There’s good news and bad news for mortgage real estate investment trusts (mREITs). The good news is that the long-awaited housing market recovery may have actually begun, which could mean increased mortgage business. The bad news is that the global economy has entered a downturn, which could spread to U.S. shores sooner or later.
Housing prices actually rose in most American cities in March, the Standard & Poor s (S&P)/Case-Shiller Index indicates. The analysts found that home prices rose in 12 of 20 cities surveyed. The biggest increases were in Dallas, Phoenix, and Seattle. Unfortunately, housing prices were still falling in some cities, such as Detroit, Chicago, and Atlanta.
The combination of rising home values and record low interest rates should drive more people to refinance, or at least try to refinance. That should benefit mREITS like American Capital Agency (AGNC) and PennyMac Mortgage Investment Trust (PMT), which buy up refinanced arms and second mortgages.
The increase in home purchases should help trusts such as AG Mortgage Investment (MITT), Hatteras Financial (HTS), MFA Mortgage Investments (MFA) and Anworth Financial Asset (ANH), which invested in federally-backed mortgages. Since federally guaranteed mortgages are about the only ones left, these firms should see more business.
The upshot of this should be an immediate increase in stock value and earnings per share for some mREITs. The job market is also improving, which means more people should be able to afford to refinance or buy a home. Economists predicted that 160,000 jobs would be added to the U.S. economy in May.To continue reading, click here.