Sales of previously occupied U.S. homes increased last month to the fastest pace since February as lower mortgage rates helped pull more homebuyers into the market. Existing home sales rose 1.2% in October from the previous month to a seasonally adjusted annual rate of 4.10 million units, the National Association of Realtors said Thursday. Sales climbed 1.7% compared with October last year. The latest sales figure topped the roughly 4.09 million pace economists were expecting, according to FactSet. The ...

Sales Performance - Existing home sales in the U.S. rose 1.5% in September from August, reaching a seasonally adjusted annual rate of 4.06 million units, marking the fastest sales pace since February [1] - Year-over-year sales increased by 4.1% compared to September of the previous year, although the latest figure was slightly below the expected pace of approximately 4.07 million units [2] Price Trends - The national median sales price for homes climbed 2.1% in September from a year earlier, reaching $415,200, representing the 27th consecutive month of annual price increases [2] Market Context - The U.S. housing market has experienced a sales slump since 2022 due to rising mortgage rates, with sales of previously occupied homes hitting their lowest level in nearly 30 years last year [3] - Mortgage rates began to decline in July, coinciding with the Federal Reserve's decision to cut its main interest rate for the first time in a year, amid concerns over the U.S. job market [3] Mortgage Rate Dynamics - Homes sold in September likely went under contract in July and August, when the average rate on a 30-year mortgage ranged from 6.75% to 6.56% [4] - The decline in mortgage rates accelerated in September, with rates dropping as low as 6.27% last week [4]

Core Insights - New home sales in the US increased significantly by 20.5% in August, reaching a seasonally adjusted annualized rate of 800,000 units, indicating a strong demand in the housing market [1][5] - The decline in mortgage rates, attributed to the Federal Reserve's monetary policy easing, has contributed to this surge in new home sales [2][3] - However, the labor market is showing signs of weakness, which may limit the sustainability of this growth in home sales [4] Sales Performance - New home sales rose to an annualized rate of 800,000 units in August, a notable increase from the revised July rate of 664,000 units [1][5] - Year-over-year, new home sales increased by 15.4% in August, reflecting a positive trend in the housing sector [2] Mortgage Rates - The Federal Reserve cut its benchmark overnight interest rate by 25 basis points to a target range of 4.00%-4.25%, with expectations of continued reductions through 2025 [3] - The average rate for a 30-year mortgage fell to 6.26%, the lowest in 11 months, down from approximately 7.04% in mid-January [3] Labor Market Conditions - The labor market has softened, with nonfarm payroll gains averaging only 29,000 jobs per month over the three months leading to August, a decrease from 82,000 jobs during the same period last year [4]

Core Insights - Mortgage rates have decreased to 6.26%, the lowest since October 2024, driven by a decline in U.S. Treasury yields and a Federal Reserve rate cut [1][11] - The reduction in mortgage rates has led to a significant increase in mortgage loan application volume by 43% and a 58% rise in refinancing activity [2] - The favorable environment for mortgage rates is expected to benefit mortgage REITs (mREITs) such as Ellington Financial, Annaly Capital Management, and Orchid Island Capital [3][4] Mortgage Market Trends - The Federal Reserve's indication of two additional rate cuts by the end of 2025 suggests further declines in mortgage rates, which will likely enhance mREIT profitability and asset prices [4] - As net interest spreads expand, mREITs are positioned for stronger profitability and increased dividend payouts, appealing to income-focused investors [5] Company-Specific Insights Ellington Financial (EFC) - EFC is diversified across residential and commercial mortgage loans, contributing to stable growth and income [6][7] - The company employs dynamic hedging strategies and maintains a balanced portfolio to navigate market volatility [8] - EFC's 2025 earnings estimates remain at $1.74 per share, reflecting a year-over-year growth of 19.2% [9] Annaly Capital Management (NLY) - NLY manages an $89.5 billion portfolio, focusing on diversified investment strategies to reduce volatility and enhance risk-adjusted returns [12][13] - The company's net interest income (NII) surged to $493.2 million in the first half of 2025, up from $47.1 million year-over-year, positioning it for book value gains [14] - NLY's 2025 earnings estimates are stable at $2.89 per share, indicating a year-over-year growth of 7% [15] Orchid Island Capital (ORC) - ORC focuses on Agency residential mortgage-backed securities (RMBS), targeting traditional and structured Agency RMBS [18][19] - The company's NII increased to $42.9 million in the first half of 2025, with expectations for further improvement due to favorable mortgage rates [21] - ORC's 2025 earnings estimates remain at 63 cents per share, reflecting a substantial year-over-year increase of 450% [21]

