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Market Analysis 2.25.26

Good Morning on this best day of the week Wednesday from your Hometown Lender,

Yesterday saw mortgage bond improve a bit in the afternoon before falling back to end the day about the same as when pricing came out. Rates are about the same or just a bit worse than yesterday, and reprice risk on the day is low. It’s setting up to be uneventful today.

Market Analysis – From a higher and better view:

Quick Snapshot (Wed, Feb 25, 2026)

  • 10Y Treasury: ~4.06% (a touch higher this morning)  
  • Freddie Mac PMMS (wk of 2/19): 30Y 6.01% | 15Y 5.35%  
  • MBA apps (wk ending 2/20): +0.4% overall; refi +4%, purchase -5%  
  • Today’s “watch me” items: New Home Sales (10:00a ET), EIA crude inventories (10:30a ET), Fed speak (Barkin)
  • Political headline risk: Trump’s State of the Union leaned heavily into tariffs + housing policy (markets will keep gaming the inflation angle).  

1) Market Analysis – What Hit This Morning (CPI… but not CPI day)

What we got / what matters

  • MBA Mortgage Apps: Slight uptick overall (+0.4%), but the story is composition: refi demand is waking up (+4%) while purchase apps dipped (-5%) week over week.  
  • Rates in the plumbing: MBA’s conforming 30Y contract rate fell to 6.09% (from 6.17%).  
  • Energy/inflation impulse today: Reuters flagged a big crude stock build (~16M barrels) weighing on oil—helpful on headline inflation optics if it persists.  

Narrative you can use (client-friendly)

“Rates have backed off enough that refinances are starting to stir, but buyers are still payment-sensitive. The market’s basically saying: ‘show me sustained disinflation (or slower growth) and I’ll reward you with lower rates.’”

2) Fed Watch

  • Fed funds target range: 3.50%–3.75% (held steady since the January meeting).  
  • Next FOMC: March 17–18.  
  • Fed tone right now: multiple officials are signaling patience—inflation progress is not convincing enough to rush cuts.  

My read: The Fed’s base case looks like “hold… then maybe cut later” unless inflation breaks lower convincingly. The market will keep trying to front-run June-ish cuts, but officials are basically holding up a “not so fast” sign. 

3) Market Analysis – Where Mortgage Rates Actually Are

  • Freddie Mac (weekly benchmark): 30Y 6.01% | 15Y 5.35% (as of 2/19).  
  • MBA contract rates (more “in the pipes”):
    • Conforming 30Y: 6.09% (from 6.17%)  
    • Jumbo 30Y: 6.20%  
    • FHA 30Y: 5.97%  
    • 5/1 ARM: 5.23% (ARM share holding ~8%+)  

Translation: We’re still in a low-6% world for well-qualified conventional borrowers, and ARMs remain meaningfully cheaper for the right profile.

4) Market Analysis – Housing Market Check

Existing homes

  • January existing-home sales: 3.91M SAAR, median $396,800, ~3.7 months inventory.  

New homes

  • December new-home sales: 745k SAAR, median $414,400, ~7.6 months supply.  

Leading indicator (contracts)

  • Pending home sales (Jan): -0.8% m/m (index 70.9).  

So what? Inventory dynamics are still the boss. When supply stays tight, prices stay annoyingly resilient even if volume is soft.

5) Market Analysis – Political Backdrop & Fed Independence

Trump’s SOTU gave markets two big “rate-relevant” buckets:

  1. Tariffs / “pay-fors” rhetoric
    • He leaned into tariffs as a central lever (including talk that tariffs could replace portions of income tax). Markets hear one word: inflation—even if the policy path is uncertain and depends on Congress + courts + implementation.  
  2. Housing policy signaling
    • He touted housing moves including the idea of restricting large Wall Street firms from buying single-family homes. That’s potentially meaningful for investor demand at the margin, but again: details + enforcement + legal path matter. 

Meanwhile, Fed officials are trying to keep the message boring: policy is mildly restrictive/near-neutral; they want clearer inflation progress before changing course. 

6) What This All Means for Rates Going Forward (Three-Scenario Grid)

ScenarioWhat would cause itRate impact
Base case (most likely): “Sticky-ish inflation, steady growth”PCE/core hangs near ~3%, labor stays stable, tariffs stay mostly rhetoric or get phased in slowly  oai_citation:23‡Bureau of Economic AnalysisRates range-bound; improvements come in small steps
Bull case for rates: “Disinflation resumes”Softer demand + inflation prints cool; energy helps; Fed confidence rises  oai_citation:24‡Bureau of Economic AnalysisLower yields → better mortgage pricing
Bear case for rates: “Inflation re-accelerates / policy shock”Tariffs implemented aggressively, inflation expectations pop, Fed stays tighter longer  oai_citation:25‡InvestopediaHigher yields → worse mortgage pricing

7) Market Analysis – Practical Takeaways

  • Refi conversation is back: not “everybody wins,” but enough borrowers will pencil that it’s worth screening your database.  
  • Purchase strategy: payment buydowns, targeted ARMs, and seller credits are still doing real work in this market.
  • Watch supply, not vibes: volumes can be weak and prices can still hold if inventory stays constrained. 

8) Lock vs Float

  • Float if you have time and can tolerate volatility: we have meaningful event risk (Fed speak + housing + energy + policy headlines).
  • Lock if: closing is inside ~15–21 days, payment is tight, or you’re already below the borrower’s “pain threshold.”