Another 'Fed is done rally' but.../Other good stuff, including HP comments

I lost count on how many 'Maybe the Fed is done hiking rates' rallies we've had this year in markets but it's been a lot. While the Fed will most likely pause in September, we ended the day on Tuesday still about 50/50 for another one by yr end post JOLTS data. On the still higher for longer belief that is becoming more entrenched in people's minds, as it should, a full 25 bps rate cut is not priced in until next June in the fed funds futures market. That is in stark contrast to what was priced in this early May when the market was pricing in about 200 bps of rate cuts by June 2024. The S&P 500 by the way was around 4100 in early May. Also in early May, the 10 yr yield traded between 3.4-3.5%, so the long end since then has 'tightened' conditions by 70-75 bps. 

We know how difficult it is for many to swallow a 7.5% mortgage rate to buy a home but it's also now impacting cash out refi's which people have used to consolidate higher interest rate debt elsewhere, to use for spending projects, etc... Yesterday the FHFA said in Q2, cash out refi's made up 17% of total mortgages, down from 46% in Q2 2022. The 20 yr average is about 30%. 

More on mortgages, the MBA said that for the week ended 8/25 purchase applications for a home rose 2% w/o/w off the lowest level since 1995. Refi's were up 2.5% w/o/w and follows 5 weeks of declines. Bankrate's average 30 yr mortgage rate yesterday was at 7.53%.