Morning Report: Home prices rise 10%

Vital Statistics:

S&P futures4,061-6.4
Oil (WTI)59.841.22
10 year government bond yield 1.68%
30 year fixed rate mortgage 3.33%

Stocks are flattish this morning on no real news. Bonds and MBS are up.

Home prices rose 10.4% YOY in February, according to CoreLogic. “Homebuyers are experiencing the most competitive housing market we’ve seen since the Great Recession. Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers, especially in more expensive metro areas. As affordability challenges persist, we may see more potential homebuyers priced out of the market and a possible slowing of price growth on the horizon.” I think the slowing of price growth is probably a given, since double digit price growth is generally unsustainable. That said, professional money is flooding the single family sector, and a lot of new construction will be build-to-rent. With inventory at record lows, it will take years to get supply and demand back into balance. Note every state is seeing high single digit + appreciation except one: New York.

The MBA is urging the CFPB to adopt the new QM rule without delay.

“MBA supports the General QM Final Rule’s pricing construct, which, compared to the
alternatives considered, strikes the best balance between ensuring consumers’ ability to
repay and ensuring access to responsible, affordable mortgage credit. Loan price is a holistic
measure, capturing the borrower’s credit score, income, debts, assets, debt-to-income (DTI)
ratio, and other strongly correlated indicators of a borrower’s risk of default. The Bureau’s
analysis of loan performance data demonstrates that loan price is a strong proxy for a
borrower’s ability to repay. Specifically, the Bureau’s analysis indicates that for loans within a
given DTI ratio range, those with higher rate spreads consistently had higher early
delinquency rates, and loans with lower rate spreads had relatively low early delinquency

Loans in forbearance fell again last week to 4.9% of servicer portfolios. “The share of loans in forbearance decreased for the fifth straight week, and new forbearance requests dropped to their lowest level since March 2020,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The share of loans in forbearance also decreased for all three investor categories. “More than 21 percent of borrowers in forbearance extensions have now exceeded the 12-month mark. Of those that exited forbearance in March, more than 21 percent received a modification, indicating that their income had declined and they could not afford their original mortgage payment.”

There were 7.4 million job openings at the end of February, according to the JOLTS jobs report. This was an increase of 268,000 from the end of January. Hires were 5.7 million while separations were 5.5 million. The quits rate was unchanged at 2.3%.

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