Mike's Daily Rate Commentary | Home Loan Mortgage

Today’s Mortgage Rates in September 2023



Mortgage Mike
Mortgage Mike
September 29, 2023 | 26 Minute Read

Sept 29, 2023

While mortgage bonds have improved following todayโ€™s PCE news, the trend for higher rates remains intact. Until the longer term trend is broken, there is minimal incentive to float. We have a short term opportunity today to take advantage of a slightly improved market.

Inflationโ€™s Surprise Plot Twist!๐Ÿ”ฅ

The latest report on Personal Consumption Expenditures (PCE) reveals that Core inflation experienced a modest increase of only 0.1% in August. This figure falls short of the marketโ€™s expectations of 0.2%, causing the annualized rate to decline from 4.3% to 3.9%. PCE serves as the primary measure utilized by the Federal Reserve to gauge consumer inflation, highlighting the significant progress still needed to achieve their target of 2%.

However, itโ€™s worth considering that if we were to witness a consistent 0.1% increase over the next 12 months, the annual inflation rate would reach 1.2%. Hence, it is evident that the current pace of inflation remains well below the Federal Reserveโ€™s desired range.

Shutdown Showdown: Game of Politics!๐Ÿ’ฅ

As the possibility of a US shutdown looms, the conversation now centers around the duration of this potential crisis. With ten staunch Republicans refusing to support a short-term funding bill, House Speaker Kevin McCarthy may find himself compelled to seek a compromise with Democrats, jeopardizing his position as house speaker. In his perspective, an extended shutdown would be the worst-case scenario, prompting him to potentially bypass his fellow Republicans with whom he cannot find common ground.

Fedโ€™s Dilemma: Mortgage Magic & Consumer Spending๐Ÿก

One of the biggest hurdles that the Fed is grappling with is the robustness of consumer spending, which witnessed a 0.4% increase in August. However, the Fed seems to overlook the fact that a significant number of homeowners have managed to slash their housing expenses thanks to the low mortgage rates prevailing in 2020 and 2021. Consequently, these homeowners, who would otherwise be potential move-up buyers, find themselves stuck in their current homes with a substantially higher amount of disposable income compared to pre-2020.

Nevertheless, once interest rates decrease and the move-up buyer market makes a comeback, these homeowners will inevitably face an increase in their monthly housing costs, leading to a reduction in their spending capacity on consumer goods and services. Paradoxically, this scenario will prove advantageous for the Fed as it will help temper the overheating sectors of the economy.

 

Sept 28, 2023

Tomorrow we will receive an update on consumer inflation from the PCE Report. This has not been favorable to mortgage rates in recent months. Based on the current trend, we will maintain a locking bias.

Riding the Rate Wave: How High Can We Go?๐ŸŒŠ

The relentless surge in mortgage interest rates continues this morning, with national average rates now hovering around 7.83%. Drawing from the historical trends of the 10-Year Treasury Note yield, it appears likely that unless we receive unfavorable economic news to alter the current course of rates, we can expect another ยฝ% increase.

The potential impact on the housing and mortgage industry is truly unsettling to contemplate. With rates already reaching highs not witnessed since the year 2000, most real estate professionals are navigating uncharted waters.

Pending Home Sales Plummet: Is Rate Anxiety to Blame?๐Ÿ“‰

Pending Home Sales, which measures the number of signed contracts for existing homes, experienced a significant decline of 7.1% in August. As the summer months draw to a close, it is not uncommon to observe a seasonal decrease. However, it is clear that the higher mortgage interest rates have played a crucial role in this downward trend.ย 

The traditional move-up buyer market has seen a substantial drop, as many are unwilling to exchange their 3% mortgage for a home with a 7%+ interest rate. The encouraging news is that we anticipate a surge in move-up buyer activity once the rates decrease to a more favorable level.

The Labor Market Conundrum: How It’s Affecting Rates๐Ÿ’ผ

Given the Federal Reserve’s mounting concern over the scorching labor market, the recent unemployment report revealing only 204,000 new claims last week further solidifies their stance on keeping interest rates elevated for an extended period. We eagerly await the BLS’s September jobs report next Friday, which is expected to once again showcase a robust job market, based on the substantial decline in unemployment claims. Unfortunately, if this proves to be true, it will not bode well for mortgage interest rates.

 

Sept 26, 2023

There remains little home of significant improvement to rates in the near term. We maintain our locking bias.

