars are nearly 30% pricier than they were in 2020, and the average new-car payment has reached an all-time high of $770 a month. The math of owning a home on the suburban fringe looks different when you add that to the mortgage. San Antonio-based broker Levi Rodgers says the premium for walkability is already showing up in sales data. Homes in walkable neighborhoods in his market sell for roughly 15%-25% more per square foot than comparable homes in car-dependent cul-de-sacs, and they sell faster.
Still, truly walkable neighborhoods remain scarce. Joel Berner, senior economist at Realtor.com, puts a specific number on just how scarce: only 2.8% of properties nationwide score an 8.0 or better out of 10 on Local Logic's pedestrian-friendly index, which measures proximity to daily destinations, street connectivity, and overall ease of getting around without a car. Even in markets where walkability is essentially the product, inventory is the constraint. The challenge isn't finding walkable neighborhoods in places like Manhattan. It's finding available inventory within those neighborhoods.
The gap between what people want and what they can actually find is also showing up in how homes get marketed. In May 2024, just 0.4% of listing descriptions used the word "walkable." By May of this year, that share had reached 1.0%, a signal that sellers and agents are increasingly treating proximity as a selling point rather than a given. But what is walkable to some is a marathon to others, so Realtors have to be super careful about how they present it.
The biggest barrier to walking, cited by 71% of respondents, is simple distance. The places people need to go are just too far away. Traffic safety came next, cited by 39%, and that concern isn't abstract. Pedestrian deaths in the U.S. rose 70% from 2010 to 2023, even as peer countries moved in the opposite direction. Sweden's Vision Zero approach cut pedestrian deaths by 65% over a similar period. The European Union reduced road deaths by 25% since 2011.
What that points to is a design problem more than a desire problem. A sidewalk is only useful if there's somewhere worth walking to. Walkability at scale requires homes near destinations, and destinations near homes, which means zoning that allows the kind of mixed-use, higher-density development most communities still resist.
Realtor, TBWS
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are moving sideways today. The MBS market worsened by -19 bps last week. This was not enough to increase mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
These are the three things that have the greatest ability to impact rates this week. 1) Geopolitical, 2) The Fed and 3) Inflation.
1) Geopolitical: This will continue to dominate long bonds as this weekend's further escalation in the Middle East and the potential closure or partial closure of the Straight of Hormuz creates more instability and uncertainty.
2) The Fed: Fed Chair Warsh will Testify on Tuesday and Wednesday and we will get the Fed's Beige Book on Wednesday. We also have a ton of speeches this week from FOMC members.
3) Inflation: We get a lot of inflationary related data this week. Headline CPI is actually expected to be negative on a MOM basis. Obviously this is due to energy prices dropping short term. We also get PPI, Import and Export Prices.
Honorable Mention: Retail Sales on Thursday will get a lot of attention as will the Bank of Canada's Interest Rate Decision.
This Week's Potential Volatility: High
This morning markets are moving sideways despite geopolitical concerns. Volatility has started at moderate levels but could easily become high any time this week.
Bottom Line:
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
No new news from the mid-east this morning, no economic data today.
US bond markets are largely dependent on the price of oil and its impact on inflation outlooks.
Today bond markets will trade quietly unless something happens geopolitically.
10 year note: 4.55% unch
5 year note: 4.29% +1 bp
2 year note: 4.19% unch
30 year bond: 5.07 unch
30 year FNMA 5.5: @9:30 am 99.87 -3 bp (unchanged from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.72 -2 bp (-1 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.19 -9 bp ( unchanged from 9:30 am yesterday)
Dollar/Yen: 161.75 -0.63 yen
Dollar/Euro: $1.1422 -$0.0008
Dollar Index: 100.89 -0.01
Gold: $4,109.10 -$31.70
Bitcoin: 64,329 +1137
Crude Oil: 71.67 -$0.41
DJIA: 52,554 +66
NASDAQ: 26,213 +6
S&P 500: 7556 +12
Weekly jobless claims last week were expected at 219K, reported at 215K, the prior week revised from 215K to 217K. Below forecasts, the lowest in six weeks; continuing claims, which are a gauge of outstanding unemployment, rose by 8,000 to 1,814,000 in the last full week of June, the highest since late March but below expectations of 1,820,000.
The Fed mulling over increasing the FF rate, yesterday the minutes from the June meeting didn’t reveal much as Warsh insists that the Fed talks too much, wants markets to find their way without constant comments from Fed officials that most times adds to uncertainty.
