Here is a quick recap of what went down last week.

Monday ISM Manufacturing was a Miss, but not by much. This is what we expected and is another log on the fire that the overall economy is still slowing as the Fed intends. Even a reversal for the better in the coming months will not change Fed policy as this is still just 1 factor among ALL the variable they are juggling right now. Yes, Juggling.

Tuesday JOLTS – Job Opening and Labor Turnover Survey was a HUGE miss and this is good news. Less job openings essentially means less opportunity for people to make money which makes its way into the economy, thus keeping prices high and inflation steady. This is also the first time in almost 2 years that the number was under 10M openings. For nearly 24 months we had somewhere between 10 million to 11 million job openings and that was making it more difficult on the Fed tamp down inflation.

Wednesday was a punch to the gut when ADP non-farm employment change came in way lower than projected. Fewer jobs than forecast spells trouble on personal budgets and small business growth projections; however, it does favor the Fed’s agenda of slowing the labor markets. Once again, of the many tools they claim to have, suppressing labor growth as a result of credit tightening on the business sector, is part of the plan.

Thursday we got even more “bad” news on jobs when unemployment claims came in higher than expected. The increase of corporate layoffs that are set to continue through 2023 and possibly into 2024 is beginning to be reflected in this figure. Again, I don’t want more people to be out of work, but it’s what our “betters” are calling for…so we have to understand and interpret what this means to us at the personal level.

And finally, Friday’s lower unemployment rate was a headliner! Even though the markets were closed for Good Friday, this 3.5% print coming in lower than last months 3.6% print could already spell trouble for the next Fed meeting…Why? Remember when Jerome Powell said they need the unemployment rate to be at 4.5% by end of year 2023?…This month’s reading of 3.5% is a lower number than the previous months reading which means we are now moving in the wrong direction, and now with less time on the clock. They still need to get to 4.5% unemployment and now only have 8 whole months remining to do so.

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And there’s no break this week with a slew of inflation readings coming out. Remember these are backwards looking so what we need to our eye on is slowing inflation to eventually target a flattening, and then a reversal. If you missed our full breakdown of the Fed Press conference where I detailed when this will be, you can click the banner at the top of this video to watch that next.

In summary we will have Fed members speaking this week, CPI, CORE CPI, PPI, CORE PPI, retail sales, Core retail sales, and preliminary consumer sentiment all hitting us hard this week.

Strength in these figures will mean there is more tightening the fed may have to do in order to grind to a stop all this entrenched inflation.

Weakness in these figures will signal that the last 13 months of tightening is finally making its impact felt throughout the economy at large and future rate hikes could be paused.

DO NOT bet the farm on Rate Cuts no matter what the TV analysts say. Look, I’d love to be wrong about this, and will admit if I am, BUT JUST 3 WEEKS AGO Jerome Powell stated abundantly clearly that “rate cuts are not in our base case”…So even though there are pundits and economists calling for the Fed to start cutting sometime this year….what we have been told point blank is that rate cuts aren’t even on the table at this time. Maybe we’ll look back at this in the future an celebrate that we were wrong…maybe. And this week’s inflation readings are expected to weigh heavily on whether or not we can point and laugh at how wrong I was…of if we take another victory lap. As for me, I’ll be out buying new running shoes this weekend.

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So what does this all mean for mortgage rates Andy?

Mortgage rates got better at the beginning of last week but it was a short week, and that short week ended up with the mortgage backed security market going back up on Good Friday. Expect that this week you will see price changes to reflect that, since markets were technically closed on Friday.

We are 100% in the needs-based market. If you are unsure what you should be doing over the next 12 to 24 months with your property, please let us know when we can discuss this with you to create a game plan that best suits your family’s personal financial needs.

For those of you looking to purchase a home in 2023 there are new programs coming about that might help ease your entry into home ownership. If you have not yet scheduled your pre-approval appointment with William or with Brian please send us a direct message or contact them directly so that we can help you best prepare for home ownership this year. You will still see that there is mild buyer competition but in general less and less overbidding and fighting over one another to get into homes.

Wherever we can help you win in mortgage and real estate we want to help you win. We want you to feel secure and confident about your financial future when it comes to your mortgage options and your real estate holdings. Tell us how we can help!

…

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!

Here is a quick recap of what went down last week.

First on Tuesday we got the consumer confidence reading which came in better than expected and although we are still digesting everything that has occurred in the month of March, the consumer in general still has some optimism left in the tank. And the new question will be at what point could they begin to feel fatigue? I do have a sense that fatigue will begin to show in future consumer confidence readings as I have been hearing people around me grumble and utter under their breath about elevated prices everywhere they look. This will eventually reflect in the numbers even if they don’t right now.

