As I mentioned, last week was packed with economic data

Tuesday, we got Flash PMI which came out a bit better than expected, which was nice to see.

Wednesday Fed Meeting Minutes came out – which is what I was really waiting for – and most of the attention was put on an interesting statement in the notes. The statement wat that “almost all fed members supported the rate hike”….ALMOST ALL…NOT definitively all.

That might sound like I’m splitting hairs, but when it comes to public releases like this…the word selection matters and is purposeful. So when things like this come out we can look at that piece and establish that someone, or “someones,” are starting to feel that the end could be near. However, there’s a problem. The problem is that all the data the Fed references as justification for their decisions is contradicting the idea that their rate hikes are over.

The markets seemed to have looked past the notes and are wagering that there will be another hike in March cause we’re no where near the fed desired inflation target and in their own words the labor market “remained very tight, contributing to continuing upward pressures on wages and prices.” Also know as the wage price spiral, Prices go up and cause wages to go up while wages going up cause prices to go up.

Thursday, we got Preliminary GDP reading that came in lower than expected, which does make us wonder where the easing is coming from, because the prior reading had a heavy dose of government spending packed into it. So are we to assume the same for this most recent reading that’s lower?…if that IS the case…then slowing in both the PUBLIC sector and PRIVATE sectors is slowing as it should be.

We got unemployment on Thursday which was better than expected putting more pressure on the Fed. They will need to cause more pain in the labor market to force less spending in the economy to stand a chance at returning to 2% inflation.

Friday, we get Core PCE which was another Whammy to the Fed. It was expected to come in at 0.4% and came in at 0.6%. Now that seems like a small difference; but it’s not… 0.6 is 0.2 higher than 0.4….but 0.2 is HALF of 0.4 which means that a 0.6% print is a 50% higher reading than was projected – AND REMEMBER this is still a positive number with A + sign in front of it….meaning that we’re still overall experiencing higher prices compared to the previous reading.

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This week is pretty slow actually.

Monday will bring us Pending Home Sales with a pretty low forecast, kind of par for the course right now when it comes to readings related to mortgage and real estate. On this show AND the podcast, we’ve been talking about inventory shortages which are helping keep home process relatively high still and with mortgage rates still elevated too pending home sales have really become a trouble spot.

Tuesday we’ll get consumer confidence which is going to be really interesting cause sometimes the data we talk about contradicts the elevated optimism among consumers which can distort or even cover up some innerworkings of the overall economy. We’ll see how “Confident” the consumer really is.

Wednesday, we get ISM Manufacturing PMI which has been in contraction for months and we’re expecting that to still be the case this week.

Thursday unemployment will roll out and Friday the ISM Services PMI comes out, which had a surprising optimistic reading last month so it’s up for grabs this week whether it will be more good news OR swing back into the bad news category.

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So what does all this mean for mortgage rates?

Mortgage rates have come under heavy pressure recently with the data supporting the assumption that the Fed will have to continue raising rates until they achieve optimal pain in their plan. Until then there is no reason for the market to assume that we will see rates returning back to historic lows or even going in that direction for long periods of time. It is certainly clear that the mortgage market is going to continue struggling without the Feds involvement in buying mortgage-backed securities. As that is the case it puts additional pressure on mortgage-backed security investors to hold the line and build a tough stomach over the course of these upcoming months of fed rate hikes and policy changes. Rates will ebb and flow in response to money coming into the mortgage-backed security market or money coming out of the mortgage backed security market.

As we have been teaching you, the more money that comes in, the lower the rates will go and vice versa money that leaves the market creates more scarcity which causes rates to increase.

We are also at the point in the cycle where we’re getting closer and closer to the next Fed meeting and everyone’s antennae are up looking and listening for any cues that could signal change that impacts the rate market directly.

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As I mentioned, last week was packed with economic data

MoM CPI, YoY CPI, CORE CPI all came at or higher than expected which is a clear sign that we are still NOT where the Fed wants to be.

Retail sales and Core Retail Sales BOTH came in higher than expected, which seems great on the surface, but is also evidence that on paper the consumer seems able to keep up with these elevated prices…remember that when I come back to “entrenched” inflation.

The Empire State Manufacturing Index was still negative as expected – not a good sign!

PPI and Core PPI BOTH came in higher than expected, which is all but the proverbial nail in the coffin for any argument of a “Fed PIVOT”…I wish people on TV never started talking about that…it’s NOT A THING! And last week is all the explanation you need for why this was a silly concept to go out there trying to sell the audiences on

Unemployment came in lower than expect – again, opposite of what the Fed Needs to happen!!!

building permits and housing starts came in just a sliver short of their projected numbers, but this one is really telling about the future of home prices this year.

