With all the breaking news about Maduro’s capture in Venezuela and the potential collapse of Iran’s Islamic government, I will provide some good news for investors about Mortgage-backed Securities (MBS).
Mortgage-backed securities (MBS) are capping off an exceptionally strong 2025 with further outperformance in December, beating the rest of the aggregate bond market on an excess return basis. Both total and excess returns for full year 2025 were the highest in more than a decade. MBS performance has been boosted by spread tightening as volatility declined and scarce net supply that was met with resilient demand, including renewed GSE and overseas buying.
Thanks to University of Chicago graduate Erica Adelberg.
This is the opposite of the housing bubble from The Big Short where home prices in Phoenix, Las Vegas, Los Angeles and Florida rose then crashed. Instead, the fastest growing cities are in the northeast and midwest.
The Case-Shiller 20-City Home Price Index rose 1.3% year over year in October 2025, easing from a 1.4% increase in September and coming in slightly above market expectations of a 1.1% gain. This represents the smallest annual increase since July 2023, reinforcing signs that the US housing market is settling into a much slower growth phase. Home price appreciation continues to trail consumer inflation. With October CPI estimated at around 3.1%, inflation-adjusted home values appear to have edged modestly lower over the past year.
Regional data point to a pronounced geographic rotation. Chicago now leads all major markets with a 5.8% annual gain, followed by New York at 5.0% and Cleveland at 4.1%. In contrast, Tampa recorded a 4.2% decline, the steepest among the 20 cities, and its 12th consecutive month of falling annual prices. Other former pandemic boom markets, especially in the Sun Belt, are seeing the sharpest declines, led by Phoenix (-1.5%), Dallas (-1.5%), and Miami (-1.1%).
Housing price growth has stalled even though M2 money growth is higher YoY.
On the silver front, silver regained losses yesterday, but increased margin requirements are causing losses again.
Pending sales of existing homes in the US surged 3.3% MoM (more than the expected 0.9% MoM move) in November as a modest improvement in prices and mortgage rates encouraged buyers.
The gain was broad-based across regions and exceeded all but one estimate in a Bloomberg survey of economists, but left the YoY change in sales somewhat stagnant on an NSA basis.
Signings have now increased for four straight months, matching a streak seen during the frenzied housing market of the pandemic.
The trade association’s report on Monday showed contract signings rose in each US region last month to their highest levels of the year. The West posted the largest increase, followed by the South, the nation’s largest home-selling region.
November’s surge dragged the Pending Home Sales Index to its highest since Feb 2023…
Bloomberg reports that the recent data point to the gradual improvement many economists see for the housing market into 2026.
Mortgage rates that were close to 7% in May have since settled in the 6.3% to 6.4% range, and home prices are growing at a much slower rate compared to last year.
That’s helped fuel small gains in contract closings in recent months. However, economists and industry experts have widely different expectations for next year.
In a recent survey of nine market analysts, estimates for the home resale market ranged from 1.7% to 14% sales growth, with the rosiest projection coming from NAR’s Yun.
Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold.
The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 16 percent higher than the same week one year ago.
The Refinance Index decreased 6 percent from the previous week and was 110 percent higher than the same week one year ago.
Overall mortgage application volume fell last week, despite the slight decline in mortgage rates. I expect the trends of a softening job market, sticky inflation, elevated home inventories, and steady mortgage rates will persist into the new year.
Politicians love to scream about housing being simply unaffordable. Like mayor-elected Mandami in New York City. But the reality is that housing prices vary by city and there are more affordable cities than New York City to choose from. Federal policies should not be focused on letting people staying a particular city.
When we look at housing prices compared to average hourly earnings, we see housing prices rising with average hourly earnings … as expected.
If we look at year-over-year changes, we see the Covid bump in housing prices corresponding with the surge in Federal spending. But things have simmered down since the bump in 2020-2023.
My suggestion is for the Federal government to stop interfering in the housing market.
Nobody wastes money like government, particularly around events like Covid where Federal spending led to housing prices spiking after Covid outbreak in 2020. This made housing unaffordable for most households. This in turn helped kill the mortgage market.
The Market Composite Index, a measure of mortgage loan application volume, decreased 3.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 13 percent higher than the same week one year ago.
The Refinance Index decreased 4 percent from the previous week and was 86 percent higher than the same week one year ago.
Once again, the government response to the Wuhan Covid virus of 2020 helped drive up housing prices killing off mortgage demand.
Confounded Interest - Anthony B. Sanders 
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