Wednesday we got pending home sales that came in better than forecast and also still in positive territory. So even though it only expanded by .8% that was a much better reading than the – 2.9% forecasted. Like I mentioned last month when the print was 8.1% I said this would be a key marker to carry real estate and mortgage across the finish line in 2023. Keep your eyes on this reading…we will be!

Thursday we got the final quarterly GDP number which was 2.6%, just shy of the 2.7% forecast. This is a very good sign on the surface, however we also must remember that the fed is forecasting “below trend growth” in the next years ahead. This number is expected to retreat over the course of the next 12 to 24 months. Also, Additional unemployment claims came in just higher than forecast and are right around where the target number needs to be in order to achieve an increasing unemployment number for the duration of 2023. As this number continues to grow throughout the course of the year the effects and the impacts it has in the material economy will begin to show with less dollars chasing goods. The hope and intention is that products and service sectors will eventually begin to reduce prices as a result of consumer pain hitting their personal pocketbooks. It’s not upon us now, but it will have to come at some point.

On Friday the Federal Reserve’s main measurement for inflation came out better than expected. I’m talking about the Core PCE reading that was forecast to be .4% and it came in at .3%. This is a good sign because it is lower than expected and it also shows that there is plenty of work still to be done because the .3% is still in positive territory month over month and will eventually have to be a zero print and then a negative print in order to return down from our highs.

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Looking ahead next week is predominantly about jobs manufacturing and services. We are going to get a whole host of data that indicates whether or not our economy is expanding in services and manufacturing while at the same time seeing what job growth or contraction is occurring with the jolts job openings, ADP non-farm employment change, unemployment claims, average hourly earnings, nonfarm employment change, and the actual unemployment rate! All of this may not move the markets that much in comparison to overall banking health and the mixed messaging The US treasury and Federal Reserve members have been making over the past few weeks, but it is advised that we still take this into consideration as they foretell what the next quarter will look like – Which will make a direct impact in mortgage rates

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So what’s this all mean for mortgage rates Andy?

Mortgage rates got better last week for a few days but then revisited their most recent averages meaning that intraday repricing for the better did occur on select days of the week but in general rates ended up rebounding to where they started at the beginning of the week. This is the type of price action in mortgage rates that we expect moving forward into quarter 2 of 2023. The mortgage market has less and less participation of the Fed and more and more to do on its own. It will influence the markets as banks will have to become more appetizing with lower rates than what we’re currently seeing in order to regenerate loan business which is the primary revenue stream for banks.

We are beginning to get a lot of needs based questions from people about what they should do during this time in their personal finances and in their real estate and mortgage strategy. If you are unsure what you should be doing over the next 12 to 24 months with your property, please let us know when we can discuss this with you to create a game plan that best suits your family’s personal financial needs.

For those of you looking to purchase a home in 2023 there are new programs coming about that might help ease your entry into home ownership. If you have not yet scheduled your pre approval appointment with William or with Brian please send us a direct message or contact them directly so that we can help you best prepare for home ownership this year. You will still see that there is mild buyer competition but in general less and less overbidding and fighting over one another to get into homes.

Wherever we can help you win in mortgage and real estate we want to help you win. We want you to feel secure and confident about your financial future when it comes to your mortgage options and your real estate holdings. Tell us how we can help!

…

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!

Called it! I called it. Last week I said that the Fed was in between a rock and hard place and that the way they approach their press conference would be VERY telling about how they view the markets, bank stress, and whether they’re winning the fight against inflation. Remember last week? You remember right? 

 [From last Week’s episode] “What I’m looking for next week is to see how much of their time in front of camera is spent addressing their longstanding goals versus what they feel they need to address to restore confidence to the American population that their money will be safe in the institutions that have come under duress over the last two weeks. This will be a very critical meeting for the Fed to do 100% accurately otherwise this will signal they are actually way more worried about the system than they are leading on, and therefore abandoning the other issues that they have been telling us are their primary concerns for nearly a year. They HAVE TO GET THIS RIGHT.” 

 So what happened? Jerome Powell had to get up there and do a dog and pony show, do a little bit of a dance and try to very creatively answer reporters’ questions while also not throwing the markets into a complete freefall – all while trying to avoid issuing contrary statements and he was struggling. I kind of feel bad for him, kind of.  At one point he mentioned the recent bank collapses would be under independent investigation when days prior it was revealed that SVB had already been in oversight, so how did they get caught off guard? It just doesn’t make sense! And then he had to deliver difficult news about unemployment but before we get to that remember this from a few weeks ago? 

