The real estate data for March 2023 had a significant impact on mortgage-backed securities (MBS) in April. Let’s explore how specific factors influenced MBS:
Decline in Existing Home Sales and Low Inventory Levels
Existing home sales decreased by 2% in March compared to February and 22% from the previous year. This decline indicates reduced demand for mortgages tied to existing homes, which can affect MBS.
Inventory levels are critically low, with only a 2.6-month supply nationally, well below the balanced market level of 6 months. Limited inventory creates a competitive market, potentially leading to higher demand for mortgages and increased MBS activity.
March 2023 Real Estate Data Shows Rise in Mortgage Rates
The increase in mortgage rates since the end of 2022 has led potential sellers to feel “locked in” to their current homes due to higher rates on new mortgages. This phenomenon can impact the supply of homes available for sale and influence the demand for MBS.
Home builder sentiment experienced a slight rise, reflecting optimism within the industry. Positive sentiment can contribute to increased home construction, boosting MBS activity and the availability of mortgage financing.
Positive Trends in New Home Construction and Building Permits
Although total housing starts declined in March, there was a 3% increase in single-family housing starts from February, indicating a positive trend. This growth in new home construction presents an opportunity for MBS by potentially increasing the supply of homes and stimulating mortgage activity.
Single-family building permits also increased by 4% from the previous month. Building permits serve as a leading indicator of future construction activity, suggesting potential growth in the housing market and related mortgage lending.
Surprising Increase in New Home Sales and Median Prices
Sales of new homes increased by 10% in March compared to February, reaching the highest level since March 2022. This stability in new home sales indicates a potential market segment for MBS growth and mortgage lending, even as previously owned homes experienced a decline.
The median price of new homes also increased by 3% compared to the previous year, influencing the value and risk associated with mortgage-backed securities tied to these properties.
Looking Beyond the March 2023 Real Estate Data
Overall, the March 2023 real estate data, including the decline in existing home sales, low inventory levels, positive trends in new home construction and builder sentiment, and the surprising increase in sales of new homes, all contribute to shaping the landscape of mortgage-backed securities in April.
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