Here is an excerpt from our good friend Peter Boockvar’s site, The Boock Report. Peter is simply pointing out the data and asking why the Fed is still injecting $40billion into Mortgage Backed Securities (MBS). It;s the continued trend of once the easy money taps get turned on there is only one direction to go – bigger!

Click here to visit Peter’s site – The Boock Report.

The MBA said that mortgage rates fell to a fresh record low at 2.9% and that helped refi apps to rise 1.8% w/o/w after last week’s drop and they are higher by 89% y/o/y. Purchases though took a breather, falling by 5% w/o/w but only after jumping by 9% last week. They are still higher by 22% y/o/y. With home prices rising about 7% y/o/y, 4.5 times the rate of CPI, and that rise completely offsetting the benefit of lower mortgage rates and resulting in higher down payment needs, particularly challenging for the young, first time home buyer, one has to ask the Federal Reserve, WHY ARE YOU STILL BUYING $40B OF MBS EACH MONTH? Are 7% annual price increases not fast enough, especially for those first time buyers with the least amount of means? The CEO of Toll Brothers in yesterday’s earnings call said “There has been some sticker shock out there from some clients as we’ve been raising prices.” For those with means, they can certainly better afford these increases but the first time Millennial buyer, THE MAIN BUYING DEMOGRAPHIC IN THE DECADE TO COME, won’t be helped by annual 7% home price increases. Also, by owning more than 1/3 of that market, is the Fed in the process of Japanifying the MBS market? Yes.