ALL THE CREDIT | EPISODE 35

The residential real estate market directly or indirectly impacts everyone. After all, everyone is born short a house. Home prices and construction activity also largely impact economic growth, wealth, inflation, and, for fixed income investors, residential mortgage-backed securities (RMBS). With the market suddenly in a downturn, should investors be prepared for lower house prices and rents? Declines in home construction and sales? Increased delinquencies and defaults on mortgages?

In this episode of All the Credit^®, Kaustub Samant, Head of Mortgage Credit Research at PGIM Fixed Income, reviews the current state of the residential real estate market, along with the recent history of home price appreciation (HPA) and changes in rental rates. Mr. Samant examines trends in the market and affordability issues, and the looming decline of residential prices and rents. We also discuss:

• implications for GDP and inflation;
• mortgage default vulnerabilities; and
• shifts we’ve made within the capital structure in lieu of changes in the market for mortgage-related fixed income securities.

Recorded on January 12, 2023.