On Monday the Russian central bank increased their interest rate from 9.5% to a whopping 20%. They closed their market to short sellers and foreign investors and their currency dropped 30% to a low of 100 rubles to 1 to dollar. This comes after the US, it’s Euro allies, and Canada agreed to cut off key Russian Banks from SWIFT access which hampers their ability to tap into the $630B warchest of foreign reserves.
Mortgage Rates – improved marginally this week as the price of Mortgage Backed Securities broke above the 25 day moving averages for the first time since early November. The ongoing conflict in Ukraine has spurred investors to move money from the stock market to the bond market including Mortgage Backed Securities which are considered one of the safest investments. Rates are up approximately 1% from this time last year.
Jobs – nearly 680K jobs were created in February which was way higher than expectations. The unemployment rate continues to move down. The U-6 ‘all-in’ unemployment rate is at 7.2% which is near pre-pandemic levels. Average weekly earnings were up very slightly from the previous report and are up 5.4% year over year.
Home Prices increased 19.1% between Jan 2021 and Jan 2022. If you purchased a $400,000 home in Jan of 2021 it would be worth $476,000. Core Logic is forecasting relatively tepid appreciation of 3.8% over the next 12 months. They also forecasted 0% appreciation for the month of January and we ended up seeing 1.4%. Their forecasts should be taken with a grain of salt.
Fed chair Jerome Powell gave his semi-annual testimony to the House of Representatives. He mentioned that he was in favor of a 0.25% rate hike instead of the 0.50% rate hike the market was anticipating. This prompted a 1 day sell off of MBS (see Wed’s red candle above). When the Fed hikes the fed funds rate it is actually good for MBS and mortgage rates as they increase their rate to slow down inflation (the arch-nemesis of MBS). When the Fed announced they would only hike rates 0.25% MBS investors responded negatively fearing inflation.
Mortgage Applications to purchase homes fell 2% last week and are down 9% year over year. If you factor the increase of cash buyers purchase volume is down closer to 4%. Refinances declined 1% last week and make up 50% of transactions.