Team Patereau's in-house mortgage agent at Intero Real Estate, Dario Liberati, brought us up to date on the mortgage market. Here's his report:Last week mortgage bonds had their worst one day performance since October, losing an astounding 206 bps. So what happened and what's next?
The main culprit for the selloff is SUPPLY. The Treasury has literally been printing money by way of Treasury auctions to pay for the massive spending. These hundreds of Billions of dollars of new Bond supply have to be absorbed by the market. The additional supply literally weighs on the entire Bond market and drags prices lower.
Also, when you think of SUPPLY, consider all the refinancing we have been doing and that those loans have been bundled, packaged and sold on Wall Street. This additional SUPPLY has now started to hit the secondary market as those loans are now getting sold. While the Fed has been a buyer, they simply cannot buy enough to balance all the selling.
Economics 101: Anytime supply exceeds demand, prices will move lower. As prices move lower, yields rise. That rise in yield will attract new buyers as they get a higher return on their investment. This is how the market finds balance.
Mortgage bonds have lost a staggering 363 bps since last Thursday. All locked loans are getting closed at a great rate. The new market must unfold to settle at its price.
Rates are better today than at close last Friday, and are still at ALL TIME LOWS!!! Don’t give up hope. Buyers, buy your homes. Values are still in the purchase and prices may not be this affordable in the near future.
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