Despite the negative media coverage, the housing market remains robust, with home values consistently reaching new all-time highs.
Mortgage-Backed Securities and Treasury Yields
Today, we observe a positive shift in the financial markets. Mortgage-backed securities are up by 12 basis points, and the 10-year Treasury yield has decreased by two basis points.
Home Values Hit New Highs
CoreLogic’s latest Home Price Index reveals a continuous rise in home values. Home prices increased by 0.2% in November, marking a 5.2% year-over-year growth. This trend is in line with other major indices like Case-Shiller and Black Knight, reinforcing the housing market’s strength.
Future Home Price Projections
While CoreLogic forecasts a 0.2% decrease in home prices for December, they predict a 2.5% rise over the next 12 months. However, their conservative estimates have often been surpassed by actual market performance. Our analysis suggests a higher appreciation rate, potentially around 7% annually.
Mortgage Applications Indicate Market Activity
The mortgage application data shows a significant increase. Purchase applications rose by 6% week-over-week, though they are down 16% year-over-year. Refinance applications saw an even more substantial rise, increasing by 19% week-over-week and 30% year-over-year.
Inflation Data on the Horizon
The market eagerly awaits the upcoming Consumer Price Index (CPI) data. The headline CPI is expected to rise slightly, but the core CPI, which excludes volatile food and energy prices, is anticipated to decrease from 4% to around 3.8%.
Technical Analysis and Market Outlook
Technical indicators show mortgage bonds riding the 25-day moving average. With favorable CPI data, there’s an opportunity for a breakout above the 23.6% Fibonacci level. The 10-year Treasury yield remains under a “triple layer of resistance,” including the 25-day and 200-day moving averages and a Fibonacci level. Positive CPI data could lead to a further decrease in yields.
The outlook remains cautiously optimistic as we continue monitoring market trends, particularly with the impending inflation data. Today’s market starts with a floating stance, reflecting a positive trend in housing and the potential for favorable economic data.