๐Ÿ”ฎJamie Dimonโ€™s Daring Prediction: A 7% Fed Fund Rate and Stagflation? ๐Ÿ“ˆ๐Ÿคฏ

Once again, the leader of JP Morgan Chase, Jamie Dimon, is sounding the alarm about the potential for a 7% Fed Funds Rate, which could mean an additional 1.5% increase in the near future. Not only that, but he also warns of the looming threat of stagflation, where the US economy could enter a recession while still grappling with high consumer inflation.

The notion of a 7% Fed Funds Rate far exceeds the expectations of any voting Fed member. While most anticipate a modest ยผ% increase, one member even predicts the rate could soar above 6% during this cycle of interest rate hikes.

๐Ÿ›๏ธGovernment Shutdown Showdown: McCarthyโ€™s Dilemma๐Ÿค”๐Ÿ’ฅ

This Friday, the Federal Government is once again facing the threat of losing funding due to the failure of our congressional leaders to reach an agreement. However, there is hope on the horizon as reports suggest that both parties may come to a potential short-term deal. Unfortunately, there are hardliners on the right who are willing to go to extreme measures, even threatening to remove Republican House Speaker Kevin McCarthy if he brings this deal to a vote.

McCarthy finds himself caught in a difficult predicament, torn between preserving his position and preventing a government shutdown. Regardless of the outcome, it is clear that this issue is far from resolved. Even if a short-term deal is reached, it would only grant us an additional 45 days before we find ourselves embroiled in this battle once again.

Housing Market Blues: Rates Soar, Sales Plummet, and the Squeeze Tightens!๐Ÿ’ธ๐Ÿ˜ซ

The decline of 8.7% in New Home Sales for the month of August highlights the impact of rising mortgage rates, which have once again surpassed the 7% threshold. This has led to a significant drop in home builder confidence, as we have seen in previous high rate cycles. Both new construction and existing home sales have suffered as a result.

Furthermore, with home values reaching all-time highs according to major price indexes, families in need of homes are facing increasing difficulties in affording the payments. It is clear that either rates or prices must eventually fall in order to sustain this market.

 

Sept 25, 2023

Mortgage rates have been trending higher this morning in response to the surge in Treasury yields. In light of these developments, we recommend a locking bias to secure current rates.

Mortgage Rates Face Uphill Climb as Treasury Yields Surge ๐Ÿก๐Ÿ“ˆ

Any hopes for a modest recovery in mortgage interest rates were dashed this morning as the yield on the 10-Year Treasury Note breached the critical 4.5% level. This significant move has the potential to trigger a more substantial climb, possibly reaching the 5.1% range. Notably, billionaire investor Bill Ackman has taken a substantial short position in the 30-year Treasury market, anticipating a 5.5% yield in the near future. All indicators point towards the possibility of 8% or higher mortgage rates becoming a realistic target in the coming months.

Fedโ€™s Commitment to Inflation Target Raises Concerns ๐Ÿ’ฒ๐Ÿ“‰

Federal Reserve members continue to express their concerns about inflation. Chicago Fed President Austan Goolsbee, in an interview with CNBC, voiced apprehensions about the persistence of higher-than-desired inflation levels. He reiterated the Fedโ€™s unwavering commitment to bringing inflation back to its 2% target without significantly increasing the unemployment rate.

However, the challenge with the Fedโ€™s stance is that they aim to approach their targets before considering any reversal of their rate-hiking policies. This rear-view mirror approach could result in delayed responses to economic shifts.

CEO Insights: Bess Freedman on Home Values ๐Ÿ ๐Ÿ’ฐ

Bess Freedman, the CEO of Brown Harris Stevens, discussed factors impacting home values on CNBC. She attributed rising home values to heightened demand and limited inventory. Freedmanโ€™s perspective raises questions about her belief that home prices will soften when interest rates fall due to an expected increase in inventory.

This assumption hinges on the idea that people will sell homes without repurchasing, which might be true for some investors. However, the majority of home sellers are also homebuyers, which should have a neutral impact on demand and not adversely affect home prices.

 

Sept 22, 2023

Mortgage rates have seen improvement as bond prices found support and trended lower. We anticipate further developments as the day progresses. If you have the ability to closely monitor market conditions, floating might be an option, but be prepared to lock if sentiment shifts.

RE/MAX Settles for $55 Million ๐Ÿ’ผ๐Ÿ’ฐ

Earlier this week, RE/MAX reached a settlement of $55 million in one of the ongoing lawsuits regarding agent commission payments. This settlement has heightened speculation that other real estate giants like Keller Williams and Home Services of America may also consider settlements to avert potential damages in the event of a trial. Across the three lawsuits, the total damages sought amount to a staggering $45 billion.

