The Boy Who Cried Wolf

We see this happen again and again. Leading up to appreciation reports, certain housing analysts push the narrative that the housing industry is ‘broken’ and ‘this month’s appreciation report will show it!’ Well, unfortunately for them, this was not their month. Neither were the last 108 months where they cried wolf. We got appreciation numbers for May this morning showing 16.6% appreciation from May of 2020 – the highest year over year appreciation reading on record.

Something to think about:

The US auto market is in a strange place. Used cars are being sold for close to the price or more than new cars. Why? Supply and demand.

The US is facing a chip shortage. Less chips means less cars manufactured and higher wait times for new cars. Now, something similar may be happening in the housing market. The vast majority of homes sold come with appliances and those appliances need chips. Less chips means less appliances means it takes longer to get a home on the market. Yes, there are tons of reasons that the purchase numbers are falling at the same time appreciation is rising, but this is a fun idea.

The rates:

Mortgage bonds have recovered all of yesterday’s losses – up 22 bps so far this morning.  They are quickly making another run at their 200 DMA which has been a strong ceiling for the last week. This is great news considering bonds have not crossed this line since mid-February. We are holding a floating bias.