FRM Update

July 31, 2017



Mortgage yield spreads tightened last week, but activity improved as the curve steepened and 10-year Treasury yields moved higher after positive news in Germany. Mortgage rates were essentially unchanged last week and mortgage applications for the week ending July 21 rose 0.4% as refi apps rose 3.4%. June’s new and existing home sales data continued to show slowing improvement for the overall housing sector.

MBS

 




CMOs

Trading activity in CMOs was on the slower side and yield spreads in CMOs widened slightly last week. Depositories continue to be focused on stable structures with 4- to 6-year average lives. Full coupon front sequential structures off of 30yr 3.5% collateral (“3.5 squared”) remained popular with financial institutions with wider spreads and better supply than many shorter structures.

 

Rates and Refis

 

 

Housing

Housing data continue to perplex economists with very choppy data and frequently disappointing reports – despite lowered expectations.  June’s new and existing home sales data continued to show slowing improvement for the overall housing sector.

June’s Existing Home Sales Disappoint: Existing home sales for the month of June disappointed expectations, falling 1.8% MoM (exp. -0.9%).  Single family sales dropped 2.0% while multi-family sales were flat.  The weakest region was the South, dropping 4.7% while sales in the Midwest rose 3.1%.  On a year-over-year basis, existing home sales are now up just 0.7%.  Supply rose from 4.2 to 4.3 months in June; however, inventory has declined 7.1% YOY and the median sales prices of homes is up 6.5% YOY.

New Home Sales Rose in June but Continue Trend of Slowing Improvement: Sales of new homes did improve in June when compared to May 2017 (+0.8% MOM) and June a year ago. However, there was a negative revision of 27k to the three months prior, which left the total trajectory a little weaker than previously estimated. Supporting the story of slowing improvement, total sales were up 6.4% in 2Q 2017 when compared with 2Q 2016, but were down 12.3% on a seasonally adjusted annualized basis when compared to 1Q 2017.

 


 


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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