On this crazy day with the bond market, mortgage rates dropped to another yearly low after the CPI inflation print. How low? Mortgage News Daily came out with a shocking print of 6.11% mortgage rates for their top-tier borrowers, while HousingWire’s Mortgage Rates Center, which tracks actual loan lock data from Polly, is also at a year-to-date low of 6.44%. That means some borrowers are getting mortgage rate quotes under 6% today, so the rate environment has improved greatly from the highs around 7.50% this year.

So what is going on? The mortgage spreads are improving in 2024. For example, today, we have an 0.80% improvement on rates if you look at the worst spread levels of 2023 and incorporate them into today’s pricing. This is why I have focused so much of my work this year on the spreads: mortgage spreads improving like they usually do as we get closer to the first Fed rate cut are a massive story in 2024.

My 2024 price forecast only had a peak low rate call of 5.75%, so most of the big moves in mortgage rates have already happened. And this has all happened before the Fed has even cut rates — the bond market got ahead of the Fed and has priced in a lot of Fed easing on the 10-year and 2-year yields as well. It’s the old-and-slow Fed that has to play catch-up.

I talked a lot about mortgage rates in the most recent tracker article, and I discussed what can take us even lower after the massive move we have seen. It comes down to: weakness in the labor data, the spreads improving more or a market event where people sell stocks and head into bonds.

What have lower rates done for purchase apps? Well, purchase apps have had another positive week, making this the best 14 weeks of the year with nine positive weekly prints versus five negative prints. The year-over-year decline of 3% is the lowest since 2022. Now, I caution people that we are working from the lowest bar ever, so take the better year-over-year data within that context.

Last year, we were heading toward 8% mortgage rates, and demand did slow down. Still, with that said, purchase application data has not had a positive 14-week run at all this year until mortgage rates started to fall in June.

Overall, it has been a positive few weeks for the housing industry, which is still in a recession in the existing home sales market. Once you adjust to the workforce, home sales have been trending at the lowest levels ever. So, the moral of the story is that lower mortgage rates have improved the data, something I discuss in tomorrow’s HousingWire Daily podcast.

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