Mortgage Rates last week were pretty ugly coming off the 3 day weekend. The bond market and mortgage-backed security investors continue to gauge where the puck is going next when it comes to the fed and their monetary policy. The housing industry is strapped with historic unaffordability, the highest mortgage rates in 23 years, waning resale inventory and shallow new build inventory coming to the market. Some of this is seasonally expected in areas where in-climate weather puts a damper on home sales, but these trends are troublesome for sunshine states due to their economics, not just the weather. Towards the end of the week things evened out, but overall, mortgage applications are generally in decline year over year substantially, which then adds other pressures in the real estate system we have yet to deal with.
The Federal Reserve really has their work cut out for themselves this month. Everyone, I MEAN EVERYONE that’s connected to financial markets, mortgage and real estate is paying very close attention to every word spoken by fed members leading up to next weeks meeting, not to mention the data that shows whether we are in line with fed expectations or not. Which in turn, will determine whether we see them pause or hike rates again this month. Despite there being bold confidence from both the rate hike and rate pause camps, this could actually turn out to be a toss up, where they could kick the can down the road and yet again delay any such decision until their final meeting of the year on November 1st. What will they do?….
So when is enough enough? We’re 18 months into the current Fed tightening cycle and still hearing that there is room for more rate hikes, and that elevated rates may have to be held higher for longer in order to see the desired effects the federal reserve wants to see. Further, there’s current data references rivaling past historic black eyes to make one think they’re going steady and about to get married. Mortgage rates their highest since 2000, anyone remember the dot.com bubble? How about affordability at it’s lowest since 2008, remember the global financial collapse? And what about available inventory? Again, lowest since global financial collapse. All these comparisons are pretty nasty, but rather than getting jerked around by the comparisons, all the real pressures are in the hands of the deciders who will ultimately determine whether we’re lining up for further pain, or gain hero status by getting us outta this mess. Which do YOU think will happen?
So with that, let’s take a quick look at what’s coming up in the markets this week.
Wednesday: is all about the CPIs. Core CPI month over month, CPI month over month, CPI year over year. This will probably be one of the biggest data releases in recent history because the Fed has pegged this piece as critical to their rate hike or rate pause decision. Not to be outdone,
Thursday: Core PPI month over month, core retail sales month over month, PPI month over month
Retail sales month over month, unemployment claims. As for all the “month over month” readings, these are all going to be critical to show the Fed momentum for the better or worse which will let them know whether they should pause or hike rates at next week’s meeting. Coupled with the previous days CPI data, these will likely be the determining factors…And I’m guessing they already know this prior to it’s release….and probably already know what they’re gonna do during their rate announcement Wednesday September20th.
Friday: Empire State Manufacturing Index, Preliminary Consumer Sentiment reading both come out and will play second fiddle to all the inflation data we’re getting. BUT let’s not overlook the impact of what these two reading actually mean in the function of the overall health of the economy as they measure two different parts of the economy, but do have connection points between business and consumer relationship of consumables and spending health.
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