[From 3 Week’s Ago!] “Thursday March 2nd unemployment was pretty much the same as the previous week, pretty low, and a non-issue EXCEPT FOR THE FACT THAT THE FED NEEDS TO SEE MORE UNEMPLOYMENT AND IT’S NOT HAPPENING!!! They’re totally going to raise rates again, especially because the labor market isn’t softening like they need it to.” 

See? Even though we had bank failures since that was aired, the fed had no choice but to stick with a rate hike because they aren’t seeing the inflation return to 2% like they want…so they just have to keep going. They also had to keep going to communicate that the recent bank failures are not paramount to their primary objectives of returning inflation to 2%, softening in the labor market (code for increasing unemployment), and restoring price stability to the markets. Pausing would have been interpreted that they’re abandoning their main goals they’ve been telling us about for nearly a year! And that bank failures aren’t over, and are a bigger problem than we know about. 

Look, I hate to be the one to communicate this but Jerome Powell clearly stated they need unemployment to be at 4.5%. The most recent unemployment reading was 3.6% which means they need unemployment to go up almost a WHOLE PERCENT in order to create the demand destruction The Fed needs to see –  in order to slow down spending which will reduce prices, thus decreasing inflation and restoring to price stability. Less money to spend brings prices down because dollars chase products when there’s too much money in the system, and products chase dollars when the dollars become more scarce…the only way to separate people from their cash, is to reduce prices….thus eventually bringing inflation down to 2%…which then also achieves restoring price stability. But let that sink in a second, if we have approximately 160 Million people employed according to the Bureau of labor and statistics, 1% more unemployment is roughly 1.6 million more people hitting the unemployment lines to bring down inflation….that’s a lot. Like a Lot a lot!!! 

And this leads me to the another doozy from the press conference. When asked about whether or not he was worried about unemployment causing a snowball effect he said that reducing inflation is not linear, but as you can see from this explanation the snowball is exactly what will help cause inflation come down and so to try to avoid one would run counter to the logic that the snowball is actually what causes the outcome they need to see. It really sucks to say this, but they’re telling us that they need more pain in order to achieve their goals, and I hate to put it that way. However, they said it and even showed their charts projecting future rate expectations and inflation figures. 

Yes it’s a problem from last week’s press conference though, Jerome Powell put up a dot plot chart that showed their expectation of being back to 2% inflation in 2025…that’s 2 years from now. Which means they cannot deliver the “soft landing” it was not “transitory” it has become “sticky” and currently “entrenched” until “more pain” makes it’s way through the economy. 

So what’s this all mean for mortgage rates Andy? 

Mortgage rates were all over the place like I said they would be and this will remain the case moving forward because of the Statements Jerome gave and the interpretation of the press conference answers. Some of this was really telling! 

This week we’re not even reviewing economic reports because it all really pales in comparison to all the items Jerome Powell covered last week. Yes the data will matter looking forward, but what everyone’s focused on right now is banking stability, and digesting what the Fed said in order to brace up for the remainder of 2023, 2024, and into 2025…I can’t believe I’m saying that. 

And before you think I’m being negative I’m simply giving you front row feedback from what the Fed actually said, the reasoning and rationale they gave for their decision, and my previous experience in this industry through 2008 and 2009. We already had a front row seat to difficult economic times once during our business lifetime, and everything happening right now indicates that they are doing their best job, however the results they seek are still not on the horizon in the near future. 

As I said last week you really just need to be prepared for mortgage rates to be extremely volatile. It might sound like I’m overreacting to say that banks are on pins and needles watching every single move, every single word being said, every single thing not being said, and every piece of data that could influence the market one way or another, but right now uncertainty rules in all aspects of the financial markets. Depositor banks are very quickly reassessing their risk and exposure, mortgage lenders are readjusting pricing, the equity markets are trying to find their footing, and all the while residential homeowners are currently hunkered down with their fixed low rates they got in the last two years waiting it out to see what happens next. 

if you are currently in escrow and looking to lock your loan this week, be sure you are getting rate alert from your loan officer that notifies you and them every time mortgage rates increase or decrease during the open trading sessions Monday through Friday. On days where there may be uncertainty in other parts of the market, money can find its way into mortgage-backed securities and when there is more supply there is decrease in rates. Also Please remember that banks are in the business of making money, and they make that money by lending out funds to people like you and me. So there will be a point at which the rate environment must become more appetizing in order for them to begin lending out money more regularly in order to increase loan revenue, because in the end that’s what banks do and that’s how they make their money. 

