For the week ending July 18, 2025, US MBA mortgage applications rose by 0.8%, bouncing back from a prior decline of 10.0%. The market index increased to 255.5, up from 253.5. The purchase index now stands at 165.1, a rise from 159.6. In contrast, the refinance index fell to 747.5, down from 767.6 last week. **Mortgage Rate Trends** The average 30-year mortgage rate increased slightly to 6.84% from 6.82%. Typically, when mortgage rates go up, mortgage applications go down. This recent mortgage data indicates a stalemate in the housing market rather than a significant change. The slight increase in purchase applications, even with slightly higher rates, shows a consistent demand. However, there is no major reason for a market breakout. We believe the central bank policy continues to drive the derivatives market more than the weekly housing numbers. The key concern for traders is the Federal Reserve’s direction, which is unclear due to mixed data. The latest June 2025 Consumer Price Index (CPI) shows an improvement at 2.8%, but it is still above the Fed’s 2% target. This leaves policymakers cautious, making bets on upcoming rate cuts risky. **Policy and Market Implications** Chairman Powell’s recent comments highlight this caution, stating that the Fed is “data-dependent” before making any changes to policy. This uncertainty suggests that instruments tied to rate expectations, like SOFR futures, may stay within a certain range in the coming weeks. We think the market has already factored in a high chance of rates remaining steady through the next meeting. For traders focused on housing-related products such as options on the ITB homebuilders ETF, now is a good time for selling volatility. National home prices have remained surprisingly stable. The most recent S&P Case-Shiller Home Price Index shows a 4.5% year-over-year increase. This stability makes a major price drop unlikely, which favors strategies like iron condors or covered calls over outright directional bets. This period of stagnation is reminiscent of the 2022-2024 cycle when the market adapted to higher rates through lower transaction volumes instead of sharp price drops. It demonstrated that the housing market can handle higher borrowing costs for a long time. We expect to see a similar pattern of low-volume, sideways trading continue. Create your live VT Markets account and start trading now.

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