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MBS Highway Daily Updates 03/21/2023

Current position: Carefully Floating



Stocks are moving higher and mortgage bonds are a bit lower to start the day. Later this afternoon at 1:00 p.m. ET, there will be a 20-year bond auction, which could impact the bond market. The Fed also kicks off their 2-day meeting with a statement and press conference tomorrow at 2:00 p.m. ET.

Existing Home Sales

Existing Home Sales, which measures closings on existing homes, showed that sales were up almost 15% in February at a 4.5 million unit annualized pace, which was much stronger than the estimates of a 5% gain. On a year-over-year basis, sales are down 22%...but much less than the 37% in January.


Inventory levels remained at a very low 980,000 but are up 15% year over year. The media made a huge deal about this, but when looking with some perspective, they are up 15% from a record low level of inventory at 850K last year.


There is a 2.6-month supply of homes, which is tight because 4.6 months is considered normal. But if you look at active listings, there are only 578,000. When looking at the month's supply of available homes for sale, it's really 1.5 months.


The median sales price of $363,700 is up 1.3% on the month but down for the first time in a long time on a year-over-year basis by 0.2%. Diana Olick made this sound like a huge deal, but either doesn't understand what the median price is or wants to intentionally be misleading to get views.


Remember, the median home price is not appreciation but rather the middle priced home. That means that if more lower-priced homes are sold, this number will fall. You could have all home prices increase but the median price fall if more sales concentrated on the lower end. Actual appreciation is up 8.4% year over year according to the FHFA and 5.8% according to Case Shiller. And when looking at the breakdown of sales, you saw an increase in homes sold between $0 and $100k and from $100k to $250k, while you saw decreases in the higher categories. This is the reason the median price fell.


Homes remained on the market on average for 34 days, with 57% of homes on the market for less than 30 days. If the home is priced right, it will sell.


First-time home buyers have accounted for 27% of sales, which is down from 31% in the previous report. Cash buyers accounted for 28% of sales, which was down from 29%.


Investors made up 18% of transactions, up from 16%. They made up roughly one out of every five transactions... Clearly, investors are seeing the opportunity in housing right now.

Multiple offers and purchases above the asking price picked up. It seems investors see that rates are going to come down, and with the tight inventory environment, they expect a good return as appreciation will start picking up when activity returns.

CoreLogic Rental Report

CoreLogic reported that single-family rents are up 5.7% year over year in January, down from 6.4% in December. Rental increases have clearly been decelerating, much like we have been seeing in the Apartment List report. Once this deceleration catches up within the inflation reports, we will see meaningful progress lower.

Technical Analysis

Mortgage bonds continue to vacillate and are now testing support at the 100-day moving average. The 10-year is trading at 3.57%, in the middle of a wide range between the 200-day moving average and overhead resistance at 3.644%. Everyone is waiting to see what the Fed does tomorrow. After locking several times over the last week, we can begin the day carefully floating.


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