Mortgage services.

2024 has been one of those "it is what it is" sort of years for activity in the mortgage market.  There were signs of hope over the summer months as rates fell enough to make for a noticeable spike in refinance activity.  But with the rapid reversal starting in October, refi demand is right back in line with long term lows according to the Mortgage Bankers Association's (MBA) refinancing index. It's hard to see in the chart, but this week's survey actually showed a modest increase over last week, the difference is inconsequential as both are effectively the lowest levels since late 2023. The purchase side of the market has been less eventful, but no less depressing. This application data was collected well before this week's jobs report and subsequent rate spike.  As such, we wouldn't expect any resilience in next week's numbers.  On the brighter side, present levels are so repressed that we also wouldn't expect much more of a contraction.

Blessings, curses, enigmas, paradoxes, etc... The state of home price appreciation in the U.S. is all of the above.  The positive case for home prices is as simple as glancing at the most recent update on the two major home price indices (HPIs) released this week by FHFA and Case Shiller.  Both agree that homes continue to appreciate at a historically elevated pace. Note the extreme difference between the price correction seen in early 2023 and the outright price depression associated with the Great Recession more than a decade earlier.  It goes without saying that if appreciation is going to decline (or even briefly turn negative, in the case of Case Shiller), this is what we'd want things to look like if we're interested in maintaining healthy levels of demand among buyers. The counterpoint is that 4-7% annual growth in home prices significantly outpaces growth in income.  In other words, it's not sustainable.  Combine that with mortgage rates over 7% and it's an easy recipe for extremely poor affordability.  What can help affordability?  Here's a list: Home prices could fall Rates could fall Homes could get smaller (this would effectively make prices lower, but not in a way that would show up in the home price indices due to what's known as "repeat sales" methodology) Builders could build more homes/apartments/etc, and at a faster pace Multiple roommates/families under one roof sharing expenses The balance of other expenses could go lower

The Mortgage Bankers Association (MBA) didn't publish updated weekly application numbers last week, which meant that this week's data had to play catch up with any changes in market conditions.  Even as early as December 18th--the last time the application data came out--the writing was already on the wall due to the rate spike that followed the Fed announcement. If the index had been updated last week, we can safely assume that the index would have already been well on its way lower.  Either way, the most recent tally shows refi demand at the lowest levels since early 2024. Keep in mind, this data is seasonally adjusted, so we're not merely witnessing a drop in application activity due to the holidays.  It's a genuine response to the moderate-but-quick rate spike seen in the 2nd half of December.  There are a few silver linings, or at least a few qualifications.  First off, the rate spike leveled off by last week and we haven't broken to new highs since then. Additionally, there's no need to worry too much about volatility in refi demand in this range because the overall level of activity is still effectively bouncing along historical lows in the bigger picture.  Only two things will change this: time and/or a much bigger drop in rates than we saw in 2024. Purchase demand keeps chugging along.  Although it also dropped over the past 2 weeks, that drop represented a smaller proportion of the prevailing range--one that's been relatively narrow and uneventful since bottoming out more than a year ago.