Spotlight is on the FED this week! Can they REALLY do THIS?

In case you’ve been living under a rock, the US debt is climbing like crazy! Fed Chair Jerome Powell and other policymakers have indicated the surge in longer-term Treasury yields may reduce the case for continuing to hike the central bank’s benchmark interest rate. The FOMC announces their rate decision Wednesday of this week and now everyone is expecting a pause. This sounds great on the surface, but it is a bit weird when we add back their projection. For context, the Fed has been saying that they expect below trend growth in GDP for some time in order to reach their goal of 2% inflation. Well, the preliminary 3rd Quarter GDP could wreck that plan because it was notably higher than expected. It came in at 4.9% versus estimates of 4.1%. and the price Index shot up to 3.5% versus estimates of 2.5%. That’s not below trend at all! That’s not even neutral, it’s higher and proportionately…it’s higher by a lot! And THAT is the exact opposite of what the Fed needs to see.

A new study of 1,163 adults between October 5th and 9th reveals that Two in three Americans said their household expenses are a lot higher than a year ago. But just one in four reported rising income in the same time period. The poll found that eight in 10 of those who responded reported higher overall debt, with half reporting credit card debt, four in 10 saddled with car loans and one in four with healthcare related debt. Only 15% reported a rise in household savings over the past 12 months, 18% feel confident about their retirement savings, while 3 in 10 say they’ve delayed on a big purchase due to higher interest rates. And 1 in 4 report student debt. This is all packed into the affordability conversation we keep having when it comes to mortgage and real estate. Aspiring home buyers are saddled with increasing costs to service debts and higher debt balances, spread across more debt accounts. All of which negatively impact their housing affordability.  We are going to have to change our spending habits, savings habits and buckle down on paying off debt in order to turn up our percentage of homeownership in this country.

And guess what? Inflation is still in the positive not yet turning in the right direction fast enough. The September PCE (personal consumption expenditures) came in at 0.4%, but was expected to be +0.3%.  Year/year overall PCE thought to be +3.4%, came at 3.4% – so at least that’s fine. Markets were expecting inflation to stabilize, the data suggests it has slowed a very little. And this puts the fed in a very precarious situation coming into this week. They have to tread very carefully at their press conference. We are all expecting them to pause even though a rate hike now or in December is what they previously loaded in their chamber. The comments, justification, and context Jerome Powell provides should tell us if this is really it, If they should have hiked in September, or if they will HAVE TO hike in December. The spotlight is directly on the Fed this Wednesday, and it really….really matters!

So with that, let’s take a quick look at what’s coming up in the markets this week.

Tuesday: Employment Cost Index, Home Price Index m/m, and CB Consumer Confidence

Wednesday: ADP Non-Farm Employment Change, ISM Manufacturing PMI, and JOLTS Job openings comes out. But the most important part of the day will be the Federal Funds Rate decision, Jerome Powells prepared statements, and the Press conference to follow. The Latest sentiment is that they’re likely to pause because of the meteoric rise of the 10- year yields which has other future looking impacts still yet to be made…so does that make it the savior or will it be the 2024 thing that we contend with?

Thursday: Unemployment Claims

Friday: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate, ISM Services PMI

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!

Mortgage Demand Plummets as Rates Hit 8% But Homeowners Still Have Options

Mortgage Demand Plummets as Rates Hit 8% But Homeowners Still Have Options. The mortgage crunch continues to make national headlines as the industry and consumers battle increasing interest rate environments as well as affordability in the housing sector. Despite this, homeowners who have secured a low interest rate first loan still have access to large amounts of home equity, thereby creating numerous financial options. In this episode:

  1.  The 30-year fixed mortgage rates just hit 8% for the first time since 2000 as Treasury yields soar
  2. Mortgage demand falls to the lowest level since 1995 as interest rates near 8%
  3. September home sales drop to the lowest level since the foreclosure crisis
  4. Meet the homeowners giving up 4% mortgages and opting for cash-out refis

