May 21, 2020 - Market Update

Mortgage supply continues to be robust.  Several broker dealers saw origination topping over $5B.  The Federal Reserve had a large buying operation in both current coupon UMBS and G2SF.  Today they will continue their buying operations in UMBS-30yr and UMBS-15yr. 

Mortgage applications decreased 2.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 15, 2020.  The Refinance Index decreased 6%  from the previous week and was 160% higher than the same week one year ago.  The Purchase Index increased 6% compared with the previous week and was 1.5% lower than the same week one year ago. 

“Applications for home purchases continue to recover from April’s sizeable drop and have now increased for five consecutive weeks. Purchase activity – which was 35% below year-ago levels six weeks ago – increased across all loan types and was only 1.5% lower than last year,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.

The FHA share of total applications remained unchanged from 11.5% the week prior. The VA share of total applications decreased to 13.4% from 13.7% the week prior. The USDA share of total applications increased to 0.7% from 0.6% the week prior. 

Volatility has been the name of the game this week.  Yesterday, decent earnings from home improvement stores and Target propelled the market higher.  Optimism on the safe re-opening of the economy is also at the forefront of investors’ minds when they think about what the recovery will look like.  If the stock market is any indication, then investors are certainly optimistic.  The S&P finished the day up 1.67% to $2971.61.  The Federal Reserve released their minutes yesterday, however, it offered little more than what Jerome Powell, the Federal Reserve Chairman, has been saying during the crisis.  The Federal Reserve will continue to accommodate fiscal policy to keep interest rates low as a means to restore employment.