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MBS Highway - Daily Updates 11/01/2022

Current position: Locking

Stocks and Mortgage Bonds are both lower to start the day. Mortgage Bonds were up over 40bp earlier but have run into a wall at the 25 - day Moving Average, which has been a battlefield.

CoreLogic released their Home Price Index report, showing that home prices declined by 0.5% in September and rose 11.4% year over year, which is a decline from 13.5%. The year-over-year number is still significant, but we will likely see some vacillation month to month.

CoreLogic forecasts that home prices will remain flat in October and rise 3.9% in the year going forward, which is an increase from 3.2% in the previous report. This is important - Although we are seeing some negative readings month to month, they still forecast almost 4% appreciation nationwide over the next year, which is in line with our expectations.

Remember that 4% appreciation can still be meaningful for wealth creation - If someone bought a $400,000 home, and put 10% down, that means they would gain $16,000 in appreciation over the next year and earn a 40% return on their investment due to leverage.

The JOLTS (Job Openings and Labor Turnover) report was released for September, showing that there were 10.7M job openings in the month, which is an increase from 10.3M in August. While this is a big number, it's unclear how many of these jobs are being double counted - With many companies allowing work from home, the same job can be listed in multiple states at once and it can overstate how many job openings are available. Anecdotally, we know many companies have expressed their need to pause hiring or to begin layoffs.

Mortgage Bonds have failed to get above the 25 - day Moving Average for the fourth day and are being turned lower from it this morning. There is a lot of room to the downside before the next floor, so we must remain on guard. The 10 - year is in a similar position, where yields have been unable to get beneath their 25 - day Moving Average. Continue Locking.


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