Mortgage Rates Hit 8% and Jerome Powell is STILL WORRIED about Inflation #realestate #thefed

Whoa!…everybody calm down…I’m talking about last weeks retail sales data that was A LOT stronger than forecasted. The Core retail sales number came in 3 times HIGHER than expected, so is the forecast wrong or is the consumer ACTUALLY this strong? Or is there a false variable in here skewing the figures? I think what’s really happening is regardless of price, demand is demand and people NEED the things they NEED. Elevated retail numbers could be a false positive in the end, because other aspects of the economy are still making their impacts felt like rising consumer debt, elevated car loan rates, credit card rates, monthly rents and even mortgage rates…all which apply pressure on the pocketbooks of everyone!

And that leads us back to the inflation conversation. Last week Jerome Powell said inflation is still too high and lower economic growth is likely needed to bring it down. While speaking to the economic club of New York Jerome Powell said “Inflation is still too high and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. We cannot yet know how long these lower readings will persist or where inflation will settle over the coming quarters” Did you hear that? QUARTERS not weeks, not months, quarters with an ‘S’ we’re still no where close to returning to their target of 2% inflation over the long run…and to make things even potentially worse when asked if policy was too tight right now his answer was “I would have to say no” and further noted that higher interest rates are difficult for everybody.

Which brings us to the mortgage conversation. Last week mortgage rates hit the 8% range on the popular 30 year fixed rate mortgage. 8%!!! As we’ve been talking about, the relationship between the 10 year yield and mortgage rates historically run very parallel to one another. Last week rates rose sharply as the nation continues to be plagued with low inventory, high rates and an affordability crunch. Not to mention an undercurrent of unspoken exhaustion by aspiring homeowners who are finding it more and more difficult to get into the market. And on the other side of the coin, existing homeowners find themselves with massive equity gains still intact. They have the potential for their home equity to become the future ATM machine to cure personal financial debt problems, remodel or restoring their current home to stay in it for the long haul, or even use some of that equity to convert a garage into a dwelling, build an ADU, or room addition. This set of housing related criteria have never been at these historic levels altogether at the same time so we are definitely in uncharted territory. But those who will take action on accessing a home equity line of credit or a fixed second loan will likely be the ones in the end holding a nice bag of cash as a result of letting the house do some of the heavy lifting.

So with that, let’s take a quick look at what’s coming up in the markets this week.

Tuesday: Flash Manufacturing PMI and Flash Services PMI come out. A reading above 50 is a good sign, and anything below 50 is a sign of contraction in these sectors.

Wednesday: We learn the New Home Sales numbers, which have been a bit erratic these last few months, but with 1 major theme of WE NEED MORE HOUSING! Whether the forecast is right or wrong almost doesn’t matter because the supply is low whether the reading misses or not. So Home builders!!! Can we get some nee homes please!?!

Thursday: Advance GDP Quarter over quarter, unemployment claims and a bunch of durable goods data come out. Keep your eyes on the GDP and unemployment part as BOTH will weigh in on the Fed’s upcoming decisions. Given the stronger than expected retail sales reading last week, the temperature is heating up again…I cant believe I’m even saying that. Since March 2022 when the Fed began raising rates, this has just been the craziest 19 months….well, since 2008 & 2009

Friday: Core PCE price index and Revised consumer sentiment come out. It would be nice for these to be in line with expectations, because we need them to be. Progress must be made towards the Fed’s dual mandate and this weeks readings can really help us feel like there’s some positive action going on.

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!

Industry Groups Pressure the Fed While Consumers Blame Rates

The Mortgage Bankers Association, National Association of Realtors, and National Association of Home Builders called on the Fed to provide market certainty about its rate path. Ongoing uncertainty has exacerbated housing affordability and even consumer sentiment is starting to take its toll…but!…. BUT there are STILL SOLUTIONS in the market for homeowners and your home equity could be the hero you’ve been looking for! Today’s topics are:

  1. MBA, NAR, NAHB call on the Fed to provide market certainty about its rate pat
  2. Fed officials see ‘restrictive’ policy staying in place until inflation eases, minutes show
  3. Consumers point to mortgage rates, not home prices, as key barrier to affordability
  4. Market Solutions Discussion: HELOC, HE-LOAN, Cash out for Debt consolidation, address deferred maintenance, build an ADU, Convert your garage, remodel your home, or add square footage.

