Monday Mortgage Minute – The Fed is up to bat

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How are we already at the end of the month? January is already gone and vanished…and what a month it’s been.

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Remember last week when I said it’s blackout week?…The week BEFORE the fed’s rate decision and press conference?…it’s SUPPOSED to be calm and quiet. It kinda was, but kinda wasn’t. Let me explain.

The Advanced reading on the GDP came out at 2.9% which was better than expected but this is not as good as the headline might suggest. It was largely driven by increases in inventory investments, consumer spending, government spending, and business investments that were partly offset by decreases in housing investment and exports. Real Final Sales to Private Domestic purchases – which strips our things like trade and inventories – generates a far worse number of just 0.2% in Q4…which is the lowest print since the *Cough Cough “crash” in Spring of 2020.

Think about that for a second, we’re going to cling on to a 2.9% print, but in realistically the expansion of the economy was more like the paltry 0.2%. We could go as far as to say that this might be helping the Fed achieve their goals, since a slowing economy leads to a softer labor market…and what did we see last week?…more tech layoffs! Google, Amazon were the big 2, but that’s on top of other cracks starting to reveal themselves, like Bed Bath & beyond missing credit payments AFTER having warned they would be closing over 100 stores last year.

So take a step back real quick…realize that THIS is what we’ve been talking about here for months. This was expected. This is what they need to happen in order to combat inflation. The next few months will serve as confirmation that what was evidence and projection just a few short months ago, is the reality we’re facing this year as the Fed might actually accomplish their goals, but at the expense of some breakage along the way.

Want to know why I’m so confident in this? Core PCE Personal Consumption expenditure. At the end of last week we got confirmation that the December year over year reading was lower than the November year over year reading. NOW THIS IS REALLY IMPORTANT INFORMATION TO THE FED AND YOU SHOULD EXPECT JEROME POWELL TO MENTION THIS SPECIFICLALY IN HIS PRESS CONFERENCE ON WEEDNESDAY. With that, Let’s quickly review what to expect this week.

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Really everything this week is about the Fed. So if you wanna know what’s happening and what could be around the corner, take note of what is said, and NOT said on the Wednesday Press Conference. It really is all about The Fed, The Fed, The Fed. Expect Jerome Powell to remain pretty clear. They are focused on price stability, A softer jobs market, 2% inflation target. Other bullet points that will catapult us forward into the next round of their decisions will be the following;

Wednesday – ADP and JOLTS Both come out before the Fed Announcement and Press Conference. You can be sure they will already have this information in hand before we, the public, does

Thursday – Unemployment Claims

Friday – Average hourly earnings, Non farm employment, Unemployment rate and ISM Services PMI

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So what’s all this mean for mortgage rates?

This will be a big week for the mortgage market. However, I want to caution you that we’re not completely out of the woods yet. This first quarter of 2023 is really going to set the pace for where rates go through the rest of the year. The more time passes the more we see the direct and indirect impacts of fed policy, so look for silver linings among the mess, but make the right decision that suits the needs of YOU and your FAMILY.

Look, the Fed, the Economy, the Government will always be in the mix of what you do and don’t do when it comes to your mortgage and real estate choices. Ultimately, find a place you love, and neighborhood that fits your needs, and payment that fits your budget. I mean, even if you’re renting right now, you’re likely paying the mortgage of that landlord…so you’re technically making a mortgage payment and only calling it “rent”. So to make that next right step in mortgage and real estate in 2023, it’s imperative you get started now.

Days on Market are going up, listings are having to compete with one another to vy for buyers interest and offers. Sellers are issuing concessions in a variety of ways like closings costs, 2-1 buy down, and other benefits for choosing their home. There’s a LOT less buyer competition in this market, and if inventory holds steady, there will be slim pickins, but also less fighting over homes. Lastly, if you find yourself in a tough spot and you already own a home, reach out to us before the situation is un-fixable. There’s a lot we can do BEFORE financial hardship completely takes root, so if you are privately in that situation and need someone to talk to, reach out to your loan officer, send us a DM, text or email us so we can help you out.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

The Mortgage Heroes Podcast Episode 4 – The Headlines are Writing Themselves

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We’re only a few weeks into the new year and the headlines are already writing themselves. We discuss the housing themes that are beginning to reveal themselves, and we also cover the latest with Bank of America and Wells Fargo’s “creative financing” solutions. Are they helpful or harmful?

