Housing Market: Limited Impact from Policy

Watch on YouTube ↗  |  January 20, 2026 at 23:06  |  7:30  |  Morgan Stanley
Speakers
Jay Bacow — Co-Head of Securitized Products Research at Morgan Stanley
Jim Egan — Co-Head of Securitized Products Research, Morgan Stanley

Summary

Jay Bacow and Jim Egan discuss the $200 billion GSE mortgage purchase program and other potential US housing policy measures. They argue the initial agency MBS spread tightening is largely priced in and the policy impact on housing activity, mortgage rates, and home prices is likely modest. They still see upside risks to US housing and positive tailwinds for securitized credit, especially non-QM mortgages.

  • A $200 billion GSE mortgage purchase program was announced, with Fannie and Freddie set to execute it.
  • The program is incremental to expected GSE buying and larger than forecast net mortgage market growth.
  • Agency MBS spreads tightened about 15 basis points, with mortgage rates briefly below 6%.
  • Jay Bacow says the initial move is largely priced in; further tightening depends on front-loaded or larger purchases.
  • Jim Egan expects only modest housing impact: mortgage rates near 5.6%, existing home sales of 4.25-4.3 million, and home prices up 2%.
  • Housing risks are skewed to the upside, while securitized credit and non-QM mortgages are seen as beneficiaries.
  • Other possible policies include lower loan-level pricing adjustments, guarantee fees, and mortgage insurance premiums; portability and assumability are harder legally.
Ideas
Jay Bacow Co-Head of Securitized Products Research at Morgan Stanley 2:05
Agency MBS supported by GSE purchases
The $200 billion GSE mortgage purchase program is larger than expected net mortgage market growth and has already tightened agency MBS spreads by about 15 basis points; the initial move looks largely priced in, but further front-loaded or increased purchases, or signs of changes to the Fed's balance sheet composition, could push spreads and mortgage rates lower still.
Agency MBS HIGH
Jim Egan Co-Head of Securitized Products Research, Morgan Stanley 3:36
US housing has modest upside risk
The policy-driven decline in mortgage rates has only a modest positive effect on US housing activity; existing home sales could rise to about 4.25-4.3 million and home prices are forecast to grow 2% in 2026, with risks skewed to the upside if demand responds more strongly to a 5% mortgage-rate handle or more government programs arrive.
ITB HIGH
Jim Egan Co-Head of Securitized Products Research, Morgan Stanley 6:12
Securitized credit and non-QM benefit
Tighter agency MBS spreads create a portfolio channel effect that benefits securitized credit, with the non-QM mortgage market in particular likely to receive positive tailwinds because of its relationship to agency mortgages.
Securitized Credit Non-QM mortgage market HIGH
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This Morgan Stanley video, published January 20, 2026, features Jay Bacow, Jim Egan discussing Agency MBS, ITB, Securitized Credit, Non-QM mortgage market. 3 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Jay Bacow, Jim Egan  · Tickers: Agency MBS, ITB, Securitized Credit, Non-QM mortgage market