Mortgage News

Nothing is quite what it seems.

ATTOM Data Solutions released data showing foreclosures are up 14%. At first glance, that sounds alarming and sparks fears of another housing crisis—but that’s not the full story.

Yes, foreclosures increased 14%, but they rose from an extremely low base of just 0.26%. That’s roughly one-tenth of the foreclosure rates seen during 2009–2010.

At the same time, housing starts are up both new and existing homes. Rates have remained relatively low and appear on track to stabilize and potentially decline further into 2026. Inflation continues to cool and may reach the Fed’s 2% target sooner than many expect.

The data doesn’t point to a housing crisis, it points to normalization.

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Using this analogy, it’s easier to understand why the bond market barely reacted to last week’s rate-friendly data and the global turmoil, especially with Iran.

The key reason: federal prosecutors opening a criminal investigation into Fed Chair Jerome Powell.

U.S. bonds are considered the safest place in the world largely because the Federal Reserve is independent from the President. That independence is a critical guardrail.

When that independence is questioned, global bond managers get nervous. China has already sold billions in U.S. bonds, and other countries are either doing the same or considering it.

Think of bonds like candy in a jar.

Less candy means each piece is more valuable, so yields (rates) go up. To get people to buy bonds, you have to offer better pricing. If demand is high, no incentive is needed. That’s why Quantitative Easing pushes rates lower: more government “candy” in the jar.

When prosecutors went after Powell, that independence came into question. As a result, fewer global buyers stepped in and some sold what they already owned. That selling pressure offset the flight-to-safety gains we normally would have seen in bonds.

Bipartisan pressure is building, including from Treasury Secretary Scott Bessent.

Cooler heads will prevail and this investigation will go away.

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below 10y US Treasury. Up is lower rates, down is higher rates.

From my viewpoint, this is one of the biggest head-scratchers right now.

Federal prosecutors going after the Federal Reserve, specifically Chair Powell, adds yet another layer of uncertainty. At the same time, the current President wants Powell out before his term expires in May.

Add in the broader global turmoil: Venezuela, unrest in Iran, Cuba, and even Greenland. Under normal circumstances, this would have triggered a clear flight to safety.

Instead, I woke up to yawns from the bond market.

Is this complacency? It’s hard to say.

Tomorrow’s Consumer Price Index (CPI) for December is critical. Expectations are for year-over-year inflation to remain unchanged or possibly decline slightly. That outcome would be bond-friendly and supportive of lower rates.

On the housing front, Realtor.com released new data showing inventory is up 12%. That’s encouraging news, especially as rates begin to move lower in a more meaningful way.

More supply, combined with easing rates, could finally start to bring some balance back to the housing market.

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The President instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities. This is effectively Quantitative Easing (QE), the purchase of bonds to add liquidity and support lower interest rates.

For the past five years, we have been in Quantitative Tightening (QT), where the Fed has been reducing its balance sheet by selling Treasuries and MBS. That prolonged selling pressure has pushed bond yields higher and, as a result, negatively impacted mortgage rates.

A shift away from QT toward QE is meaningful for housing and could provide much-needed relief for rates.

The President also strongly suggested curbing large institutional investors from purchasing single-family homes. The intent is to prevent big corporations from “gobbling up” housing inventory and instead prioritize owner-occupants and very small investors.

Limiting bulk purchases by large funds could help stabilize home prices, increase available inventory, and improve affordability for individual buyers, especially first-time and move-up homeowners.

This isn’t a new concept. Variations of this proposal have been discussed for years, including by lawmakers on the other side of the aisle, particularly as institutional ownership of single-family homes has grown.

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Increasing the defense budget to $1.5 trillion, yes, trillion, represents roughly a 50% increase. The obvious question is: where does that money come from? It gets printed, and that’s exactly what rattled the bond market.

The gains we were expecting from productivity and jobless claims were erased with a single tweet.

Tomorrow’s BLS Jobs Report is expected to show the unemployment rate edging down from 4.56% to 4.50%. On the surface, that seems insignificant, but these figures are rounded.

• 4.56% prints as 4.6%
• 4.50% prints as 4.5%

That rounding can change the narrative.

Bottom line: you can’t rely on the headline number alone. You have to look under the hood to see what’s really going on.

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We received several bond-friendly economic reports, including ADP, JOLTS, Geo-Political tensions and overseas inflation data. Together, these developments are putting downward pressure on interest rates.

ADP Employment Report
ADP is considered the gold standard for real-time jobs data because it is based on actual payroll information rather than surveys.

• December job growth: 41,000
• Market expectation: 50,000
  This miss reinforces the narrative of a slowing labor market.

JOLTS (Job Openings and Labor Turnover Survey)
The JOLTS report also signaled labor market weakness. It tracks:

• Job openings
• Hiring and quitting trends
• Wage growth for both job stayers and job changers

Results showed continued softening, particularly in wage momentum.

Job Growth Trend
The longer-term trend clearly shows deceleration:

• 3-month average: 20,000
• 6-month average: 22,000
• 12-month average: 51,000
• 2024 average: 144,000

Bottom Line
The labor market continues to weaken. Mortgage bonds reacted favorably, pushing rates lower, as markets increasingly expect job growth to either continue slowing or stabilize at lower levels in the coming months.

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Rents make up the largest share of both the CPI and PCE inflation reports, followed by transportation/energy, with food and beverages coming in third.

While you might expect recent actions involving Venezuela to be destabilizing and push oil prices higher, the opposite has occurred. Concerns about a future oversupply of oil are driving prices lower, outweighing geopolitical risk.

Anecdotally, as consumers continue to tighten their belts, manufacturers and retailers are feeling the pressure and are responding by lowering prices to maintain demand.

All of this means lower Mortgage rates and more incentive for the FEDs to cut rates further. 2% inflation is on the horizon.

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I wanted to share a quick market update. Interest rates remain sensitive to global events, and recent actions involving Venezuela have added some short-term volatility to the bond market.

When geopolitical uncertainty increases, investors tend to move toward safer assets, which can put downward pressure on rates, but these moves can be temporary and change quickly.

As always, I’m watching the market closely and will reach out if there’s an opportunity that makes sense for you. If you’re considering a purchase or refinance in the coming months, it’s a good time to stay informed and prepared.

Please feel free to reach out with any questions and forward this email to your friends or clients looking to refinance or purchase.

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The Fed, most members, at least want to lower interest rates, but there is still some hesitation due to inflation concerns. Early indicators suggest inflation may have peaked and could move closer to the 2% target in the coming months.

The labor market has weakened, which is a growing concern. The Fed has acknowledged that the market has softened and is something they are watching closely.

Both these are strong indicators that the Fed rate and Mortgage rates will continue to drop in 2026.

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Thank you for spending your time reading, engaging, and occasionally disagreeing with my posts this year. The conversations, feedback, and new subscribers made it an incredibly rewarding year.

As we peer into 2026, the outlook for home prices, market activity, and interest rates is pointing toward a banner year.

Having been in the business for over 21 years, I’ve seen my share of ups and downs. The last five years have marked one of the longer recoveries I’ve experienced but there is clearly light at the end of the tunnel.

Again, thank you for your time with me this year and onward to 2026.

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