The Trend is Your Friend

Despite the ongoing dysfunction in Washington—now entering Day 14 of the government shutdown—financial markets have remained remarkably resilient. Both equities and bonds continue to perform well, suggesting that investors are more focused on fundamentals and forward guidance than on political theater.

The Dow Jones Industrial Average now sits above 46,000, reflecting optimism that corporate earnings and consumer demand remain intact despite the absence of new fiscal policy direction. Meanwhile, the 10-year U.S. Treasury yield has quietly retreated to levels not seen since early April, reinforcing the bond market’s confidence that inflation pressures are easing and that monetary policy may remain stable—or even begin to pivot—sooner than previously anticipated.

This decline in yields has translated directly into improved borrowing costs for consumers. Conventional 30-year fixed-rate mortgages are now averaging 6.31% nationally, with roughly 0.75 points, while FHA and VA loans have settled around 6.00% with similar pricing. These are the lowest levels in roughly six months, offering a much-needed reprieve for both potential homebuyers and existing homeowners.

Although this quiet drop in rates has yet to spark a broad housing rebound, it has clearly stimulated refinance activity, which now accounts for more than 35% of all mortgage applications nationwide. Homeowners who purchased or refinanced in the high-6% range earlier this year are taking advantage of even modest improvements to reduce monthly payments or eliminate private mortgage insurance.

With the federal government largely paralyzed, the market has been operating in an information vacuum—there have been no major economic data releases for nearly two weeks. In the absence of hard data, traders and analysts have defaulted to technical momentum and sentiment trends. The adage that “the trend is your friend” seems particularly fitting at this moment, as bond investors continue to buy into a rally that has driven yields steadily lower.

History suggests that once 30-year mortgage rates dip below 6%, home sales activity tends to accelerate. Lower rates not only improve affordability but also restore buyer confidence, prompting both first-time and move-up purchasers to re-enter the market. Should the 10-year Treasury continue its downward trajectory, it’s entirely plausible that we’ll see that sub-6% threshold breached before the end of the month—an event that could reignite housing demand just as we move into the typically quieter fourth quarter.

For now, stability in rates and cautious optimism across the markets provide a welcome counterbalance to Washington’s gridlock. If the current trajectory holds, the next few weeks could mark a subtle but meaningful turning point for the housing sector—proof that even amid dysfunction, the trend remains our friend.