Give Us More Inventory and More Stimulus. Stocks are higher and Mortgage Bonds are lower so far this morning. Treasury Secretary, Janet Yellen, made another big push to “go big” with another stimulus plan and other investments to follow. She also alluded to higher taxes to pay for the investments, which is unclear whether they would be passed in 2021 or 2022, but they are likely coming.
Existing Home Sales, which measures closings on existing homes, were up 0.6% in January, which was stronger than the slight drop expected. Sales are up 24% year over year.
There were only 1.04M homes for sale, down from 1.07M homes in November. Inventory is down 26% year over year at a record low. There is only a 1.9-month supply, which is also a record low. Homes were only on the market for 21 days on average.
The Median home price was $303,900, up 14% year over year. Sales on the low end were down 15%, while homes above $1M were up 77%. This drags the median home price higher.
First Time Home Buyers increased from 31% to 33%, even with the stiff competition for homes on the lower end. Make sure to market to them and explain they don’t need 20% down. Cash buyers remained stable at 19%, but still remains at a high level. The only way to beat a cash buyer is to offer more – Use the Bid Over Ask tool on MBS Highway to help your customers decide if it is a good decision.
Next week is a busy week, highlighted by housing and inflation. We will get the Case-Shiller HPI, FHFA House Price Index, Pending Home Sales, New Home Sales, and the Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE).
Mortgage Bonds continue to trade in a range between two Fibonacci levels. Unfortunately, Bonds look like they are going to test support at 101.597, which is 10bp beneath present levels. The 10-year is up to 1.335% and seems destined to test the next ceiling at 1.37%. Because it appears there is more downside risk in Bonds and upside risk in yields, we are going to have a locking bias. If you do have more time and can weather a bit of a drop, we may see a bouncer higher in MBS prices once we test the 101.597 Fibonacci level.