The Fed, Inflation, Mortgage Rates…a Rocketship week!

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!

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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