Monday Mortgage Minute – Uh oh the Empire State Manufacturing Index was super bad!

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Guess what?….we had a surprise last week. We didn’t dive into the Empire State Manufacturing index because it’s not really housing related; however, it peeled back a layer of how vulnerable we might actually be as an economy. This index is a leading indicator of economic health. Businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The reading was expected to come in at -8.7 (anything below ZERO is BAD NEWS)…Well the actual reading came in at -32.9! This rocked the markets and cause a lot of market makers to take a step back and reevaluate where this is all heading, Which leads us right back into…PPI.

And PPI is where we found a bit of relief…because all PPI measurements came in BETTER THAN EXPECTED! Which is a sign that we can reasonably expect consumer price index numbers to follow suit in the months ahead…we will see. There’s still a lot of steps between producers and consumers, so further evaluation will be necessary. Then we had Retail Sales and CORE retail sales BOTH come in very weak – Not a really good way to start the new year. This will probably make it’s way up my radar as we monitor signs of improving or deteriorating conditions in the overall economy and how that weighs in on Mortgage and Real Estate.

Let’s quickly touch the NAHB Housing Market Index – The National Association of Homebuilders. Remember what we talked about? This index has been getting clobbered month after month after month, falling from 83 a year ago, all the way down to 31 in December…Well it came in at 35, which is better than the previous reading of 31…but WELL below 50 still and Existing Home Sales continue to be in the ditch as they booked their 11 consecutive month in decline. You can start to paint the picture that one side of the coin might be getting some sunshine, while the other is completely in the shade. And that’s the story here. With inventories remaining, and mortgage rates still well above their 2020 + 2021 lows, this kind of news overshadows any positive change in the Home builder sentiment.

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With that let’s get on to this week’s market outlook! Next week is a VERY LIGHT WEEK because it is considered a “dark week”. This refers to the week before the Federal Reserve announces their next rate hike decision and does their press conference aka publicity dance. Ok ok…There is one thing we’re going to watch and it’s the Advanced reading on the GDP. It IS an advanced reading…so, not final, therefore not as relevant as any publicized final number. Theoretically this shouldn’t weigh in much on what the Fed Does February 1st, but if somehow it’s so off the mark that the reaction is “house on fire” then maybe we’ll see it mentioned on the February 1st press briefing. Otherwise, Jerome Powell has been pretty clear – They are focused on price stability, A softer jobs market, 2% inflation target.

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So what’s all this mean for mortgage rates? The markets continue to gather all the data they can leading up to the Fed Rate hike decision and press conference February 1st. Intermittently, rates are following the direction of the markets going lower and higher day-in-day-out depding on the conditions of money flow, but if you need to make that next right step in mortgage and real estate in 2023, it’s imperative you get started now. As we’ve been discussing, rates will likely hover in this range we’re in for quite some time until something obvious shifts sentiment and money in a defined direction. Until we start seeing progress made to reduce inflation, expect that elevated rates are what we’re contending with.

Also, a reminder – there’s a LOT less buyer competition in this market, and if the Homebuilder index is any indication, there’s still not a lot of new inventory coming to market anytime soon. Therefore, prices could stabilize or lightly correct vs. crash and burn. And someone else’s cold feet could be your opportunity to get in that dream house in 2023. If you haven’t heard about the 2-1 buy down yet, that’s the focus of last week’s podcast. Memo and Brian reviewed the program and talked about how people are using it today to win in the market. Take a listen and see if this is what can help you achieve your ownership goals in 2023.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

The Mortgage Heroes Podcast Episode 3 – The 3 2 1 buydown and how to use it in this market

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This week we have a product highlight conversation on the table. Brian and Memo discuss the 3 2 1 buydown. They also describe how people are using it in this market and the advantages it can give sellers AND buyers alike. This tool can help buyers achieve a lower monthly payment during their first years of ownership. This tool can help home sellers move their home on the market quicker than their competition. This tool can help agents be rockstars to their clients, no matter which side of the transaction you are representing.

Monday Mortgage Minute – What the Fed Said, PPI, Existing Home Sales & Homebuilder Index

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Last week we got more of the same from Jerome Powell. Tuesday while giving remarks about the economy and policy he reiterated the need for the Fed to remain focused on Price stability, but also made it very clear that the Fed will not become a “climate policymaker”.

No big surprises, so no big changes leading up to the February 1st Fed Rate Hike announcement.

