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Housing Activity Picking Up

February 22, 2024
The Fed Minutes from the January 31 FOMC meeting were released yesterday. Considering the meeting was three weeks ago and we’ve heard from a parade of Fed speakers since then, most was old news. However, there were a few key points.

Fed Minutes

The Fed Minutes from the January 31 FOMC meeting were released yesterday. Considering the meeting was three weeks ago and we’ve heard from a parade of Fed speakers since then, most was old news. However, there were a few key points. The Fed is certain they want to cut rates but were non-committal on the timing of the first cut. The big takeaway was what’s expected for the March meeting. We know they will not cut rates, however, they will be discussing their balance sheet. The majority of Fed members want to consider slowing or tapering the reduction later this year. This would be helpful in absorbing supply in the bond market. One quote that stood out was “some participants remarked that, given the uncertainty surrounding estimates of the ample level of reserves, slowing the pace of runoff could help smooth the transition to that level of reserves or could allow the Committee to continue balance sheet runoff for longer.”

Philip Jefferson – Fed Vice Chair

Philip Jefferson echoed much of the minutes this morning. He said it would likely be appropriate to reduce monetary policy later in the year – again, not committing to an exact timeframe. He mentioned that the policy rate is well into restrictive territory, and this restrictive stance is putting downward pressure on economic activity and inflation. He also claimed that there is a path to restoring price stability without a significant increase in unemployment that has often accompanied significant tightening cycles.

Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell 12,000 to 201,000.

Continuing Claims, or those that continue to receive benefits after their initial claim, fell 27,000 to 1.862M. These numbers remain elevated which means that employers are trying to hold onto their workers but once these workers are let go, it’s challenging for them to find a new job.

It’s also important to remember that this data is for last week, which is the sample week that is factored into the next BLS Jobs Report. Because these numbers are low, it might skew the job numbers lower.

Existing Home Sales – January

Existing Home Sales, which measures closings on existing homes, rose 4% month-over-month to a seasonally adjusted annualized pace of 4M and are down 1.7% from a year ago.

Lawrence Yun, the Chief Economist for NAR, said, "multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals (32%) indicated a market full of multiple offers and propelled by record-high housing wealth”

Inventory increased 2% month-over-month to 1.01M units and is up 3.1% year-over-year.  There is a 3-month supply of homes, which is tight, because 4.6 months is considered normal.

The median home price increased by 5% from a year ago to $379,100.  Homes remained on the market for 36 days on average, which is up from 29 days in December.  However, days on market was 22 not too long ago, so we are definitely seeing a slowdown at this time of year like we normally see.

First-time homebuyers accounted for 28% of sales, down from 29% in the previous report.  Cash buyers accounted for 32% of sales, a jump from 29%. Investors made up 17%, down from 16% in last month’s report.

20-Year Bond Auction

Yesterday’s 20-year bond auction was not well received, causing the bond market to sell of a bit.

Technical Analysis

Mortgage Bonds have broken below their 200-day Moving Average and are now in a tight range between resistance at the 200-day Moving Average and support at 100.068.

The 10-year Treasury is trading beneath resistance at the 100-day Moving Average and hasn’t closed above that level since November. If it remains beneath this level, the next stop below is support at 4.246%. Begin the day floating.

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