Morning Musing
No major data today in the U.S., but we did have strong UK CPI and EUR wages. We did get weekly mortgage applications, and I found them intriguing.
Mortgage rates have risen alongside bond yields and are inching towards 7%.
Still well below April peaks, but typically a rise above 6.5% sees a sharp fall in mortgage apps. While certainly not strong bounces, we’ve had two straight weeks of positive numbers despite the higher mortgage rates.
The purchase index has risen for two straight weeks. Again, not spectacular rises but notable and out of character from prior pattern.
We have to be open minded to possibilities:
This could be hurricane related, replacing damaged properties, thus not tied to housing demand.
Election uncertainty could have held back housing transactions, and so we may have a “paradigm shift” where optimism in the economy shifts some of the dynamics such as housing vs. rates, stocks vs. rates to higher levels.
Wealth effect has been so massive in recent weeks that it overwhelms the rise in rates.
SPX up 3.3% in 2 weeks this month.
Bitcoin +37%
Loosening lending standards, which has been occurring since last year, as well as optimism for the deregulation agenda, are narrowing mortgage spreads. So they are rising alongside UST yields, but less so than before.