CPI data that we kept a very close eye on came in exactly as projected. It’s not bad, but it’s also not the GREAT signal that inflation is reversing course.

And consumer sentiment was not earthshattering.

Collectively this means nothing was startling enough to shake up the markets ahead of the February Fed meeting

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With that let’s get on to this week’s market outlook!

Monday is actually a bank holiday in honor of Martin Luther King Jr. day. No banks are open, and the markets are closed.

The real fireworks start Wednesday January 18th when we get all PPI data. Month over month, year over year, and CORE PPI all come out before the market opens. If these come in better than expected, then the case can be made that inflation may be tapering off, flattening, or maybe reached it’s peak.

Remember, the Producer Price Index is a lagging indicator, but a projections of future consumer expenses that end up in our Consumer Price Index. Keep an eye on all things PPI this week. Higher than expected is bad news, Lower than expected will be treated as GREAT news.

And there’s even more important news on Wednesday this week when we get the latest in retail sales…remember we just talked about consumer sentiment a minute ago? The question we’re hoping to answer is “will this retail sales number reflect that same attitude we just got in consumer sentiment or will it conflict and create confusion in the markets?”

And then really important data for us know about in mortgage and real estate is the NAHB Housing Market Index – The National Association of Homebuilders.

This monthly reading is a survey of about 900 home builders which asks respondents to rate the relative level of current and future single-family home sales. Any number above 50 is a favorable reading. But this index is getting clobbered month after month after month, falling from 83 a year ago, to 55 by July 2022, all the way down to 31 in December, just last month. So in 1 years time it plummeted from 83 to 31…an unheard of 52 point fall from grace.

Any turn around in this number would be very welcome news, but I wouldn’t be surprised if this eventually bottoms out in the low 20s or high teens….YIKES!

Thursday January 19th we get unemployment claims and boy has this one been all over the place. Not to mention there was a recent revision that delicately admitted the government over stated jobs growth by 1-million jobs, but oh well, it’s not like we’re making monetary policy around here based on actual data right?!?! (sarcastic)

And we round out the week Friday January 20th with Existing Home Sales. This is another interesting case of data because it HAS ALSO been declining month after month after month for well over a year. At one time it posted 6 consecutive months of readings of 6-million annualized sales, but most recently posted an annualized reading of 4- million in December. That was JUST last month, and it’s a 33% decline from the most recent high. This is another big black eye for the housing industry as a reflection of the overall economic impact of monetary policy that makes its way through the nation.

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So what’s all this mean for mortgage rates?

The markets are going to continue to gather all the data they can leading up to the next Fed Rate hike decision and press conference February 1st. But if you need to make that next right step in mortgage and real estate in 2023, it’s imperative you get started now.

As we’ve been discussing, rates will likely hover in this range we’re in for quite some time until something obvious shifts sentiment and money in a defined direction. Until we start seeing progress made to reduce inflation, expect that elevated rates are what we’re contending with.

That being said, there’s a LOT less buyer competition in this market, and if the Home builder index is any indication, there’s not a lot of inventory coming to market anytime soon. Therefore, prices could stabilize or lightly correct vs. crash and burn. And someone else’s cold feet could be your opportunity to get in that dream house in 2023.

If you haven’t heard about the 3-1 buy down yet, that’s the focus of this weeks podcast coming out in a few days where we talk all about how people are using it today to win in the market. Take a listen and see if this is what can help you achieve your ownership goals in 2023.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

The Mortgage Heroes Podcast Episode 2 – Home Prices & Was the Homeownership Society a Mistake?

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We’re only into the second episode of our new show and there’s already drama!?! We talk about the mechanics of home prices flattening, but will they crash? And Was the Homeownership Society a Mistake? We debate this topic kinda of…don’t let the media sell you down the river.

Monday Mortgage Minute – Jobs data conflict and Jerome Powell speaks this week!

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Well, the first week of the new year surely didn’t disappoint! The economic data we were waiting on came out mostly better than expected which initially sent mortgage rates up but they then eased to end the week.

The big deal of last week was the FOMC meeting minutes, which actually didn’t reveal anything new or earth shattering, so what could have been a rocky patch in the market was thankfully met with “Meh…ok”.

The surprising and possibly troublesome part of last week would actually be Friday’s jobs data that came out better than expected. With the Fed’s recent comments that they need to see a softening labor market in order to know that they are winning the fight against inflation, the last thing they want to see is more jobs being created and unemployment going down at the same time. Which BOTH happened. That might sound counterintuitive but in order to achieve their objective they have to continue forcing demand destruction, meaning less dollars chasing less goods at their current prices…More jobs and less unemployment is the opposite of that and translated as consumers ability to keep this spending up for even longer.

