This week’s newsletter is all about context—because in economics (and life), what you see depends a lot on how far you zoom in… or out. One chart can scream “WOW,” while another quietly whispers, “Relax.”
Let’s start with something simple.
Early January brought a nice little mortgage rate rally, and—no surprise—refinance applications popped. When you lump that together with the mini refi bump we saw back in September 2025, things look pretty lively, even after last week’s small dip from the highs.
But now let’s zoom out. Like, way out.
When you compare today’s refi activity to the actual historical refi booms, today’s numbers—while definitely better than recent doldrums—are basically just crawling back up from the basement. Still progress, just not champagne-popping progress.
Context matters here too. For most of the time shown in the chart above, mortgage rates were falling from the all-time highs of the early 1980s. That meant borrowers could refinance… then refinance again… and then refinance one more time for good measure.
Fast-forward to today: rates hit historic lows in 2021 and have mostly moved higher since. That means the only folks with decent refi opportunities lately are buyers who purchased when rates were higher over the past few years.
Now let’s talk home prices.
This week’s data showed that home prices rose at their fastest monthly pace in over a year. Sounds impressive—and it is, at first glance.
But once again… zoom out.
When you widen the frame, that “big” gain looks more like a historically solid—but not extraordinary—month for home price growth. In other words: nice, but not record-shattering.
So was this price bump caused by the recent drop in mortgage rates? Not really.
The home price data is for November, so the only rate move that could even arguably matter would be September’s decline. Home prices don’t react instantly to rates anyway—if the most recent rally makes a difference, it’ll show up 2–3 months from now.
Another important caveat: month-to-month charts can be misleading. Year-over-year charts are better at showing the bigger trend. Below is the same FHFA Home Price Index, but measured annually. Prices are still rising—just at the slowest pace since the financial crisis.
Feeling a little gloomy after that chart? Don’t.
Here’s the same exact data in raw form—the actual FHFA Home Price Index, not percentages or growth rates.
Yep. Still sitting at all-time highs. Prices just aren’t sprinting like they used to—which, depending on your view of market sustainability, might actually be a good thing.
Context also matters in the bond and rate markets.
If you only looked at this week, you’d think things were pretty volatile—possibly reacting to Wednesday’s Fed announcement.
But zoom out again, and rates are mostly just consolidating after last Monday’s more dramatic breakout. None of this week’s scheduled data really moved the needle in a major way.
That said, buckle up a bit. The week ahead brings the most important batch of economic data for the month. Supporting actors include ISM manufacturing and services reports (Monday and Wednesday), Job Openings (Tuesday), and ADP Payrolls (Wednesday).
And, as always, the main event—the heavyweight champ of market volatility—will be Friday’s jobs report.