Monday Mortgage Minute – Most important week of 2023!?!

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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