If we consider the weight of the economic information, I just shared we can start to clearly see that rates are going to remain elevated in housing through the rest of this year. I mean we’re already 11 months past the initial interest rate hikes in March 2022, and we’re STILL NOT SEEING the necessary impacts the Fed wants…so it’s reasonable to expect that fed rate hikes this month, next month, and likely in May will also take just as long to see their way through the markets.

So expect slight dips in prices as sellers make concessions so they can move onto the next thing they have in their life, And expect rates to stay between the high 5s and high 6s depending on the loan program you are in and the qualifications you bring to the table. At this point there’s just no other way to slice it.

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Now this week is very mild comparatively.

Monday is a bank holiday (President’s Day) the markets are also closed.

Tuesday we get Flash PMI – which could be interesting certainly not as important as all the data we just reviewed.

Wednesday Fed Meeting Minutes – This is what I’m really looking out for because it will indicate and new change of tone and give us insight to their meeting minutes and sentiment about how they came to those conclusions and any forward guidance that might show us what is coming up ahead in March and into the summer.

Thursday we get Preliminary GDP reading, that we’re hoping will match up with the most recent announcement, but some of you might remember that topline came in at 2.9%, but if wee strip out government spending and inventory replenishment…it was actually 0.2%….so this reading we’ll be looking for any notable changes that indicate a more realistic reading of the overall health of the economy.

We also get unemployment on Thursday as well….

Friday we get Core PCE. We’re hoping for 0.3% target, but anything below that would be a VERY WELCOME reading so that we can get a sense that the Fed’s efforts might actually be driving this number down. BUT don’t get your hopes up cause you just heard what I said about CPI and PPI right?  Right?

Remember with Core PCE, ZERO would mean no increase in costs, and a negative number would mean costs are reversing and going back down. So 0.3% projection isn’t too hot, and ANYTHING, literally ANYTHING lower than that will be a very welcome sign!

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So what’s all this mean for mortgage rates?

Mortgage rates going to head sideways this week. And every week that we get closer and closer to the next Fed meeting, the more and more that anticipation will impact market rates. In the meantime, we can expect that normal fluctuations and day by day changes in rates will continue.

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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.

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Last week Jerome Powell spoke at the economic club of Washington D.C. – and as was expected, no big deal no new news. Same went for Fed Member John Williams when he was interviewed at the Wall Street Journal’s CFO Network Summit. More of the same, but that’s cause for concern because the Fed is all but admitting that they’re not done yet.

The real surprise last week was on Friday when the Preliminary Consumer Sentiment came in higher than expected and has been increasing through the months that we believed were going to be the most challenging, November, December and January.

All markets were pretty choppy last week. Nothing really rattled the cages of the hands that hold the money, but for those who were paying attention, we DID HAVE 3 straight days of household name layoff announcements: Zoom is cutting 1300 jobs, Disney 7000 jobs, and Yahoo 1600 jobs by end of year which for Yahoo is 20% of their workforce. Take a step back from that and think about what is going on at these companies’ accounting departments that they have to lay off these proportionately big numbers of workers. That’s a lot of spending to cut. And, there will be a lot more of this, it’s just getting momentum.

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Now brace up, this week has a LOT of important data coming out:

Tuesday is all about CPI. We get Month over month CPI, Year over Year CPI, and Core CPI all coming out at the same time. This is going to have a LOT of eyeballs on it because this reading weighs heavily into market sentiment and the mix of how the Fed comes to their hike conclusions. With the March 22 meeting still off in the distance, you can bet that THIS DATA will be key to helping them determine what they should do next.

Wednesday we get Retail sales and Core Retail Sales report. These are both interesting to me because of what Jerome Powell said at the last press conference. They’re seeing dis-inflationary pressure in certain segments of the economy, but the longer inflation persists the more concerned they are that inflation will become entrenched….soooooo retail sales and core retail sales are a really good indication of whether or not we as consumers are still spending nonchalantly, or if price pressures are finally starting to weigh us down.

And also Wednesday we get the Empire State Manufacturing Index. Remember last month when we got surprised with the extremely terrible reading of -32.9?!? It was projected to be -8 which is bad in its own right, because anything below ZERO signals worsening conditions….so -32.9 was a super bad indicator that got everyone’s attention. This week I’m looking to see if it’s any better than -32.9, but my money’s on it still being negative by a healthy margin.

Thursday we get PPI and Core PPI which I will zero in on as leading indicators of what future costs are going to make their way to the consumers, which the CPI report from 2 days prior is evidence of. So just like CPI, these readings of PPI will be critical for the Fed to digest in the upcoming weeks prior to the next rate decision on March 22. But wait there’s more!

