Appreciation Comes in Hot!

Good morning! I hope your week is off to a great start.

We got home appreciation for 2020 in from Case Schiller this morning showing the highest annual appreciation in 15 years at 11.2%. Appreciation is even higher on homes that have conforming loans on them – over 12%. This rapid appreciation is happening at the same time that the US is seeing the lowest inventory count since 1982, the last time there were only 1.03 million homes for sale in the entire country. While the Execs over at Core Logic do not think the housing shortage shows any sign of improvement, they do believe that rising mortgage rates will be a bit of coolant on inflation but 2021 will still be a strong year for home values.

Mortgage backed securities dropped 14 bps this morning but have recovered most of their losses and now sit down 2. The reason for the sharp fall this morning was a rise in the 10 year Treasury. The 10 year crossed 1.75% yield, a ceiling that has heled multiple attempts of breakthroughs. In response, the MBS market dropped. However, the treasury market had a quick pull back below that 1.75% and the MBS market was able to recover. Given the 1.75% ceiling has already been broken and weakened from this morning’s rally, we are holding a locking bias.

Have an awesome day!