Mortgage Backed Security pricing has dropped to levels seen last fall when domestic banks like SVB started failing. Banks freezing their assets brought greater illiquidity which drove long term interest rates down over the next two months. Interestingly, while we sit at the very same MBS price today, Standard & Poor’s has downgraded the credit rating of additional U.S. banks. This news, though unfortunate, could help to reverse the upward trajectory of mortgage rates.
The path probably won’t be swift. Several sovereignties are placing sell orders on MBS this week in anticipation of higher rates ahead, and the flooding of supply will make it tough for prices to rise enough in the near term for the downward effect on interest rates to be seen.
Partly due to Existing Home Sales declining by 2.2% last month, Existing Home Inventory increased by 3.7% M.O.M. There is now a 3.3 month supply of homes available for sale, which keeps us squarely in “seller’s market” territory.