We have to talk about mortgage rates. They are on the climb with it’s favorite running mate the 10-year yield. Last week both stretched their legs and went for a steep incline outing only to level off at the end, essentially telegraphing their consistent direction upwards. Undoubtedly this is putting pressure on numerous sectors of real estate and mortgage, along with aspiring home owners, banks & investors as the fed and the markets wrestle one another over inflation and price stability. There are still going to be opportunities in the market, but we’re going to have to work together heading into the end of 2023 and kicking off 2024. If you’re serious about buying a home, hit us up right now so you can position yourself for success.

Could last week’s ADP payroll data be the beginning of the hard labor contraction the fed has been desperately seeking for months on end? In case you missed it, private payrolls came in sharply lower than expected. ADP reported that private job growth totaled just 89,000 for the month, down from an upwardly revised 180,000 in August and below the 160,000 estimate from Dow Jones. Job gains came almost exclusively from services, which contributed 81,000 to the total. Perhaps more importantly, the report provided some sign that a historically tight labor market could be loosening and giving the Federal Reserve some incentive to stop raising interest rates. We’ll have to see about that though. The thing that really caught my attention, was the losses:

• 32,000 in professional and business services
• 13,000 in trade, transportation and utilities, and
• 12,000 in manufacturing

We have to talk about pending home sales. Last week we learned that pending home sales fell by 7.1% in August, significantly higher than expectations of 1.0%. This was the biggest monthly decline since September 2022. NAR Chief Economist Lawrence Yun said “The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates.”

Well sure, but that’s a pretty narrow point to make in response to this data since it’s a force function of a number of variables, not just the fed funds rate. Not to mention that mortgage rates aren’t even determined by the fed even if you wanted to argue that the markets follow the fed lead….I actually think if the other way around, and the fed is on the losing side of the field a lot these days.

Today I have a quick public service announcement. You may not know that we have a weekly podcast show that goes into greater depth and detail on many of the topics we cover here on Monday Mortgage Minute. Will, Brian, Loan-Some Mike, and I bring our collective decades of experience to the table to unpack all the latest mortgage, real estate, and economic news that helps paint a picture for you the viewer about what you need to know regarding the markets right now. With a variety of different roles, and perspectives we each have, the goal is for you to be a more informed, educated, and confident homebuyer, and homeowner. We have new shows rolling out in the new year, so pile into the comments and tell us what kinds of things you’d like to bring your way!

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So with that, let’s take a quick look at what’s coming up in the markets this week. We have a LOT on deck this week.

One could argue that emphasizing the importance of this week could be a bit much….but really? Really. We have 8 fed members speaking, the fed meeting minutes coming out, BOTH major inflation metrics and unemployment data coming out….this is one to pay close attention to.

Monday: is a bank holiday, and 3 fed members are speaking…hopefully there won’t be any fireworks.

Tuesday: Two more fed members speak

Wednesday: the most recent fed meeting notes will be released and another fed member speaks. This could be interesting because the markets will be looking for any clues in the notes about the federal reserves actual confidence regarding everything going on right now. I’m guessing the are gonna keep things pretty tight to the vest and to themselves…they honestly don’t need any drama.

We will also get PPI and Core PPI Month over month. Heads up, it’s likely to be UP. This is directly connected to energy prices, specifically oil, which means fuel, which means producers costs to produce things goes up…this is likely to be up and the markets will not like this

Thursday: is all about CPI and unemployment. Consumers are in focus on this day, and as the saying goes, the *(&%^#^#&& rolls down hill.

Friday: another fed member speaks, plus the preliminary consumer sentiment and preliminary inflation expectations will be released. Maybe it will be a gentle end of the week…maybe.

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For all the talk about what parts of the government would get shut down if the budget didn’t pass, it all turned out for naught. Which is good, because I really didn’t wanna sit here this week and weigh the impacts of a partial government closure on the markets, how long closures would last, and then tap dance around the data next time the Fed comes to the plate in November. So with that said, all the pressure in October & November will be on the politicians in DC plus the Federal reserve members. And I have to say, the horizon doesn’t look too favorable for any of them.  These coming weeks are absolutely stacked to the rafters with discussions, data, and decisions that will make major impacts in 2024 and beyond. Let the jockeying for position begin, while the mortgage and real estate markets are subject to continue being plagued with the current hand we’re dealt.

In case you missed it. Two Fed officials last week said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. On Friday, the August PCE inflation report, the core year/year forecast came in at 3.9% down from 4.2%. Jerome Powell continues to look mostly at the core (excluding food and energy) although with energy prices, increasing higher costs will likely feed through the economy. Therefore it DOES impact what we pay at the registers despite everyone wanting to strip out those costs from other inflation measurements. Have you every baked a cake and then tried to take two ingredients out? Of course not, all the ingredients are necessary and when you try to remove SOME ingredients, you end up messing up the flavor of the cake. This is akin to skewing the impact in the wallets of consumers out of convenience for a “less volatile” metric. Look, we all pay for food and energy EVEN when they are volatile….so c’mon guys!