Last thought on this is actually a couple of headlines that crossed the screen this week regarding mass layoffs coming. Most notably Amazon announced job cuts of 18,000 (Article Link) and Salesforce announced job cuts of 10%, which is roughly 8,000 jobs (Article Link). So just those 2 companies make up 24,000 job cuts. And if this is any indication of what we can expect from companies that are smaller on the food chain, then all this aforementioned positive labor data could just be a blip on the radar. And only time will tell.

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With that let’s get on to this week’s market outlook!

The economic calendar has 3 big things coming up this week.

 

First – Jerome Powell will speak on Tuesday January 10th, this is not expected to create any disturbances on the heels of a mild FOMC meeting minutes release last week; however, what most people ARE listening for are any clues about their February 1st rate hike decision. Could Jerome signal or foretell what the markets can expect?…probably not, but let’s see how he plays it this week. He’s been exercising a heavy dose of caution as of late.

Second – We will get all CPI data on Thursday January 12th. Month over month, year over year, and CORE CPI are all on display right before market open. Although each are important in their respective rights, I’ll be looking at the Core CPI with special interest as it also relates strongly to Core PCE and CORE PPI which give us an average understanding of where inflation lies in our overarching economy. Remember that any positive number (+) means inflation is still increasing, a Zero (0) means NO CHANGE, and a negative number (-) means inflation is going down. The going down part is key because in order to achieve the Fed’s target of 2% average inflation, we’re going to have to start seeing some negative inflation readings pulling down these highs we’ve seen over the past year. WATCH this closely. It WILL impact the Fed’s rate decisions in these first few meetings of 2023.

Third – Preliminary Consumer Sentiment comes out Friday, which will let us peer into how the consumer feels about the economy right now. We’re coming off a holiday season where some spending was higher than normal, and some intentionally spent less by choice (or force). This could all be a big toss up though because the Consumer Sentiment readings over the past 6 months have missed expectations to the upside and downside anywhere from 0.5% – 5.0%…which is a pretty big statistical variation here. So all in all, not a lot of credibility can come of this even though it’s considered an important reading.

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So what’s all this mean for mortgage rates?

The general consensus is that the markets are thawing out from December still, posturing and preparing themselves for the February 1 Fed rate decision, and press conference. We’re living in the middle of a time where what the Fed says or doesn’t say dramatically impacts and alters market fluctuations. There will be a point where the mortgage markets have to begin regaining some consumer appetite to borrow once again, and that can only come with rates easing and coming back down. The BIG QUESTION is when will that happen? When will enough be enough and the markets have to start enticing aspiring homebuyers to buy homes, and homeowners to refinance, no matter what the reason may be. This week and this month it’s all about needs and desires. If you need to buy, lean in and start preparing yourself for homeownership, connect with your loan officer to best prepare to buy in 2023. There’s a LOT less competition right now. So if you found yourself getting outbid time and time again, take another look this year, you’re home might just be on the market right now. Even though inventories are lower than usual, the time on market is longer than it has been, closing prices are AT and sometimes BELOW list price, and we are starting to see more and more agents tout “seller concessions” as an emerging buyer advantage in the market right now… It might be time to take that second look…or third…or fourth :/

And for those of you who need to refinance to access cash locked up in your property, build that room addition, ADU, or prepare to take in a family member who needs assistance living out their best days, please let us know how we can help you. There are many ways we can assist in closing the gap of where you might find yourself financially today, and where you’d like to be in 3-6-9 months from now.

Mortgage Rates aren’t going to be making any dramatic changes up to new highs or burrow out some new lows, they will fluctuate, and they might do this for months. With so much of our financial future hanging in the balance of the Feds decision in relation to fighting inflation, there really isn’t a clear defined direction for rates to head. Expect ranging rates until we reach a clearing and have a destination in sight.

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Thank you so much for tuning into the NEW Monday Mortgage Minute.

Be sure to like this video, share, and subscribe.

We’ll see you again next week!

