MBS Highway Daily Updates 05/24/2023
Current position: Carefully Floating
Stocks and Mortgage Bonds are both lower to start the day.
The Fed has put themselves in a tough position - A recession is likely already a sure thing , but if they continue to hike, we could have more banking issues. If they cut rates, it will help the banking sector and make the recession less painful. But if they cut rates too much, the dollar could have a tough time and oil prices move higher because they are dollar denominated, which would work against inflation.
And speaking of oil prices, yesterday the Saudi Energy Minister told those betting against the price of oil to "watch out". Even with production cut, less demand for oil will prevent prices from moving higher. For now, oil is behaving and is around $73/barrel, up a little after the warning, but still above $10 lower than where it was in April.
Later this afternoon at 2:00 pm ET the Fed Minutes from the last Fed meeting will be released. This will give us more insights into the thinking of the Fed where they unanimously voted to hike 25bp. We will update you with any noteworthy comments in the market news section of the website.
Zillow recently released their forecasts for home prices, predicting that home values will increase by roughly 4% in 2023. This is not too far off of our forecast, which is between 5-6%. While 4% does not seem like that much, it is meaningful for wealth creation . If a customer bought a $ 500,000 home and we saw 4% appreciation, they would gain $20,000 in that year alone in appreciation. Make sure to utilize the Real Estate Report Card and Appreciation Calculator to quantify the opportunity in homeownership in your local market.
The MBA released their Mortgage Application data for last week, showing that purchases fell by 4% last week and are down 30% year over year.
Interest rates increased from 6.57% to 6.7%, with rates now about 1% higher than this time last year. Refinances decreased by 5.4% last week and are now down 44% year over year.
Mortgage Bonds are trying to form a bottom after a sharp downturn over the last week. The 10-year is also cresting and forming an "Even Star Pattern" which would portend lower yields ahead. Additionally, the Stochastic momentum indicators are setting up in a positive way for follow through in the right direction . Lastly, there has been a "golden cross" on Mortgager Bonds and a "Death Cross" on yields, which typically points to MBS prices moving higher and 10-year yields moving lower. Begin the day carefully floating.