No Appraisal and Doge

Good afternoon everyone!

Reports from Redfin show the increasing competition is the housing market. Their report showed that 18% of accepted offers across the US were not contingent on an appraisal. Most purchase contracts are ‘contingent on an appraisal’ meaning that after your due diligence is over, you have time to get an appraisal and if it does not come in at or above the purchase price, the buyer is able to back out of the deal without losing their earnest money. On top of that, 13% of accepted offers were not based on a home inspection meaning that a structural problem with the home will not void the purchase contract. Buyers would have to purchase a home knowing there are structural issues or hand over their earnest money. This is some dangerous territory for buyers but sellers are loving it.

I’m sure that many of you know about the Doge Coin craze over the last few days. If you don’t, here’s a quick synopsis. Similar to the Game Stop rally from February, a large group of young traders have banded together to “take Doge Coin to the moon”.  Doge Coin is a crypto currency and this means they invest in it together and pump the value as high as possible. The importance of this is the impact that stimulus checks are having. Their intended purpose was to stimulate local economies. However, the Fed found that the amount spent on local economies decreased at with each additional check. Today, 37% of the last checks went toward savings or investments. So this raises the question, will our record breaking stock market be able to sustain once stimulus is cut.

Good news in the MBS market this morning! In the last 3 days, MBS’ have broke above their 50 DMA and fallen below before market close. Yesterday, they jumped 17 bps and closed above the 50 DMA. Remember, while intraday trading is important, where floors and ceilings are created is in closing prices. Because they closed above the 50 DMA, that will now serve as a floor instead of a ceiling. Because this floor has not been tested yet, it is not very strong but it is good to see mortgage bonds continue to make progress. Today, MBS’ are up 13 bps, well above their 50 DMA. We are holding a carefully floating bias as MBS’ now have a floor but it has not been tested.