August 19th, 2022 - Market Update
Current position: Carefully floating
Stocks and Mortgage Bonds are both sharply lower to start the day.
The big headline from yesterday was that Zillow reported home prices fell 0.1% in July, which is the first decrease since 2012. The big missing piece of the story, is that Zillow said "median" home values fell 0.1%.
Median prices can be affected by the mix of homes, and it is not looking at real home values like Case Shiller that measures resales. More importantly, they now factor in reductions in listing prices, which is negatively impacting the numbers. And listing prices that are out of touch with reality and are sitting on the market, are being reduced.
But if a home is priced correctly, it is selling fast - Average days on market is 14 according to yesterday's Existing Home Sales Report. They also are factoring in the pace of sales, which we know is much slower, and it's having a negative impact on their index. Bottom line - they anticipate 2.4% appreciation, not depreciation, over the next 12 months.
On the Jobs front - PwC released a business survey showing 50% of respondents are reducing their overall headcount, even as business leaders remain concerned about hiring and retaining talent. Everything we are seeing is pointing to a slowdown in the jobs market, we just have not seen it show up in the Jobs report yet...but it is a lagging indicator.
Mortgage Bonds are battling the 50-day Moving Average, but if they break convincingly beneath it, there is a lot of room to the downside. The 10-year is also contending with its 50-day Moving Average, which is keeping a lid on yields for now. If these levels are breached, you will be hearing from us.
For now, with the damage done early, we can begin the day carefully floating.
Source: MBS Highway
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