Mortgage Market Overview - Mortgage rates are currently at the lowest levels of 2025, with the average 30-year mortgage rate at 6.58% as of August 21, 2025, unchanged from the previous week and down from 6.91% at the start of 2025 [1][9] - The decline in mortgage rates reflects market optimism for potential Federal Reserve rate cuts later in the year, along with changing inflation and bond market dynamics [4] mREITs Performance and Outlook - mREITs such as Apollo Commercial Real Estate Finance (ARI), Annaly Capital Management (NLY), and Orchid Island Capital (ORC) are expected to benefit from lower mortgage rates, which are lifting mortgage originations and driving stronger refinancing activity [5][9] - With improving purchase originations and refinancing activities, mREITs are likely to see book value improvement as Agency market spreads tighten, enhancing net interest spread and financial performance [7][9] Apollo Commercial Real Estate Finance (ARI) - Apollo Commercial has a portfolio of $8.6 billion in loans, primarily secured by properties in the U.S. and European gateway cities, with 96% of its lending consisting of floating-rate loans [10] - Despite a 23.9% year-over-year decline in net interest income (NII) in the first half of 2025, NII is expected to rise due to declining mortgage rates, with a current dividend yield of 9.9% and a payout ratio of 96% [11] Annaly Capital Management (NLY) - Annaly manages an $89.5 billion portfolio, with a focus on residential credit, mortgage servicing rights (MSRs), and Agency mortgage-backed securities (MBS), which helps reduce volatility and interest rate sensitivity [14][15] - NLY's NII increased to $493.2 million in the first half of 2025 from $47.1 million a year ago, supported by improving purchase originations and refinancing, with a current dividend yield of 13.6% and a payout ratio of 99% [16][17] Orchid Island Capital (ORC) - Orchid focuses on Agency residential mortgage-backed securities (RMBS) and has seen its NII rise to $42.9 million in the first half of 2025, compared to net interest expenses of $3.2 million in the same period last year [22] - The company currently offers a dividend yield of 20.4% and has increased its dividend twice in the past five years, with earnings estimates indicating significant year-over-year growth of 450% and 39.7% for 2025 and 2026, respectively [23]

Core Insights - Freddie Mac reported a decline in the average 30-year fixed-rate mortgage (FRM) to 6.76% as of May 1, 2025, down from 6.81% the previous week and significantly lower than 7.22% a year ago [1][5] - The 15-year FRM also decreased to 5.92%, compared to 5.94% last week and 6.47% a year ago [5] Summary by Category Mortgage Rates - The 30-year FRM averaged 6.76% as of May 1, 2025, reflecting a downward trend in mortgage rates [1][5] - The 15-year FRM averaged 5.92%, indicating a slight decrease from the previous week [5] Historical Comparison - The current 30-year FRM is lower than the first quarter average of 6.83% [1] - Year-over-year, the 30-year FRM has decreased from 7.22% to 6.76%, while the 15-year FRM has dropped from 6.47% to 5.92% [5] Freddie Mac's Role - Freddie Mac aims to enhance liquidity, stability, and affordability in the housing market, having assisted millions of families since its inception in 1970 [2]