If you have questions and you wish to talk with one of us here on the team please send us a direct message, email, call or text so that we can help you make the best choice considering all the circumstances facing you and your family. Again, we’ve been at this for 18 years and we have our finger on the pulse of what’s happening in the markets. Wherever we can help you win in mortgage and real estate we want to help you win. We want you to feel secure and confident about your financial future when it comes to your mortgage options and your real estate holdings. 

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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!

Before we jump into all of the economic expectations for the coming week we have to address all of the recent bank failures and the list of banks that are under financial stress and duress due to the most recent bank runs. At this point you have probably seen numerous news pieces about this as well as online videos and articles highlighting the potential risks that the United states banking system is under because of a variety of reasons. Not all of these threats to the system are equal because not each bank has the same type of risk at the same rate of risk.

The primary take away that I want everyone who watches this show to have is that the mortgage industry is connected to the banking industry, the Fed, the treasury, in a very specific regard as it relates to lending to residential real estate, and is more of a sidecar to the main show rather than the culprit. This is a stark contrast to 2008 and 9 back when mortgage and real estate were the primary catalysts with too easy lending standards, wild financial products, improper investment ratings of products and institutions, just to name a few of the issues. And more than anything else what I want you to know is that the current state of affairs when it comes to banking in the United states has very little to do with risk associated to residential real estate and mortgages at this time.

You should also know that we are out of the woods yet because every day we wake up to new news and information that was unknown the prior day. As more and more information unfolds it alters and changes the context for which we assess the forward-looking risk the banking system, which then impacts the type of backstops or bailouts the government and the Fed need to come up with in order to prevent all out collapses.

I have to admit, the solutions for the SVB bank run were astonishingly quick and did have a very familiar sense to it because it was handled over a weekend much like some of the other bank takeovers were back in the Great Recession of 2008 and 9. Again although there are much different reasons for why this happened, but the swiftness for which they backstopped this failure felt very familiar. My hope moving forward would be that other banks looking on would not continue to run high risks in the hope that they will also receive some sort of backstop if it goes too far and works against them, however this move to backstop SVB bank as quickly as they did signals that it is OK for these banks to overleverage, under regulate themselves, and do that all without consequence to their business.

Let’s quickly recap what went down in the data last week and talk about what’s coming next.

All the CPI news from Tuesday last week spells bad news for the fed because they were all pretty much what we expected…remember we need these to be going DOWN, not hitting their mark. Hitting the mark means that there is more time we have to wait before prices retreat and actually begin to decline.

All the PPI data last week spelled goods news because they ALL MISSED TO THE DOWNSIDE meaning that they were softer than expected…this is good news because easing on the producer side of things signals that we can eventually expect easing on the consumer side, but only more time will tell when that will be.

And once again the Empire State manufacturing index came in super weak WAY WORSE than expected and will remain a trouble spot for our economy for the months moving forward because of the variables that impact this reading becoming worse thus undermining this data each month. If we continue to see weakness in manufacturing, that sends ripple effects throughout dozens of industries connected to getting products made, out the door, delivered to their destinations, and purchased by businesses and consumers. It’s like the first domino in a string of 12 dominoes…when the first one tips eventually all the others do too!

Both Building permits and housing starts came in way better than expected which is a bright spot for housing in particular because we need both permits and housing starts to move in the same direction and provide more inventory for an extremely tight housing market. Above all other news last week this one is definitely going to carry us through 2023 into a more positive 2024 as it relates to real estate and mortgage specifically.

Preliminary consumer sentiment, and preliminary inflation expectations both came in well below expectations. This is bad when it comes to consumer sentiment but it is good when it comes to inflation expectations. We would like to see the consumer feeling confident about the market but the fact that they have a lower reading than was expected indicates that the reality of prices becoming more and more entrenched is souring to the consumers feeling about the economy. This is also is reflected in the inflation expectations being lower than expected in the sense that people see some prices flattening which also signals that there is potentially a top being met.

Despite all this information that came out last week, really everyone’s attention was on bank failures and other bank potential failures. In a week prior to fed meeting, this information would have been considered much more heavily than it was because it got caught in the deep long shadow of the systemic weaknesses of the banking system coming under heavy heavy scrutiny.

And now this week all eyes are on the Fed again, but not for all the reasons we thought just a few weeks ago. Instead of Jerome taking the podium to announce a rate hike as well as make a statement then take questions strictly from the economic data and monetary policy discussions they have over their two day meeting, they have to very carefully and narrowly weigh how much of their time spent in front of cameras will be dedicated to addressing bank confidence and how capable they feel our system still is.