We will also get Unemployment, building permits and housing starts. I’m really really interested in building permits and housing starts. We are in desperate need of more inventory, and there’s a lot of chatter going around that builders and developers can sandbag the markets and keep prices high by building slower so that the markets don’t get oversaturated with supply which drives down prices, but at the same time literally everything connected to building these days is more expensive and is more entrenched (not transitory)…honestly, what are they to do!?!?! It’s a real problem and its consequences are being felt in the real estate and mortgage markets. Just look at how many ADU’s are going up, garage conversions are underway, and attachments are being added on to homes right now…THAT’s all evidence that we need more space for people and MORE residential construction can’t come soon enough!

Each of elements I just reviewed is important in their own right, but to have ALL OF THIS TOGETHER IN ONE WEEK is honestly a TON of insight into the overall health of our economy. Expect a lot of jostling around in the financial markets, and rates will likely get knocked around day by day since there are so many heavyweights stepping to the plate throughout the whole week. This one is gonna be entertaining.

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So what’s all this mean for mortgage rates?

In general mortgage rates are trending sideways. Certain market activities are going to make money come INTO and OUT OF the mortgage markets, which BOTH impact rates going up or down. And what we’re starting to see a lot more of is companies coming up with alternative methods for properties to change hands more readily: like assumable loan solutions, loan servicers are creating new ways to help struggling home owners figure out re-payment methods that are accommodating so they don’t have to take a home back through foreclosure, and even lenders are working to close the gap between current market products and more appetizing solutions to encourage buyer appetite.

Like I said last week, Days on Market are going up, listings are having to compete with one another to vie for buyers interest and offers. Sellers are issuing concessions in a variety of ways like covering  closings costs, 2-1 buy downs, and other benefits for a buyer choosing their home.

There’s a LOT less buyer competition in this market, and if inventory holds steady, there will be slim pickings, 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!

We got what we expected last week! The Fed announced their most recent rate hike of 0.25%. That’s exactly what everyone was expecting, but the market was way more interested in what Jerome Powell had to say about the overall economic outlook than the decision itself.

During the press conference, he hinted at a few new things that could be quite telling about the future of the Fed’s rate hike decisions.

#1 he mentioned that they are beginning to see disinflation in a few sectors, but not in as many as they need to, in order to know that the full impact of their rate decisions are taking place.

#2 he made reference to the Fed’s terminal rate being at or slightly above the 5% target as their continued effort to bring inflation back to their target of 2.0%.

#3…Jerome mentioned a few times that they need “substantially more evidence” before making a change in policy direction (which is short for stopping the increases, and considering future decreases)

…so the question I’m asking myself is…what are they waiting for? Because this is kind of a continued admission that it’s taking way longer than they thought. Which is evidenced by this follow up doozy Jerome dropped when he said they’re concerned that the longer inflation remains, the higher the chance it becomes entrenched.

So which one is it? Are we moving towards a 2% inflation target or are we worried it’s gonna get entrenched?…both can’t happen as they are in direct contrast to one another.

Their next meeting isn’t until March 22 so we have quite a ways to wait until we get another crack at hearing their insight and perspective about where this is all really going. Nonetheless, it turns out this first quarter of the new year will prove quite pivotal in our direction economically.

With that, let’s take a look at what’s in store for us this week:

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Tuesday Jerome Powell speaks at the economic club of Washington D.C. and I would expect that this will be a lot of the same things he just mentioned at his last press conference. There’s no upside for him to announce anything NEW here, when he could have said it when it really mattered…from the podium.

On Wednesday Fed Member John Williams will take part in an interview at the Wall Street Journal’s CFO Network Summit. Don’t expect anything earthshattering here, because once again….Anything monumental should have already been stated from the podium last week during the Fed Press Conference.

Then on Thursday we will see unemployment claims. Unemployment has ebbed and flowed month after month, and the most recent round of tech layoffs will hit this number in waves over the next few weeks and months, so although the announcement of laying off tens of thousands of workers seems big, the rate at which all those workers get in the unemployment line, is completely up to them…The numbers will reflect that.

Lastly, on Friday we get the Preliminary Consumer Sentiment which has been getting better, but compared to the other data that we need to see fundamental change in, this isn’t really a heavy-weight right now.

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So what’s all this mean for mortgage rates?

Mortgage rates initially trended down when the Fed Press Conference happened last week, but then the market took back all that by the time Friday rolled around. So while many would like to scream from the mountaintops “rates dropped”…the truth is they fluctuated.

They DID drop, and then bounced back some. So once again, here I am advocating that PREPARATION is king. Moving forward it will be imperative that you stay very close to your loan office and the market, especially as the Fed needs “substantially more evidence”…still…

Like I said last week, 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 a buyer choosing their home.

There’s a LOT less buyer competition in this market, and if inventory holds steady, there will be slim pickings, 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!