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  • Writer's pictureWWH

MBS Highway Daily Updates 01/20/2023

Current position: Locking

Stocks are higher and Mortgage Bonds are lower to start the day.

Existing Home Sales

Existing Home Sales, which measure closings on existing homes, showed that sales were down 1.5% in December at a 4.02M annualized pace, which was better than expectations looking for a 3.4% decline. On a year-over-year basis, sales are down 34%.

Inventory continued to move lower after peaking at 1.3M in August, as it has every time this year after the normal seasonal build, and declined for the fifth straight month to 970k. This is a decline of 13.4% from the previous report. This will continue to limit the downside in home prices and set up for a reacceleration in appreciation once hibernating buyers come back when rates fall further.

There is a 2.9-month supply of homes, which is tight because 4.6 months is considered normal. But if you look at active listings, there are only 690,000, which means that 29% of the "inventory" in the Existing Home Sales report is under contract and not truly available. This speaks to demand, as a normal market has 25% of inventory under contract. When looking at the month's supply of available homes for sale, it's really 2 months.

The median sales price of $366,900 is down 1% on the month but up 2.3% year over year.

Homes remained on the market on average for 26 days, up from 24 days, but they are still moving fast. 57% of homes were on the market for less than 30 days.

First Time Home Buyers have accounted for 31% of sales, which is up from the previous report of 28%. Cash buyers accounted for 28% of sales, which was up from 26%.

Next Week

Tuesday: 2 - Year Note Auction

Wednesday: Mortgage Applications; 5 - Year Note Auction

Thursday: New Home Sales, GDP, Jobless Claims, and the 7 - Year Note Auction

Friday: PCE Pending Home Sales

Technical Analysis

Mortgage Bonds are continuing to trade in the middle of a range comprised of the 101.671 Fibonacci ceiling and a floor at the 25-day Moving Average. The 10- Year has broken above the ceiling at the 3.431% Fibonacci level. If this level remains broken, yields could move higher to test the 25-day Moving Average . Begin the day with a Locking Bias.


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