At 10 am June existing home sales expected at 4.20 mil from 4.17 mil.
10 year note: 4.57% -1 bp
5 year note: 4.30% -3 bp
2 year note: 4.19% -4 bp
30 year bond: 5.08% unch
30 year FNMA 5.5: @9:30 am 99.87 +8 bp (-7 bp from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.73 +3 bp (-15 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.19 +3 bp (-3 bp from 9:30 am yesterday)
Dollar/Yen: 162.34 -0.27 yen
Dollar/Euro: $1.1440 +$0.0023
Dollar Index: 100.93 -0.06
Gold: $4,135.60 +$53.20
Bitcoin: 62,889 +665
Crude Oil: $72.899 -$0.63
DJIA: 52,432 +83
NASDAQ: 26,052 +181
S&P 500: 7516 +33
Yesterday afternoon, oil prices increased, MBS prices fell. Iran attacked three ships in the Strait. The US unleashed a strong military response. MBS prices ended the day -29 bps, crude oil increased $3.35/barrel.
Weekly MBA mortgage applications declined last week. Applications in the US fell by 2.2% on the week to July 3rd, extending the muted movements from the two previous weeks, applications to refinance a mortgage fell by 4.1%. In the meantime, applications for a mortgage to buy a home inched down by 0.6%.
FOMC minutes at 2 pm this afternoon from the June meeting. These minutes may have some twists with Warsh’s first meeting. Warsh was insistent at his press conference that he wants to get inflation lower, that implies the Fed may increase the FF rate this year, talk about one increase of 0.25% has momentum. There may be more than one increase according to James Bullard former St. Louis Fed president, “A lot of people are talking about one rate increase. The committee does not generally do that. I mean, what’s the point of that?”
At 1 pm Treasury will auction $39B of 10 year notes.
At 2 pm FOMC minutes
At 3 pm May consumer credit.
10 year note: 4.58% +3 bps
5 year note: 4.32% +2 bps
2 year note: 4.22% +2 bps
30 year bond: 5.07% +2 bps
30 year FNMA 5.5: @9:30 am 99.94 -15 bp (-37 bp from 9:30 am yesterday)
30 year FNMA 6.0: @9:30 am 101.88 -11 bp (-22 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.22 -9 bp (-29 bp from 9:30 am yesterday)
Dollar/Yen: 162.52 +0.42 yen
Dollar/Euro: $1.1415 +$0.0002
Dollar Index: 101.30 +0.08
Gold: $4,085.50 -$71.90
Bitcoin: 61,9971 -1790
Crude Oil: $73.80 +$3.36 (yesterday +$3.35)
DJIA: 52,406 -519
NASDAQ: 25,763 -55
S&P 500: 7469 -35
A jobs report nobody loved; a housing market that shrugged
The June jobs report landed with a thud last Thursday morning. Employers added just 57,000 nonfarm payrolls for the month, well short of the roughly 100,000 to 115,000 consensus estimate and the softest monthly print since December.
Making matters a bit worse, April and May were both revised downward, pulling the three-month moving average down to a more modest 110,000, a pace that falls short of translating into a sign of genuine labor market strength.
The one bright spot was unemployment, which ticked down to 4.2%, a tad better than the 4.3% most forecasters had penciled in. However that improvement was driven partly by a drop in labor force participation, which fell to 61.5%, the lowest level since March 2021, rather than a meaningful expansion in employment. Wage growth came in exactly as expected — up 0.3% for the month and 3.5% over the year. Not bad until you remember inflation is still running above that, which means workers are still losing ground in real terms.
Realtor.com's Jake Krimmel describes the result as a downward surprise, but one that doesn't flash any real red flags for the labor market. The sector breakdown offers some context for why. Professional and business services led the gains at 36,000, followed by social assistance at 25,000 and healthcare at 22,000 — all relatively stable, higher-wage sectors.
The bad news came from leisure and hospitality, which shed 61,000 jobs on a seasonally adjusted basis, an unusual loss for a sector that typically ramps up seasonal hiring as summer begins. Leisure and hospitality workers tend to skew younger and are disproportionately renters, which means sustained weakness there could ripple into rental markets in ways that don't show up in headline job counts.