Did you hear what Jamie Dimon said last week?!?! Don’t look to JPMorgan CEO Jamie Dimon to calm things down, as he warned that even a 7% Fed funds rate is possible – that’s a long way from where we’re at right now. This seems to be a shot across the bow that Investors need to be prepared for 7% fed funds rates because he believes most of them aren’t. That’s a stark warning from JPMorgan Chase CEO Jamie Dimon over potential risks for the U.S. economy. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,” Dimon said in an interview with the Times of India. So will this come to pass? Or is he taunting the Federal reserve? Is he factoring other aspects of reinflation that would require rates to go even higher in 2024 before everyone can claim victory? Look, all I know is that EVERYONE’S tone has changed this fall, and we should take note of that. Clearly – transitory, soft landing, and some pain are no longer options…listen up for a new buzzword in an effort try and describe what’s about to happen next.

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So with that, let’s take a quick look at what’s coming up in the markets this week. THIS week is stuffed with a ton of activity, and now that the government budget drama is resolved temporarily this week’s economic information can hit us without any asterisks that would have come from a shut down.

Monday: ISM Manufacturing PMI and Prices come out. Fed Chair Jerome Powell speaks along with fed members Harker and Barr. This could be interesting now that they’ve made their decision to pause raising rates AND the government passed a 45 day continuing resolution to keep the government open. Let’s see what these Fed members have in store for us this week!

Tuesday: JOLTS Job openings comes out and the fed really cares about this one. With just a few short weeks until their November meeting, Jobs data will be a primary focus.

Wednesday: ADP Non-Farm Payroll Employment Change, ISM Services PMI, and two more fed members speak

Thursday: Unemployment change, and Fed Member Barr speaks for the second time this week.

Friday: Average Hourly Earnings month over month, non-farm employment change, unemployment rate, Fed Member Waller speaks.

This is quite a bit for one week. And I have to tell you, I’d rather have all these fed members speaking and all this data coming out with one another so that we can try and put the pieces of this puzzle together rather than blindly guessing what’s to come.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

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They did it again! Last week the Federal Reserve paused interest rate hikes and mortgage rates immediately went up higher for two days consecutively. Jerome Powell and the federal reserve last Wednesday but left room for a possible rate hike in November. So the question is: If they know they might need room to raise rates in November then why not raise rates right now? Do they think that we have finally accomplished their stated goals and we just need more time in order for all those target metrics to be hit? Are they concerned that maybe they went too far and that all lagging indicators will be showing up at the same time – or – possibly now too quickly? Or is there another reason they haven’t stated that’s causing them to leave themselves some wiggle room in order to raise rates in November? And if they do raise rates in November, then that means that the data is not in support of what they need it to be in order to have done that at this last meeting. Despite everyone saying that it makes sense, when you look at all the details- it really doesn’t make sense does it? It’s almost like saying “Oops, we should have done this one last time in September, and since we didn’t, it’s now a mistake we have to compensate for.” ….Great!

And that leads me to what we’ll be talking about next: What does the future of mortgage and real estate look like if the Federal Reserve themselves are saying that they have to leave interest rates higher for longer and that the lagging effects of monetary policy decisions have yet to make their full impact on the economy? Simply stated this means that they are waiting for unemployment to continue cooling and for inflation to get closer to 2% before they make their next decision. And that isn’t even the unsettling part- the unsettling part is that 2024 could be a year where they keep rates exactly where they are at without even being able to offer the markets or the economy a rate reduction. And why is that Andy? Because it has taken us 18 months to get this far and if they raise rates in November then it will be 20 months since their initial rate hikes began in March of 2022. And THAT means if it could take that same amount of time to finally end their prescribed course of fiscal policy tightening, then now we’re not talking about rate cuts until 2025. Thaaaaat could be too late. Expect rate cuts to start in 2024, cause that’s we’re gonna need them.

Look, I really want to believe that the Fed has chosen the lesser of two evils when it comes to battling inflation and trying to restore price stability in the markets. However, this little exercise over the last year and a half has been very challenging for so many reasons: not to mention mortgage and real estate being in the Direct Line of fire of these policy changes. We have historic unaffordability, interest rates the highest they’ve been in 23 years, delinquencies the lowest in 27 years because of the mortgage market refinancing half the country with the lowest mortgage rates that we’ve ever seen back in 2021 and 2022 (which also happened to be the two highest years of mortgage origination volume ever recorded on history). Coupled to these things we have a resilient consumer and continued spending – even if it is with credit cards. We have seen that inflation which recently bottomed out and has made an uptick that now leaves us asking when will we actually see the true decline that they have been asking for.

So here are three things you want to watch for between now and the federal reserve’s next meeting in November 2023.

#1 Core PCE- this is the feds favorite measurement of inflation, and it needs to get as close to 2% as possible as quickly as possible. Anything above 3% is still a threat to their overall goal.