The Mortgage Heroes Podcast Episode 1 – A Look back at 2022, and a look ahead at 2023

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Welcome to our new show! We wanted to start of the year with a bang by introducing a new show format, “The Mortgage Heroes Podcast”. Each week Memo, Brian and Andy will break down the latest in real estate and mortgage, dive into the details of what’s going on in the markets, and talk about how you can WIN in real estate and mortgage in 2023! This week we take a look back at some of the most meaningful parts of 2022 and look ahead to what to expect in 2023!

Monday Mortgage Minute – WE HAVE A NEW SHOW FORMAT!

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Welcome to a brand new week and welcome to a brand new show! We hope that you had an awesome Christmas season and a wonderful safe new year and we are already going to jump into 2023 with a bang with the introduction of the new Monday Mortgage minute format.

As you’ve been seeing in previous formats we talked about what happened in the prior week in the mortgage industry and in the markets as well as what’s coming up this week and the impact it will have on mortgage rates.

All that will continue but we’re also going to be adding in a little bit more context and detail to describe and follow the story arc of economics overtime and it’s measured impact in the mortgage industry as we better plan and prepare for this entire year of 2023 to be a little bit different than the years that led us here in a tighter market, with more fed involvement expected, and the fight of inflation continuing all while the real estate and mortgage markets position themselves for an abnormal year.

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Today I want to announce that we have just launched the Mortgage Heroes podcast!

Each week William Brian and I will discuss the latest topics in real estate, share trends and observations, opinions, and insights on what we see happening here in the local real estate market in San Diego as well as abroad across the nation from the front lines of the industry.

You can check out our brand new show on Apple Podcasts and Google Play

Next, you’re going to find all of our content shared across each of our social media spaces which include Facebook, Instagram, and YouTube.

If you have not followed those pages or not subscribed and turned-on notifications for YouTube do that so that every time we distribute new content you hear about it first.

Coming into the new year we realize that there will be a greater sense of needing access to us, our decades of experience, our knowledge attained from thousands of transactions and our firsthand account of working inside the market during abnormal times.

If at any time you find yourself watching our video or listening to a show and you need help or have questions, please reach out to us so we can understand your particular scenario and decide with you how to best help.

We know that not all decisions coming into the new year will be easy, however we do make every decision alongside our clients with the mindset of what we can do today to create the tomorrow that you desire.

We Also wanted to make our content easy to share so you will additionally find short versions and show clips easily accessible on social media to share with friends, family, coworkers, and anyone else you know who needs to win in mortgage and real estate in 2023.

With that let’s get on to this week’s market outlook!

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The economic calendar is going to waste no time with a bunch of big headline information coming out the very first week of the year.

On Wednesday January 4th we’re going to get the ISM manufacturing number as well as the JOLTS job openings number before the big one of the day which is the FOMC meeting minutes.

For those of you who are new to this show the Federal Reserve meets 8 times per year and roughly three weeks after their meeting they release their prior meeting minutes which is a detailed record of the most recent meeting that provides in-depth insights into the economic and financial conditions that influence their vote on where to set interest rates.

Also, the market looks at any terminology or word changes that they used from their previous meeting notes to indicate any sentiment change or policy change that could be on the horizon.

This will be a very sought out day of economic information.

Not to be outdone, Thursday January 5th we get the ADP non-farm employment change.

Around here we normally talk about the nonfarm payroll regularly but the change in employment is important to determine the trajectory of the job market. With Jerome Powell’s recent statements saying that we need to continue to see a softening labor market, this new year will bring about great focus to any changes in employment good or bad in relation to the statements that he has made publicly.

Remember, he has stated numerous times that in order to beat inflation we need to have a softening labor market, which is code word for we need to see more unemployment.

And on Friday January 6th we will have another bulk of employment information with average hourly earnings, nonfarm payroll employment change, the unemployment rate and the ISM services PMI.

All of these weigh in on the general health of the labor markets and are going to come out of the gate swinging in this very first week of the year and possibly even set the tone for the entire month of January and where the markets go.

As this relates to mortgage interest rates expect that they are going to have a medium to high volatility impact.

As this news comes out most people who trade in the mortgage space are going to be coming back to their trading desks for the first time since before Christmas and it’s likely that there may be low volatility due to it being only the first week of the year and an entire years’ worth of data to consider and where we’re going and how quick we’re getting there.

That being said, if you are in escrow right now and you are looking to lock your loan, you could find a day this week where market rates dip down in your favor and you have an optimal time to lock your loan.

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Thank you so much for tuning into the NEW Monday Mortgage Minute.

Be sure to like this video, share, and subscribe.

We’ll see you again next week!