Do not get this mixed up, this is a really big distraction for them. For months they have been talking about inflation needing to come down to 2%, they have been talking about needing the labor market to “soften” which means more unemployment, they’ve been talking about restoring price stability to the markets, and now the big albatross around the neck of the Fed has everything to do with bank stability and Americans confidence in the banking system. They absolutely did not need this distraction.

What I’m looking for next week is to see how much of their time in front of camera is spent addressing their longstanding goals versus what they feel they need to address to restore confidence to the American population that their money will be safe in the institutions that have come under duress over the last two weeks. This will be a very critical meeting for the Fed to do 100% accurately otherwise this will signal they are actually way more worried about the system than they are leading on, and therefore abandoning the other issues that they have been telling us are there primary concerns for nearly a year. They HAVE TO GET THIS RIGHT.

So what does all this mean for mortgage rates Andy? You know after being in this industry for close to 18 years now I have to say that we will probably experience the most wild, most volatile moves in mortgage pricing this week than we have seen since the initial COVID lockdowns that happened and the Fed dropped rates all the way to 0% overnight, and of course the actual Great Recession financial collapse of 2008 and 2009.

There is just no other way to look at everything happening right now in this exact snapshot moment in time and say that we will have smooth sailing ahead, everything will be easy-peasy, and that we should not expect volatility this week. This will likely be one of the most Volatile weeks we will see this entire year barring any other unexpected surprises of course which right now I can’t even confidently say we’ll avoid given all the things being uncovered.

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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!

Remember last week when Andy said that there were two big, REALLY BIG things happening?….Jerome Powell AND Jobs!

First off, Jerome Powell testified in front of the Senate Banking committee Tuesday March 7^th and Wednesday March 8^th . He pretty much sounded like he was reading off the same set of notes from the last Fed Press Conference. He said things like – We will have to hold rates higher than initially expected, for longer than expected and sustain them until we see inflation returning to the 2% target…I mean how many months in a row is this going to continue?!?! I get it, they’re not making traction in the ways they need to, and he’s not gonna reveal any new secrets prior to the meeting coming up next week, but man, the repeated canned commentary is just not helping inspire confidence that we’re heading in the right direction.

Second was Labor and Jobs

• JOLTS continues to be bipolar month after month. North of 11 million one month, then below 11 million the next…then north of 11 million again, and back below 11 million…In my opinion, It’s way too unpredictable to continue as a major variable in Fed policy moving forward. {shrug} But what do I know?….maybe they have a job opening coming up 😉
• ADP Non-Farm Payroll came in super-hot, well above the forecast and even the previous moniths number. So even though we want there to be more job growth like this is indicating, the Fed wants more UNEMPLOYMENT in order to squash demand so that people will stop spending money at these elevated levels. It’s the ONLY WAY inflation has a chance at returning to their target.
• Unemployment wes higher/lower than expected. Again, this reading has the Fed’s attention as it relates to the future because of the aforementioned “demand destruction” strategy.
• average hourly earnings were better/worse than expected but what’s most important is the long term readings COMPARED to inflation. If hourly pay can keep up with the elevated costs, then the problems for the Fed persist as wage earners are able to cope with sustained high prices.

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This week, the most important things happening are all coming at us like a firehose. THIS IS the week before the next Big Fed meeting and rate announcement, so this data will all be considered vital leading up to the March 22^nd Fed Rate announcement.

Tuesday starts us off with: Month over month CPI, year over year CPI and the Fed favorite – Core CPI

Wednesday we get month over month PPI, month over month CORE PPI,  month over month CORE retail sales, and month over month retail sales…But wait! how could there be more?  The Empire state manufacturing index ALSO comes out, which we thought wasn’t a big deal last month but turned out to be a really bad sign for the markets. Wednesday is a big one.

Thursday we’re watching Building permits and housing starts closely hoping for positive readings in BOTH of those. Unemployment also comes out and has been pretty erratic lately and in contrast to what the Fed wants to see happening.

Finally, Friday we have preliminary consumer sentiment, and preliminary inflation expectations readings. It sure would be nice for both of these to reflect some sort of positivity coming into the week before the fed rate announcement. The markets and the economy at large could use some good news right about now.

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So what does all this mean for mortgage rates Brian? You can expect mortgage rates to be flying around all over the place this week. With SO MUCH data coming out AND it being the week before the big fed announcement, you should not expect this week to be smooth sailing.

Weeks like this are where your preparation, communication, and execution all work in your favor. If you have a lock a loan this week, you should stick REAL close to your loan officer and be ready to strike IF and WHEN rates take a midday nosedive.

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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!