Monday Mortgage Minute – Uh oh the Empire State Manufacturing Index was super bad!


Guess what?….we had a surprise last week. We didn’t dive into the Empire State Manufacturing index because it’s not really housing related; however, it peeled back a layer of how vulnerable we might actually be as an economy. This index is a leading indicator of economic health. Businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The reading was expected to come in at -8.7 (anything below ZERO is BAD NEWS)…Well the actual reading came in at -32.9! This rocked the markets and cause a lot of market makers to take a step back and reevaluate where this is all heading, Which leads us right back into…PPI.

And PPI is where we found a bit of relief…because all PPI measurements came in BETTER THAN EXPECTED! Which is a sign that we can reasonably expect consumer price index numbers to follow suit in the months ahead…we will see. There’s still a lot of steps between producers and consumers, so further evaluation will be necessary. Then we had Retail Sales and CORE retail sales BOTH come in very weak – Not a really good way to start the new year. This will probably make it’s way up my radar as we monitor signs of improving or deteriorating conditions in the overall economy and how that weighs in on Mortgage and Real Estate.

Let’s quickly touch the NAHB Housing Market Index – The National Association of Homebuilders. Remember what we talked about? This index has been getting clobbered month after month after month, falling from 83 a year ago, all the way down to 31 in December…Well it came in at 35, which is better than the previous reading of 31…but WELL below 50 still and Existing Home Sales continue to be in the ditch as they booked their 11 consecutive month in decline. You can start to paint the picture that one side of the coin might be getting some sunshine, while the other is completely in the shade. And that’s the story here. With inventories remaining, and mortgage rates still well above their 2020 + 2021 lows, this kind of news overshadows any positive change in the Home builder sentiment.


With that let’s get on to this week’s market outlook! Next week is a VERY LIGHT WEEK because it is considered a “dark week”. This refers to the week before the Federal Reserve announces their next rate hike decision and does their press conference aka publicity dance. Ok ok…There is one thing we’re going to watch and it’s the Advanced reading on the GDP. It IS an advanced reading…so, not final, therefore not as relevant as any publicized final number. Theoretically this shouldn’t weigh in much on what the Fed Does February 1st, but if somehow it’s so off the mark that the reaction is “house on fire” then maybe we’ll see it mentioned on the February 1st press briefing. Otherwise, Jerome Powell has been pretty clear – They are focused on price stability, A softer jobs market, 2% inflation target.


So what’s all this mean for mortgage rates? The markets continue to gather all the data they can leading up to the Fed Rate hike decision and press conference February 1st. Intermittently, rates are following the direction of the markets going lower and higher day-in-day-out depding on the conditions of money flow, but if you need to make that next right step in mortgage and real estate in 2023, it’s imperative you get started now. As we’ve been discussing, rates will likely hover in this range we’re in for quite some time until something obvious shifts sentiment and money in a defined direction. Until we start seeing progress made to reduce inflation, expect that elevated rates are what we’re contending with.

Also, a reminder – there’s a LOT less buyer competition in this market, and if the Homebuilder index is any indication, there’s still not a lot of new inventory coming to market anytime soon. Therefore, prices could stabilize or lightly correct vs. crash and burn. And someone else’s cold feet could be your opportunity to get in that dream house in 2023. If you haven’t heard about the 2-1 buy down yet, that’s the focus of last week’s podcast. Memo and Brian reviewed the program and talked about how people are using it today to win in the market. Take a listen and see if this is what can help you achieve your ownership goals in 2023.


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