To the surprise of no one, the S&P Case-Shiller HPI (Home Price Index) declined 3.3% in February from a year ago on the 20-city composite, and the 10-city composite was down 2.6% YOY. From a year ago, only Washington DC reported appreciation at 2.7%, while Phoenix and Minneapolis experienced the largest declines at over 8%. 10 of the 20 cities recorded new lows. Economists believe that with already weak home values declining further, refinancing activity will remain limited and keep prepayment speeds relatively slow - a positive with much of the market trading at a premium. At the same time, while affordability holds near record highs, homebuyers may be hesitant to purchase just yet with prices still sliding lower.
Looking at the markets, things aren't too bad, and Tuesday both stocks and bonds did well. This surprised some, given that we're still grappling with rising oil, gold, and commodity prices, a raging deficit, and problems overseas. The 10-yr Treasury closed at 3.32%. On the mortgage side, agency MBS prices improved by about .125 - .250 and one trader commented, "High price and low yield levels have relegated REITs and banks mostly to the sidelines, while other investors were mixed. In general, hedge funds and structured desks were buying..."
This morning we learned that March Durable Goods were up 2.5% versus +.7% in February. The markets seem to believe that the highlight of Wednesday's session will be the first ever post-FOMC press conference beginning at 2:15 EST with Chairman Bernanke discussing the Committee's "current economic projections and to provide additional context for the FOMC's policy decisions," as stated in the press release. We also have a $35 billion 5-yr auction. Across the Atlantic, things don't look so good in Greece as their 2-yr note yield climbed to 25%. Investing in that is not for the timid. And after 3 consecutive up days Treasuries are down this morning due to some profit taking: the 10-yr is at 3.35% and MBS prices are worse a smidge.