Housing Associations are BIG MAD…and Inflation is Making it WORSE!

In case you missed it last week the mortgage Bankers Association, National Association of Realtors, and National Association of home builders called on the Fed to provide market certainty about its rate path. The ongoing market uncertainty about the fed’s rate path has exacerbated housing affordability according to this coalition of housing trade groups. They have directly asked fed chair Jerome Powell to make two clear statements #1 That the Fed does not contemplate further rate hikes and #2 the Fed will not sell off any of its mortgage-backed security holdings until and unless the housing finance market has stabilized and mortgage to treasury spreads have normalized.  What this really means is they want the fed to commit to stop interest rate increases and to cast vision for what the future looks like for housing and shelter in America. Behind this has to be their own concerns representative of homeowners and renters alike in addition to the public consumer. We ended last week with no formal response but this week we have a ton of fed members making speeches, and we’ll have to see if they even make any reference to this call by these very influential housing trade groups.

Before last weeks stronger inflation reports the mood and comments from Fed officials was that the Fed was likely finished increasing rates. Now that view is being rethought, as noted previously, inflation news flips the media storyline. After PPI & CPI both came out strong month over month, the news headlines indicate that the Fed may not be finished increasing rates. Three Fed officials commented last week that the finish line was approaching. Fed Governor Michelle Bowman said rates may need to rise further and stay higher for longer than previously expected to get inflation down to the central bank’s goal. So basically we’re back to Fed uncertainty, and they’re NOT on the same page…again… Watch for any change in tone or word choice with the majority of members making speeches this week. They’re unlikely to tip their hand and let us know what cards they are holding, but after last weeks inflation information, my money’s on a final rate hike to end the year.

At this point, everybody knows the housing market is tight, and when the market is tight, we traditionally see creative solutions emerge from the banking sector in order to generate loan volume and open up opportunities for existing homeowners. This season is no different with most homeowners having first mortgages in the twos or three percents, and sitting on all time highs when it comes to equity. The house WILL BECOME the current and future ATM machine for financial solutions and opportunities for most homeowners. Home equity line of credit or home equity loans are proving to be two emerging popular methods of converting home equity into debt payoff solutions, down payment funds for a second home or investment purchase, or the means by which to convert a garage into a studio or one bedroom, or even add an ADU to the current lot. So if you’re over here thinking about how you can leverage your equity to advance your personal financial outcomes, there’s several ways to do that right now. And you can still do it wisely by leaving your first mortgage ALONE!

So with that, let’s take a quick look at what’s coming up in the markets this week.

Right up front….didn’t we JUST hear like 8 fed members speak last week (Yes!)…and they’re running that same play this week?! I get it, I want to know everything I can about what economic impacts are on their way, but is this starting to feel a little bit like narrative management.

Monday: Empire State Manufacturing reading, and Fed Member Harker speaks

Tuesday: Core retail sales and retail sales month over month both come out, and two more fed members speak

Wednesday: Building permits and housing starts come out, and 5 Fed members speak

Thursday: Unemployment claims, Philly Fed Manufacturing Index, Existing Home Sales, Fed Chair Powell Speaks +5 more fed members speak.

Friday: You guessed it!….Another Fed Member speaks

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!

Fannie Mae Economist Weighs In, and Affordability is Crushing Homebuyer Expectations

As things get tighter in the real estate and mortgage markets more industry leaders are raising their voices about the impacts being felt across the nation. Home prices have remained elevated regardless of mortgage rates continuing their rise which is now causing an affordability crisis not seen in 38 years! Today’s topics are:

  1. Fannie Mae’s chief economist on housing market outlook
  2. Why are existing home prices up year over year?
  3. Changing homebuyer expectations are slowing the housing market
  4. DataDigest: Today’s homebuyers are seeking affordability not found in the West

The Fed, Inflation, Mortgage Rates…a Rocketship week!

