By the Numbers
The MBS turnover edge for Florida pools fades
This material is a Marketing Communication and does not constitute Independent Investment Research.
MBS pools backed by loans from other states are starting to catch up with the relatively fast pace of housing turnover shown by Florida pools over most of the last two years. Chalk it up to home price appreciation, where Florida prices have been flat since early 2024 while other states see steady gains. As home price trends seen at the outset of Covid continue to reverse, the turnover speed gap to Florida should continue to fade.
Home prices take a modest toll on discount Florida turnover speedsHome prices in Florida have lagged the nation over the last few years (Exhibit 1). They rose about 5% in 2023 and have held roughly flat since the start of 2024, even dipping slightly in the early part of that year. National home prices have increased about 10% since the start of 2023. The exhibit includes two other states commonly used for specified pools—New York and Texas. Texas HPA has also been slow, while New York has been higher than the national average. Florida, New York and Texas home prices have each reversed trends from during the pandemic.
Exhibit 1: State-level home price appreciation since January 2023.
All indices normalized to 100 at January 2023.
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
Florida loans originated around the start of 2023 have generally exhibited faster housing turnover than other states, although the difference has narrowed (Exhibit 2). This shows speeds for loans originated in a 6-month period centered on the start of 2023 that are at least 50 bp out-of-the-money. By mid-2025 these loans’ home prices had grown about 5% in Florida and 10% nationally. The Florida loans did not experience as much of an increase in turnover last fall as other states, but over the last few months regained their speed advantage.
Exhibit 2: Florida loans originated from Oct 2022 through Mar 2023
Prepayment speeds for 30-year loans at least 50 bp out-of-the-money, owner-occupied, ≥6 WALA, ≤80 Original LTV, ≥700 FICO. Speeds adjusted to remove seasonality and differences from day count.
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
The picture is similar for loans originated in a 6-month period centered around the start of 2024 (Exhibit 3). The Florida loans typically had the fastest speeds despite almost no home price appreciation, although the gap has narrowed considerably. However, the convergence has more to do with faster speeds from the other states than it does from slower speeds out of Florida. The lower HPA in Florida prevented it from increasing as much as the other states, but even the flat HPA in 2024 did not push speeds slower.
Exhibit 3: Florida loans originated from Oct 2023 through Mar 2024
Prepayment speeds for 30-year loans at least 50 bp out-of-the-money, owner-occupied, ≥6 WALA, ≤80 Original LTV, ≥700 FICO. Speeds adjusted to remove seasonality and differences from day count.
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
A comparison of Florida speeds to cohort speeds over the last 6 months suggests that every 5% increase in home prices should lift speeds by about 6% faster, or roughly 0.3 CPR to 0.4 CPR (Exhibit 4). That is the amount of speed “lost” by these Florida loans due to weak home prices over the last few years.
Exhibit 4: A 5% difference in HPA should lift speeds by about 6%
Regression adj. R2=0.3949, slope=6.1% faster turnover per 5% higher cumulative HPA. Each data point compares one month of origination from Florida to the national average, calculating the percent difference in speed and the difference in cumulative HPA. Speeds and cumulative HPA are averaged over January through June 2025.
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
Prepayment outlook
Seasonal turnover is typically flat in July, but MBS prepayment speeds should increase about 10% to 15% from two additional business days and a pick-up in refinancing in 30-year 6.5%s and above. Mortgage rates dropped about 20 bp over the course of June and are currently around 6.60%. That leaves the 6.0% and lower coupons mostly out-of-the-money (Exhibit 5). There are mixed signals for housing turnover—the MBA’s purchase index just reached its highest level since early 2023, but new and existing home sales data have faltered in recent months.
Exhibit 5: Share of conventional MBS that is in-the-money to refinance.
Highlighted column represents mortgage rates as of 7/9/2025.
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
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