MBS Index down 6% YoY. Potential short/put opportunity coming up for the mortgage lenders, found this comment on an /r/investing (I know, I know) thread:
It is because the fed is going to stop buying MBS entirely. Going forward, MBS will be re-priced entirely based on private investor demand. So a steep drop off is to be expected as one of the biggest buyers of MBS has pulled out of the market. If the fed starts selling MBS then the drop could be even more sharp downside lower.
End result is a massive amount of liquidity in the mortgage market is gone and interest rates are up. No doubt it will result in lower housing prices since housing is a heavily leveraged asset class.
Probably a good time to short any mortgage lenders.
edit: it’s discussed in the comments that ALL fixed income is down not just MBS. Also I should probably add I am skeptical of the idea we’re in a housing bubble. People are putting full cash down on their homes these days, it’s not 2008 where people with no income were being given multiple 0% down mortgage offers. But the idea that Fed unwinding MBS purchases could decline the market seems to be worth considering.