None of this will push the Fed off its current position of fighting inflation, according to Krimmel. Fed Chairman Kevin Warsh, who called the jobs picture "steady" in an appearance just the day before the report dropped, has consistently signaled that the employment side of the Fed's dual mandate is of secondary importance right now. Inflation, still running above the Fed's 2% target for the fifth straight year, is the primary one. Following the jobs number, bond markets did pull back expectations for a near-term rate hike, with a potential September increase essentially coming off the table. But futures still point to a possible hike in October, and Warsh has been clear that he isn't offering any forward guidance on where rates are headed.
For housing, June's report amounts to a continuation of the cautious equilibrium the market has been operating in all spring. Mortgage rates held steady through the month and that stability showed up in Realtor.com's June data, Pending sales rose for a seventh consecutive month, and homes spent no more time on market than they did a year ago for the first time in 26 months. For much of 2025 and into early 2026, homes were sitting more than 11% longer than the prior year, a sign of buyer hesitation. But the gap has now fully closed.
While a 110,000 three-month average isn't the kind of labor market that drives a housing surge, it's the kind that holds things more or less in place. Krimmel frames it by saying the labor market is providing neither a tailwind nor a headwind. And with unemployment moving down rather than up, as some economists had feared heading into summer, there's at least no new alarm to be sounded against a backdrop of ongoing rate uncertainty, elevated inflation, and geopolitical volatility. At the very least, modest job growth is something.
The bigger question for housing? The leisure and hospitality weakness in June bears watching, and the downward revisions to prior months serve as a reminder that even recent strength can look different in hindsight. For buyers and sellers trying to make decisions this summer, an honest summary is that the labor market is stable enough to keep housing from deteriorating further, but not strong enough on its own to push affordability or demand meaningfully higher.
The real variable remains the Fed, and the Fed's real variable continues to be inflation.
Mortgage rates are moving sideways today. The MBS market worsened by -37 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.
These are the three areas that have the greatest ability to impact rates this week. 1) Geopolitical, 2) The Fed and 3) ISM
1) Geopolitical: We are not out of the woods yet, US/Iran and Israel/Lebanon are still big factors in risk, flight to quality and oil prices. Oil Prices will continue to be a big factor for rates.
2) The Fed: The Minuets from Fed Chair Warsh's first FOMC meeting as chair will be released on Wednesday.
3) ISM Services: This will hit Monday at 10 am and is the biggest economic release of the week.
Treasury Auction: We have a big week for auctions with all eyes on Thursday's 30Y bond auction.
07/07 3 year note.
07/08 10 year note.
07/09 30 year bond.
This morning markets are moving sideways. Volatility has started at low levels but could easily spike later this week.
This morning markets began fractionally better with very little news over the weekend. This week’s calendar is thin on key data, the main event, the FOMC minutes from the June meeting. At the end of the meeting the policy statement was succinct, the minutes likely to be directly to the point also. The minutes will be released on Wednesday.
No market impacting news from US/Iran over the weekend.
Economic reports this week not as key as last week’s. Today June ISM services sector index 54.1 from 54.5, reported at 54.0. Tuesday May US trade deficit (-$78.7B from -$55.9B), 3 year note auction. Wednesday weekly MBA mortgage applications, FOMC minutes, 10 year note auction, May consumer credit +$17.5B from +$20.7B. Thursday weekly jobless claims (219K from 215K), June existing home sales (4.200 million from 4.17 million in May), 30 year bond auction.
The Fed’s new leader, Kevin Warsh, surprised markets at his press conference after the FOMC meeting three weeks ago stressing the Fed’s 2.0% inflation goal, since then the outlook for a Fed rate increase has gained momentum with inflation year/year core at 3.4% released on June 25th.
At 10 am June ISM service sector index, expected at 54.1, hit at 54.0.
The rest of the day should be relatively quiet.
10 year note: 4.48% unch
5 year note: 4.23% unch
2 year note: 4.14% unch
30 year bond: 4.99% +1 bp
30 year FNMA 5.5: @9:30 am 100.34 +3 bp (+12 bp from 9:30 am Thursday)
30 year FNMA 6.0: @9:30 am 102.14 +1 bp (+7 bp from 9:30 am Thursday)
30 year GNMA 5.5: @9:30 am 100.49 +2 bp (+7 bp from 9:30 am Thursday)
Dollar/Yen: 162.32 +0.96 yen
Dollar/Euro: $1.1412 -$0.0024
Dollar Index: 101.10 +0.25
Gold: $4,154.50 +$28.80
Bitcoin: 61,820 -898
Crude Oil: $68.48 -$0.21
DJIA: 52,755 -145
NASDAQ: 26,075 +243
S&P 500: 7515 +32