Welcome to 2025
This was another holiday-shortened week that saw only small movement in the bond and interest rate markets:
- Housing appreciation came out strong but possibly moderating (stabilizing).
- The Chicago Purchasing Managers Index (PMI) for December showed continued slowing in the manufacturing sector.
- 30-year fixed rates are back to being slightly over 7% for Conventional loans.
- We will see in the new year if the Fed’s rate cuts can start to help push longer-term rates down, too.
Chicago Purchasing Managers Index: Bad News for Manufacturing
The December Chicago PMI hit 36.9 last month. That was lower than the 40.2 in November and a big miss from market forecasts of 42.5. Anything below 50 is considered to be in contraction (shrinking).
This is now the 13th month in a row for contraction, which is very poor news for manufacturing in the US.
Case Shiller Home Price Index: A More Balanced Market
The Case Shiller Home Price Index showed 0.3% appreciation in October. This is a seasonally adjusted number since this time of year is usually slower. Yearly numbers saw prices rise 3.6%.
The Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, also released their home price index. This index only looks at Conforming loan amounts (not including Jumbo loans nor cash buyers). They showed 0.4% appreciation in October. Their yearly number was 4.5%.
These numbers are strong for appreciation but are not as high as we have seen in the past. This could be indicative of a more balanced housing market.
MBS Highway: Credit Card Defaults Hit Highest Levels Since 2008
One interesting news report that was shared by Barry Habib’s MBS Highway is that US credit card defaults are at the highest level since the Great Recession (2007-2008):
“According to the latest date from BankRegData, defaults on US credit card loans have hit the highest level since the 2008 financial crisis. Credit card lenders wrote-off $46 Billion in seriously delinquent loan balances in the first nine months of 2024, up 50% from the same period in the year prior and the highest level in 14 years.”
A lender writes off a loan when they think there isn’t a chance to recover those funds and they take the tax benefit from the loss. This trend is a potential harbinger of a slowdown in the economy, lower inflation, and lower mortgage rates.
Looking Ahead
Next week we are back to normal economic reporting with a full load of Jobs data.
Tuesday, January 7:
- Job Opening and Labor Turnovers (JOLTs)
- Institute for Supply Management (ISM) Services
- 10-year Treasury Auction
Wednesday, January 8:
- ADP Employment Report
- Federal Reserve (Fed) Minutes
- 30-year Auction
Thursday, January 9:
- Initial Jobless Claims Report
Friday, January 10:
- Bureau of Labor Statistics (BLS) Jobs Report
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