Homebuilder sentiment dips to five month low on affordability

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1. Fed to consider changes in mortgage lending rules

The Federal Reserve is planning regulatory changes to make mortgage lending more attractive to banks after their market share has dropped sharply, Fed Vice Chair Michelle Bowman said Monday.

The problem*: Banks now originate just 35% of mortgages, down from 60% in 2008. They also service only 45% of mortgage balances, compared to 95% in 2008. Nonbanks have filled the gap.

Proposed fixes:

• Remove requirement to deduct mortgage servicing assets from regulatory capital while maintaining the 250% risk weight assigned to these assets

• Use loan-to-value ratios instead of uniform risk weights to better reflect actual risk

• Lower capital requirements to make mortgage origination cheaper for banks

Why it matters: Bowman said mortgage originations give banks stable fee income and help build customer relationships that lead to cross-selling other services. She warned that nonbank growth has outpaced regulatory safeguards, creating financial stability concerns.

The Mortgage Bankers Association welcomed the changes, saying they would help banks serve creditworthy borrowers while maintaining safety and soundness.

2. Homebuilder sentiment dips to five month low

US homebuilders’ confidence slipped again this month, bogged down by persistent worries over affordability and high construction costs.

An index of market conditions from the National Association of Home Builders and Wells Fargo edged down in February to 36, the lowest level since September. A value below 50 means more builders see conditions as poor than good.

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3. More Nuggets

🏁 Average tax refund up nearly 11 percent so far this filing season. (The Hill)

💰 The heyday of the cash homebuyer seems to be over (at least for now). (Redfin)

👋 Mike Fawaz to depart Rocket Pro, announce next steps in March. (LinkedIn)

📉 The typical homebuyer’s down payment fell 1.5% YoY to $64,000. (MorningStar)

4. Mortgage rates drop to one-month Low, refinance applications surge

Mortgage rates fell to their lowest level in a month last week, driving a 7% jump in refinance applications while purchase demand declined, according to the Mortgage Bankers Association.

Key numbers:

• Average 30-year fixed rate dropped to 6.17% from 6.21%

• Refinance applications up 7% for the week, 132% higher than a year ago

• Purchase applications down 3% for the week, only 8% higher year-over-year

• Total mortgage demand rose 2.8%

Why rates fell: Treasury yields declined after weak retail sales and home sales data outweighed positive January job market reports.

“Refinance applications increased across all loan types, marking the strongest week for refinancing since mid-January,” Kan added.

5. Markets where buyers are backing out of deals the most

In December 2025, 7.1% of home sales fell out of contract, unchanged from a year earlier, according to Realtor.com. At the same time, existing-home sales dropped 8.4% in January, marking the slowest pace in more than two years.

Here are the top 5 metros with the highest cancellation rates:

1. Atlanta, GA: 10.3%

2. Las Vegas, NV: 10.1%

3. San Antonio, TX: 9.6%

4. Riverside, CA: 9.3%

5. Phoenix, AZ: 9.2%

This comes as sales of existing homes nosedived 8.4% in January—the slowest sales pace in more than two years, even as mortgage rates touched a three-year low of 6.09%.

☀️ You’re all caught up. See you on Friday!

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