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Monday Mortgage Minute – The Fed is up to bat

 

How are we already at the end of the month? January is already gone and vanished…and what a month it’s been.

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Remember last week when I said it’s blackout week?…The week BEFORE the fed’s rate decision and press conference?…it’s SUPPOSED to be calm and quiet. It kinda was, but kinda wasn’t. Let me explain.

The Advanced reading on the GDP came out at 2.9% which was better than expected but this is not as good as the headline might suggest. It was largely driven by increases in inventory investments, consumer spending, government spending, and business investments that were partly offset by decreases in housing investment and exports. Real Final Sales to Private Domestic purchases – which strips our things like trade and inventories – generates a far worse number of just 0.2% in Q4…which is the lowest print since the *Cough Cough “crash” in Spring of 2020.

Think about that for a second, we’re going to cling on to a 2.9% print, but in realistically the expansion of the economy was more like the paltry 0.2%. We could go as far as to say that this might be helping the Fed achieve their goals, since a slowing economy leads to a softer labor market…and what did we see last week?…more tech layoffs! Google, Amazon were the big 2, but that’s on top of other cracks starting to reveal themselves, like Bed Bath & beyond missing credit payments AFTER having warned they would be closing over 100 stores last year.

So take a step back real quick…realize that THIS is what we’ve been talking about here for months. This was expected. This is what they need to happen in order to combat inflation. The next few months will serve as confirmation that what was evidence and projection just a few short months ago, is the reality we’re facing this year as the Fed might actually accomplish their goals, but at the expense of some breakage along the way.

Want to know why I’m so confident in this? Core PCE Personal Consumption expenditure. At the end of last week we got confirmation that the December year over year reading was lower than the November year over year reading. NOW THIS IS REALLY IMPORTANT INFORMATION TO THE FED AND YOU SHOULD EXPECT JEROME POWELL TO MENTION THIS SPECIFICLALY IN HIS PRESS CONFERENCE ON WEEDNESDAY. With that, Let’s quickly review what to expect this week.

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Really everything this week is about the Fed. So if you wanna know what’s happening and what could be around the corner, take note of what is said, and NOT said on the Wednesday Press Conference. It really is all about The Fed, The Fed, The Fed. Expect Jerome Powell to remain pretty clear. They are focused on price stability, A softer jobs market, 2% inflation target. Other bullet points that will catapult us forward into the next round of their decisions will be the following;

Wednesday – ADP and JOLTS Both come out before the Fed Announcement and Press Conference. You can be sure they will already have this information in hand before we, the public, does

Thursday – Unemployment Claims

Friday – Average hourly earnings, Non farm employment, Unemployment rate and ISM Services PMI

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So what’s all this mean for mortgage rates?

This will be a big week for the mortgage market. However, I want to caution you that we’re not completely out of the woods yet. This first quarter of 2023 is really going to set the pace for where rates go through the rest of the year. The more time passes the more we see the direct and indirect impacts of fed policy, so look for silver linings among the mess, but make the right decision that suits the needs of YOU and your FAMILY.

Look, the Fed, the Economy, the Government will always be in the mix of what you do and don’t do when it comes to your mortgage and real estate choices. Ultimately, find a place you love, and neighborhood that fits your needs, and payment that fits your budget. I mean, even if you’re renting right now, you’re likely paying the mortgage of that landlord…so you’re technically making a mortgage payment and only calling it “rent”. So to make that next right step in mortgage and real estate in 2023, it’s imperative you get started now.

Days on Market are going up, listings are having to compete with one another to vy for buyers interest and offers. Sellers are issuing concessions in a variety of ways like closings costs, 2-1 buy down, and other benefits for choosing their home. There’s a LOT less buyer competition in this market, and if inventory holds steady, there will be slim pickins, 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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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!

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.

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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.

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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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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!