We have to talk about mortgage rates. They are on the climb with it’s favorite running mate the 10-year yield. Last week both stretched their legs and went for a steep incline outing only to level off at the end, essentially telegraphing their consistent direction upwards. Undoubtedly this is putting pressure on numerous sectors of real estate and mortgage, along with aspiring home owners, banks & investors as the fed and the markets wrestle one another over inflation and price stability. There are still going to be opportunities in the market, but we’re going to have to work together heading into the end of 2023 and kicking off 2024. If you’re serious about buying a home, hit us up right now so you can position yourself for success.

Could last week’s ADP payroll data be the beginning of the hard labor contraction the fed has been desperately seeking for months on end? In case you missed it, private payrolls came in sharply lower than expected. ADP reported that private job growth totaled just 89,000 for the month, down from an upwardly revised 180,000 in August and below the 160,000 estimate from Dow Jones. Job gains came almost exclusively from services, which contributed 81,000 to the total. Perhaps more importantly, the report provided some sign that a historically tight labor market could be loosening and giving the Federal Reserve some incentive to stop raising interest rates. We’ll have to see about that though. The thing that really caught my attention, was the losses:

  • 32,000 in professional and business services
  • 13,000 in trade, transportation and utilities, and
  • 12,000 in manufacturing

We have to talk about pending home sales. Last week we learned that pending home sales fell by 7.1% in August, significantly higher than expectations of 1.0%. This was the biggest monthly decline since September 2022. NAR Chief Economist Lawrence Yun said “The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates.”

Well sure, but that’s a pretty narrow point to make in response to this data since it’s a force function of a number of variables, not just the fed funds rate. Not to mention that mortgage rates aren’t even determined by the fed even if you wanted to argue that the markets follow the fed lead….I actually think if the other way around, and the fed is on the losing side of the field a lot these days.

Today I have a quick public service announcement. You may not know that we have a weekly podcast show that goes into greater depth and detail on many of the topics we cover here on Monday Mortgage Minute. Will, Brian, Loan-Some Mike, and I bring our collective decades of experience to the table to unpack all the latest mortgage, real estate, and economic news that helps paint a picture for you the viewer about what you need to know regarding the markets right now. With a variety of different roles, and perspectives we each have, the goal is for you to be a more informed, educated, and confident homebuyer, and homeowner. We have new shows rolling out in the new year, so pile into the comments and tell us what kinds of things you’d like to bring your way!

So with that, let’s take a quick look at what’s coming up in the markets this week. We have a LOT on deck this week.

One could argue that emphasizing the importance of this week could be a bit much….but really? Really. We have 8 fed members speaking, the fed meeting minutes coming out, BOTH major inflation metrics and unemployment data coming out….this is one to pay close attention to.

Monday: is a bank holiday, and 3 fed members are speaking…hopefully there won’t be any fireworks.

Tuesday: Two more fed members speak

Wednesday: the most recent fed meeting notes will be released and another fed member speaks. This could be interesting because the markets will be looking for any clues in the notes about the federal reserves actual confidence regarding everything going on right now. I’m guessing the are gonna keep things pretty tight to the vest and to themselves…they honestly don’t need any drama.

We will also get PPI and Core PPI Month over month. Heads up, it’s likely to be UP. This is directly connected to energy prices, specifically oil, which means fuel, which means producers costs to produce things goes up…this is likely to be up and the markets will not like this

Thursday: is all about CPI and unemployment. Consumers are in focus on this day, and as the saying goes, the *(&%^#^#&& rolls down hill.

Friday: another fed member speaks, plus the preliminary consumer sentiment and preliminary inflation expectations will be released. Maybe it will be a gentle end of the week…maybe.

