Some Good News, but a lot of Bad News

Good morning everyone!

Lets start with the good news. We got promising numbers in for a thriving purchase market. Pending home sales are up 13% from this time last year. Keep in mind, this growth is happening during the greatest inventory shortage since the Great Recession. The Chief Economist of the National Association of Realtors spoke about how much higher that growth would have been in a market with larger inventory. Despite the shortage, he thinks the purchase market will remain strong throughout the year based on the increase in number of building permits and requests to build new homes.

The other piece of good news is that Unemployment Claims dropped significantly this month to the lowest number since November. A Chief Labor Economist out of NY talked about how the trend is likely to continue as the vaccine rollout is working and people are going out and spending more money. Now, these claims came during the same time that some of our county was in a shutdown due to cold weather. Regardless, the Labor Officer claims we will continue to see a sharp fall in claims.

On to the bad news… Mortgage Backed Securities are tanking this morning – down 105 bps so far. Tomorrow is going to be a pivotal day in the bond world because we will get PCE numbers. The bond selloff is on the back of fears of rapid inflation – the market has been hot, the vaccine rollout is working, unemployment is dropping and more people are spending more money. Tomorrow morning we will get a real feel for which direction and how fast inflation is moving. However, it looks like treasuries will continue to rise and put more upward pressure on rates. We hold a locking bias.

Have a good day!