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.
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.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 3.5 percent on December 5, down from 3.8 percent on December 4. After this morning’s personal income and outlays release from the US Bureau of Economic Analysis, the nowcast for third-quarter real personal consumption expenditures growth declined from 3.1 percent to 2.7 percent.
Unfortunately, residential and non-residential construction are negative as are imports.
Mortgage applications decreased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 28, 2025. This week’s results include an adjustment for the Thanksgiving holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 33 percent compared with the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index decreased 32 percent compared with the previous week and was 17 percent higher than the same week one year ago.
The Refinance Index decreased 4 percent from the previous week and was 109 percent higher than the same week one year ago.
Mortgage rates moved lower in line with Treasury yields, which declined on data showing a weaker labor market and declining consumer confidence. The 30-year fixed mortgage rate declined to 6.32 percent after steadily increasing over the past month. After adjusting for the impact of the Thanksgiving holiday, refinance activity decreased across both conventional and government loans, as borrowers held out for lower rates. Purchase applications were up slightly, but we continue to see mixed results each week as the broader economic outlook remains cloudy, even as cooling home-price growth and increasing for-sale inventory bring some buyers back into the market.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.32 percent from 6.40 percent, with points decreasing to 0.58 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
According to Bill McBride at Calculated Risk, In October, sales in these markets were up 2.4% YoY. Last month, in September, these same markets were up 7.7% year-over-year Not Seasonally Adjusted (NSA). The NAR reported sales were up 2.9% YoY NSA, so this sample is close.
Miami FL and central Florida lead the nation in closed sales of housing with Columbus OH second with 9.5% YoY growth in closed sales.
Let’s see if Ohio State beats Indiana for the Big 10 championship game on Saturday after OSU whooped Michigan 27-9 and won the gold pants this past Saturday.
Former Detroit Lions HC Matt Patricia, now OSU’s defensive coordinator.
Confounded Interest - Anthony B. Sanders 
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