#2 We need to see unemployment getting closer to 4.5% percent – yes, I know that sounds painful and I know that means a lot of people are going to face financial duress; However this is exactly what they have been telling us they need to happen in order to reduce the amount of dollars in the economy chasing the amount of goods being sold.

#3 We need to see fewer job openings and more early retirements which both eliminate the total number of Americans in the workforce. The secondary effects of this ultimately help price stability restore because when demand cools prices have to come down.

Will we see each of these moves in the right direction between now and November? We’re just going to have to wait; however, these are 3 key indicators are primary for the Fed to see they are making progress so that they pause rate hikes in November rather than raise rates one final time

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So with that, let’s take a quick look at what’s coming up in the markets this week.

Monday: Fed member Neil Kashkari speaks, and will likely only parrot what Jerome Powell told us last week.

Tuesday: Consumer Confidence and New Home Sales both come out.

Wednesday:  We get Durable Goods Orders and Core durable goods orders

Thursday: Final GDP Quarter over Quarter is released ß This will be important for knowing whether or not we can achieve a “soft landing” or if we have trouble brewing on the horizon. WE also get unemployment claims pending home sales and Fed Chair Jerome Powell Speaks…Don’t expect him to say anything different…he’s gonna play this one pretty safe.

Friday: Core PCE Price Index and Revised Consumer Sentiment. Keep one eye open on that one, revisions can sometimes be tricky and in recent history, some revisions have been really ugly, but since they are not the most popular topic of the day…the powers that be can get away with sneaking really bad news into these rearview looking data points.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

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Last week was all about inflation which we talked about. Consumer inflation came in at 3.7% which was higher than projected, and STILL really far away from the Fed’s 2% overall inflation target. Too many people on TV just fan the flames of market optimism, completely void of any recollection of economic history. In the past we’ve seen inflation weaken as an initial sign of progress, only to rear it’s ugly head again, right before deflation finally kicks in and wrecks a bunch of stuff in a lot of sectors of the economy. This is showing those same markers, but ok maybe it’s for different reasons. I agree with that. And Fine, those of you who are asking “why isn’t he talking about PCE?!?!” which is the Fed real marker for whether we’re making a dent in inflation…we’ll it’s still positive too, and until it starts reporting zeros in growth of even some negative numbers…we’re still in a month over month ascending line chart. By the way, I’m willing to bet that Fed members were probably aware of this during their Jackson Hole Symposium meeting recently. Remember a number of them hit the press stating that they’re prepared to raise rates higher if they need too, and then hold them there for longer….maybe its time we start believing what they’re telegraphing.

If anything has a chance of making the Fed pause rate hikes this week it will be softening jobs data. As we’ve been telling you, they want to see 4.5% unemployment rate – which is a combination of increasing numbers of American’s hitting the jobless line at the same time that companies are telegraphing hiring freezes, and making less new jobs available. Look no further than the most recent JOLTS report that was 700,000 LESS JOBS available than the previous month. And don’t even get me started on the hundreds of thousands of combined tech layoffs that have happened this year. Maybe you even forgot about all that because they have drifted off into the furthest recesses of the news headlines and collective attention span. And while weakening unemployment is bad for the economy, it’s actually good for the Fed…which somehow is also good for the economy…but on a much longer timeframe than we’ll probably be comfortable with. September 20 will either be a HUGE day for the Fed or a massive disappointment that forces everyone’s attention on their November meeting. If they need to take more action, I’d honestly like to see them do it now RATHER than whack the economy one more time in November right before the holiday shopping season.

At this point opportunities in the real estate market need to be looked at the MICRO level, meaning YOUR specific scenario and what will help YOU advance your real estate and mortgage goals. Yes, we know that certain market conditions like lower rates, reduced home prices, and more inventory will help more people, but you know what?…THIS is the time where maybe you have to compete against YOU. What does your life circumstances call for? Is renting STILL in your future? What are you capable of doing that can help you increase your income, decrease your debt, and raise your credit score. Let’s start digging in and going after our personal financial goals like they mean something and go hit those goals!

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So with that, let’s take a quick look at what’s coming up in the markets this week.

Tuesday: Building Permits and Housing Starts. Both of these are critically important to real estate and mortgage. We need more inventory any way we can get it. And with existing home sales really coming up short this year, our hopes for more buyer options in housing in 2024 will come from these batches of data. Hey Builders – we’re watching and hoping you step to the plate with more homes in the new year!

Wednesday:  Is the biggest day of the week, Month, and maybe even the year. Jerome Powell will announce the Federal Reserve Interest Rate decision, give his prepared remarks, and hold a press conference. Will they hike or will they pause? If they hike, what will they tell us about that decision? If they Pause, can they tell us that we’re finished or not?

Thursday: Unemployment Claims, Philly Fed Manufacturing Index, Existing Home Sales will be released.  Mostly par for the course here, but keep an eye open for any surprises.

Friday: Flash Manufacturing PMI and Flash Services PMI both come out.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

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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 1^st. 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?

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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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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!https://youtu.be/vjCMN2XVq0Q