Coronavirus and Rates

2020-03-12T15:31:07+00:00 March 12th, 2020|Categories: Uncategorized|Tags: , , , , , , |

Special Report: Coronavirus and Rates | March 5, 2020 As the number of reported cases of the coronavirus around the world has increased, the list of school closings, work interruptions, event cancellations, and other consequences has grown. This decline in economic activity has been brutal for stocks but good for bonds, pushing rates to record low levels. One commonly heard question, though, is why mortgage rates have not fallen as much as government Treasury yields. There are two main reasons. First, mortgage-backed securities (MBS) have prepayment risk while Treasuries do not. When people refinance, their loans are removed from MBS. This makes MBS less valuable to investors relative to Treasuries during periods of declines and more valuable during periods of increases. In other words, mortgage rates rise and fall more slowly than Treasury yields due to the basic properties of prepayment risk. Second, the large mortgage companies which purchase loans and set mortgage rates have the capacity to process only so much business at one time. Currently, there is more demand for loans and refinancings than these firms can handle, so they have less incentive to pass along the lowest possible rates to customers. Here are some actual figures from [...]

2020-02-28T18:23:29+00:00 February 28th, 2020|Categories: Uncategorized|

MBSQuoteline Weekly Newsletter | Stocks Plunge on Virus Concerns

Housing Market Conditions

2018-08-29T19:46:45+00:00 August 29th, 2018|Categories: Uncategorized|Tags: , |

The housing market data has been somewhat disappointing this year, and the most recent reports did little to reverse the trend. In July, both new and existing home sales decreased a little from June. For existing home sales, which make up roughly 90% of the market, this was the fifth straight month of declines, and they were lower than a year ago. The inventory of existing homes available for sale fell slightly from June to a 4.3-month supply. A 6-month supply is considered a healthy balance between buyers and sellers. Sales of new homes fell to the lowest level since October 2017. A number of factors have contributed to the loss of upward momentum in home sales this year. One big reason is a lack of inventory in many regions, especially for lower priced homes. Single-family home construction is essentially flat from a year ago, and it is not meeting the demand at the lower end of the market. Builders say that rising land, material, and labor costs are obstacles to a faster pace of construction and make adding entry-level homes less desirable due to lower profit margins. For decades, single-family housing starts averaged about 1.1 million per year. Following [...]

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