August 23rd, 2022 - Market Update
Current position: Carefully Floating
Stocks and Mortgage Bonds, after being lower in the early going, are now higher.
New Home Sales, which measures signed contracts on new homes, were down 12.6% in July at a 511k unit annualized pace, which was much worse than expected. Sales are now down almost 30% year over year.
There were 464,000 homes for sale at the end of July, but only 45,000 or under 10% are actually completed.24% have not even been started and 66% are still under construction. At the current pace of sales, there is a 10.9 months' supply. But when factoring in the amount of completed homes, the month's supply is really about 1 month.
The median home price rose by 5.9% last month to $439,400, which is up a little over 8% year over year. While we are clearly seeing an activity recession in housing, pricing is still quite strong.
Tomorrow Pending Home Sales, which measures signed contracts on existing homes, will be released at 10:00am ET. Additionally, the 2022 Economic Policy Symposium titled "Reassessing Constraints on the Economy and Policy" will begin. Powell is expected to speak on Friday at 10:00am ET.
Mortgage Bonds are trying to rebound from yesterday's losses, but are still trading in a very wide range between support at 99.28 and overhead resistance at the 50-day Moving Average. When in a wide range like this, Bonds can be susceptible to whipsaws and big price movements. And with the next floor of support over 80bp beneath present levels, we have to remain on guard.
The 10-year is continuing to battle with the 3% psychological level, but if that is broken, yields could move back towards 3.25%.
Begin the day carefully floating.
Source: MBS Highway
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