FRM Update

September 4, 2018



During the past week, 15-year MBS yield spreads to Treasuries were unchanged while spreads for 30-year MBS to Treasuries widened by 1bp.  However, over the past month, spreads have widened by 2bps to 4bps, and currently sit near their widest points of the year.

Activity was steady last week as investors focused primarily on seasoned and new production 15-year MBS.  The pay up over TBA for seasoning continues to remain reasonable.  The following represents a summary of the activity last week and themes in the overall sector:




Mortgage Rates and Refinance Activity



Housing:

Pending Home Sales Signal Continuation of Slower Housing: Pending home sales slipped unexpectedly in July as contract signings in the South slowed 1.7% to offset smaller gains in the lower-volume regions. Total seasonally adjusted pending sales edged down 0.7% and were weaker on a YoY, non-seasonally adjusted basis for a seventh month out of the last eight. Sales in the West dropped 0.9% while activity in the Midwest moved up a modest 0.3% and deals in the Northeast, which accounted for the smallest share of existing sales volume in July at just over 10%, improved 1.0%. “It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth,” said the NAR’s Chief Economist, who added “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.” The disappointment was just the latest indicator of slowing housing activity and signals more softness for actual closings in the months ahead.



Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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