How does the movement of the market of Mortgage Backed Securities affect home prices?
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I would perhaps say that movements in the pricing of MBS reflect factors that ultimately influence home prices, one of which are interest rates. One of the drivers in MBS prices are going to be interest rates, which ultimate go into setting mortgage rates (particularly adjustable rate mortgages) and consequently home prices.
They don’t. There are economic fundamentals like inflation, prime interest rate, and unemployment that influence both MBS and home pricing, but MBS pricing doesn’t change home pricing.
MBS pricing generally reflects the loan repayment risk of past home purchases. Home prices are driven largely by localized supply and demand.
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