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.
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!
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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