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!

Insurance Companies Are Leaving California

You have probably heard that insurance carriers are leaving California. We know that this may impact some of you now or in the future.

In this episode:

  1. Why insurance companies are pulling out of California and Florida, and how to fix some of the underlying problems
  2. Limited home insurance options in California as major carriers pull back
  3. California lawmakers failed to fix the insurance market. So what comes next?
  4. Senators take up looming insurance crisis as policy issuers flee Florida and California.

Government Stays Open – Mortgage Rates Will Rise To End 2023

For all the talk about what parts of the government would get shut down if the budget didn’t pass, it all turned out for naught. Which is good, because I really didn’t wanna sit here this week and weigh the impacts of a partial government closure on the markets, how long closures would last, and then tap dance around the data next time the Fed comes to the plate in November. So with that said, all the pressure in October & November will be on the politicians in DC plus the Federal reserve members. And I have to say, the horizon doesn’t look too favorable for any of them.  These coming weeks are absolutely stacked to the rafters with discussions, data, and decisions that will make major impacts in 2024 and beyond. Let the jockeying for position begin, while the mortgage and real estate markets are subject to continue being plagued with the current hand we’re dealt.

In case you missed it. Two Fed officials last week said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. On Friday, the August PCE inflation report, the core year/year forecast came in at 3.9% down from 4.2%. Jerome Powell continues to look mostly at the core (excluding food and energy) although with energy prices, increasing higher costs will likely feed through the economy. Therefore it DOES impact what we pay at the registers despite everyone wanting to strip out those costs from other inflation measurements. Have you every baked a cake and then tried to take two ingredients out? Of course not, all the ingredients are necessary and when you try to remove SOME ingredients, you end up messing up the flavor of the cake. This is akin to skewing the impact in the wallets of consumers out of convenience for a “less volatile” metric. Look, we all pay for food and energy EVEN when they are volatile….so c’mon guys!

Did you hear what Jamie Dimon said last week?!?! Don’t look to JPMorgan CEO Jamie Dimon to calm things down, as he warned that even a 7% Fed funds rate is possible – that’s a long way from where we’re at right now. This seems to be a shot across the bow that Investors need to be prepared for 7% fed funds rates because he believes most of them aren’t. That’s a stark warning from JPMorgan Chase CEO Jamie Dimon over potential risks for the U.S. economy. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,” Dimon said in an interview with the Times of India. So will this come to pass? Or is he taunting the Federal reserve? Is he factoring other aspects of reinflation that would require rates to go even higher in 2024 before everyone can claim victory? Look, all I know is that EVERYONE’S tone has changed this fall, and we should take note of that. Clearly – transitory, soft landing, and some pain are no longer options…listen up for a new buzzword in an effort try and describe what’s about to happen next.

So with that, let’s take a quick look at what’s coming up in the markets this week. THIS week is stuffed with a ton of activity, and now that the government budget drama is resolved temporarily this week’s economic information can hit us without any asterisks that would have come from a shut down.

Monday: ISM Manufacturing PMI and Prices come out. Fed Chair Jerome Powell speaks along with fed members Harker and Barr. This could be interesting now that they’ve made their decision to pause raising rates AND the government passed a 45 day continuing resolution to keep the government open. Let’s see what these Fed members have in store for us this week!

Tuesday: JOLTS Job openings comes out and the fed really cares about this one. With just a few short weeks until their November meeting, Jobs data will be a primary focus.

Wednesday: ADP Non-Farm Payroll Employment Change, ISM Services PMI, and two more fed members speak

Thursday: Unemployment change, and Fed Member Barr speaks for the second time this week.

Friday: Average Hourly Earnings month over month, non-farm employment change, unemployment rate, Fed Member Waller speaks.

This is quite a bit for one week. And I have to tell you, I’d rather have all these fed members speaking and all this data coming out with one another so that we can try and put the pieces of this puzzle together rather than blindly guessing what’s to come.

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!