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MBS Highway Daily Updates 04/25/2023

Current position: Carefully Floating

Stocks are lower and mortgage bonds are higher to start the day, following a weak Consumer Confidence report that showed confidence at a 9-month low.

New Home Sales

New Home Sales, which measures signed contracts on new homes, rose almost 10% in March to a 683,000-unit annualized pace, which is the best number in 13 months and was much stronger than estimates of a 1% increase.


Remember, this was when rates were higher as well.


There was a negative revision to February's number, and when factoring that in, sales were up about 7%. Year over year, sales are only down 3.4%.


There were 432,000 new homes for sale at the end of March, and at the current pace of sales, there is a 7.6-month supply, down from 8.2 months. However, only 71,000, or 16%, are completed. When looking at the pace of sales vs. homes that are completed (available supply), there is only a 1.2-month supply.


The median home price rose 3.8% last month to $449,800, but this can be skewed due to the mix of sales. Year over year, the median home price is up 3.2%.


Overall, this was the fourth strong report in a row, so how are builders having success? Many are using incentives and 2-1 buydowns. Do what the builders are doing: make sure you are using the seller contribution tool under Loan advisor.


Case-Shiller Home Price Index

The Case-Shiller Home Price Index, which is the "gold standard" for appreciation, showed that home prices rose 0.2% in February after falling modestly for seven straight months, signaling an inflection point. Year over year, home prices are up 2%, which is a deceleration from 3.7% in the previous report.


From the peak in June of 2022, home prices have come down 2.9%—a far cry from a housing bubble—and things are already starting to turn around.


Some of the hardest-hit cities are turning around:

San Diego +1.5%

San Francisco +1%

LA +1%

Denver +0.8%



FHFA House Price Index

The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Different from Case-Shiller, it does not include cash buyers or jumbo loans. The FHFA reported that prices rose 0.5% in February after rising 0.2% in January! Year over year, home prices are up 4%, which is down from 5.3% in the previous report. From the peak, home prices, according to FHFA, are down 0.2%, which is basically flat.


Based on this, you can interpolate that the decline in Case-Shiller is coming from higher priced homes where there is less demand. Additionally, there are likely cash discounts being offered, where buyers paying in cash are able to command a lower price, which is why Case-Shiller is also lower.


Technical Analysis

Mortgage bonds have broken above the 100.758 Fibonacci level as well as the 100-day moving average. Bonds are now testing the 25-day and all important 200-day moving average, which is a tough ceiling of resistance. If bonds can get above this level, there is a lot of room to run higher.


The 10-year has convincingly broken beneath its 200-day moving average and is now testing the next floor at the 3.43% Fibonacci level. If yields can get below this level, the next stop is 3.27%. Begin the day carefully floating.


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