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!

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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

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