V-shaped-recovery

Technical Look At The Mortgage Market

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Since the beginning of the pandemic, the government has extended 6 times the moratorium on foreclosures and evictions on federally backed, single-family home mortgages. The most recent extension expires on 6/30/2021. At the same tie, inflation is up 4.2% on a trailing 1-year basis through 4/30/2021. The last calendar year that reported inflation of at least 4.2% was 1990 when inflation advanced 6.1%.

The Fed continues purchasing mortgage-backed-securities. They will purchase an average of $5.3B per day over the next four weeks. Technically, the FNMA 30-year 2% coupon is just below resistance one at the 25-day Moving Average. Expect to see more volatility over the next couple of months. Stocks seemed to have regained some footing on the motion inflation will be transitory and the Fed has their foot on the gas. A Fed taper is the biggest threat to both stocks and bonds/rates. A tape will not come anytime soon unless inflation remains a big problem down the road.

The good news within this: lumber prices are retreating from record highs which is a positive sign for home builders who have been dealing with soaring prices over the past year. Prices have fallen to $1,390 from the record high $1,700 seen in the past two weeks as production continues to ramp up and as commodity traders book some profits.

“Rising material prices are significantly driving up prices for single-family homes and apartments,” wrote NAHB Chief Economist Robert Dietz. “Combined with expectations of rising interest rates, these higher prices place additional pressure on housing affordability which continued to decline in the first quarter.”