The Dynamic Financial Landscape: Home Prices, Mortgage-backed Securities, and the Impact of Jobs Data

Jobs

In March, home prices substantially increased, following a notable gain in February. Mortgage-backed securities have risen by 27 basis points, surpassing crucial technical levels, while the 10-year has dropped by 16 basis points. The March CoreLogic Home Price Index report revealed a 1.6% rise in home prices, with a year-over-year increase of 3.1%. Despite a slight drop from last month, it is compared to challenging figures from the previous year. CoreLogic forecasts home prices to rise by 0.8% in April and 4.6% over the next 12 months.

In light of recent data, potential homebuyers should not delay purchasing a home, as inflation is expected to decrease in the year’s second half. This decrease and the current lack of inventory may result in increased competition and accelerated appreciation gains.

As the Federal Reserve meeting concludes, they will focus on their comments regarding inflation and future guidance. The JOLTS report has shown a decrease in job openings, with layoffs and discharges increasing by 255,000, reaching a 27-month high. This week’s ADP and BLS jobs reports will provide further insight into the job market, anticipating weaker job creation numbers potentially benefiting the bond market.

The debt ceiling has been a recurring topic of discussion, as the government may run out of funds to pay its bills by June if the ceiling is not raised. Historically, the debt ceiling has been raised 78 times since 1960, but the last three instances did not occur during a time of Fed rate hikes or treasury inversion. If the ceiling is not raised in time, the markets could experience a sharp drop similar to 2011.

As housing reports continue to exhibit strong numbers, staying informed about the current market state is essential.

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Limited Inventory, Soaring Demand: Navigating the Housing Market Amid Economic Uncertainty

Housing market

Despite a lack of supply, buyers eagerly seek out available inventory. Starting the day with positive energy, we turn our attention to the day’s news. Pending home sales, or signed contracts on existing homes for March, were down 5.2% month over month and down 23% year over year, worse than expectations. This is the first monthly decline since November, but it’s important to note that there have been 200,000 fewer active listings since then.

Lawrence Yun the chief economist at National Association of Realtors, confirms that a lack of inventory is a significant constraint to rising sales. This limited inventory has increased competition, with 28% of homes selling above the list price and an average of 3.2 offers per home sold. Despite fewer sales than hoped, the high demand and low inventory continue to support home prices.

Initial jobless claims dropped by 16,000 to 230,000, and the Q1 GDP peaked at 1.1%, below estimates of 2 to 2.5 per cent. This indicates that the economy may be slowing faster than anticipated, with a recession on the horizon.

In terms of housing, delinquency data from Core Logic remains relatively low. Tomorrow, we’ll see the release of the PCE personal consumption expenditures for March, the Fed’s favorite measure of inflation. While the headline reading may come down, the core reading could remain steady or increase slightly.

As for the charts, mortgage bonds are down 14 basis points from their lowest levels of the day, testing the 50-day moving average. The 10-year treasury is battling the 200-day moving average. Cautiously, we’ll float into the following report.

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