Clearly, this figure surpasses the combined capacity of the defendants to pay, threatening their very existence. Both settlements include agreements that will alter how commissions are paid in the future. Although the process of implementing these changes may take years, brokerages slow to adapt could face future legal exposure if the existing commission structure is deemed in violation of the Sherman Anti-Trust Act.

U.S. Default Concerns Loom ๐Ÿ›๏ธ๐Ÿ“ˆ

The likelihood of the United States defaulting on its financial obligations is increasing as Congress has yet to reach an agreement on the way forward. Federal employee salaries are among the most vulnerable segments at risk. It is of utmost importance that our leaders reach an agreement before the month’s end deadline. Failure to fund our government could jeopardize our credit rating, potentially leading to higher interest rates.

With the pool of prospective homebuyers significantly reduced since mortgage rates surpassed 7%, this could spell catastrophe for many who depend on the housing market to sustain their families. Let’s hope for a swift resolution and a constructive compromise that satisfies the majority.

Upcoming PCE Report on Consumer Inflation ๐Ÿ“Š๐Ÿ’ฐ

Next Friday, we will receive the latest reading on consumer inflation with the release of the PCE report. Given the recent sharp rise in oil prices, we may see another mixed result report. Headline inflation could increase, while the Core rate might take another step downward. Both inflation and the labor market need to cool before we can anticipate mortgage rates falling to levels suitable for most homebuyers. The upcoming months might bring some economic challenges.

 

Sept 20, 2023

Given the Fed’s announcement today, we anticipate considerable volatility in mortgage rates. Ideally, Chairman Powell will adopt a more accommodative tone to help stabilize the markets. He is cognizant of the turbulence they’ve caused but has yet to demonstrate a willingness to restore stability to the bond market.

Fed Interest Rate Decision Today ๐Ÿฆ๐Ÿ“ˆ

At noon MT today, we eagerly await the Federal Reserve’s decision on interest rates, with Fed Chairman Jerome Powell to keep rates the same. The Fed Funds rate currently stands at 5.25% to 5.5%, marking a 22-year high. Following the meeting, the Fed is set to release updated projections.

These projections may reveal that some members advocate for at least one more rate hike before closing the chapter on this round of hikes. However, external factors such as a potential government shutdown or an extended auto strike could recalibrate these expectations down the road.

Oil Price Surge Raises Inflation Concerns ๐Ÿ›ข๏ธ๐Ÿ“‰

Oil prices have experienced a sharp ascent, with Brent Crude now trading just below $95 per barrel. This upward trajectory raises concerns about inflation and could potentially prompt the Fed to continue its rate hikes if prices don’t stabilize. Elevated oil prices tend to get passed on to consumers, as shipping and production costs increase in tandem with rising fuel prices.

The optimistic scenario is that we witness a pattern similar to 2022 when prices peaked in November and subsequently dropped significantly.

Housing Market Struggles Continue ๐Ÿ ๐Ÿ“‰

Housing starts have plummeted to their lowest levels since June 2020. This decline coincides with a sharp drop in builder confidence, largely fueled by the looming threat of rates surpassing the 7% mark once again. This poses a significant challenge to the housing market, as we require new housing starts at a rate that can satisfy buyer demand during next summer’s peak season.

At some juncture, a resolution is essential. We cannot indefinitely sustain this status quo. Either home values need to adjust or mortgage rates must come down.

 

Sept 18, 2023

Mortgage interest rates are continuing their upward trend. As we approach Wednesday’s Federal Reserve rate announcement, be prepared for heightened rate volatility. Therefore, we are maintaining a locking bias.

Recession Predictions by Mortgage Stanley ๐Ÿ“‰๐Ÿ’ผ

Mortgage Stanley has recently made headlines by forecasting a recession for next year. They’ve adopted a more pessimistic outlook for US stocks in 2024. It’s been 18 months since the Federal Reserve started raising interest rates. Historically, rate hikes have almost always preceded a recession, typically with a lag of around 10 months. However, in the 2008 financial crisis, the lag was 17 months.

Many experts now believe we may be in the late stages of the current growth cycle, with expectations that the Fed may start cutting rates by next summer to mitigate the severity of the impending recession. It’s worth noting that the Fed has historically been criticized for responding too late to economic shifts, and this time might not be an exception.

Looming Government Shutdown ๐Ÿ›๏ธ๐Ÿ”’

Another factor threatening interest rates is the looming possibility of a government shutdown. Just a few months ago, our elected officials failed to reach an agreement on funding the national debt, leading Treasury Secretary Janet Yellen to take extraordinary measures to ensure payments to Social Security recipients, the military, and federal workers.

This situation resulted in a downgrade of US debt by rating agency Finch and contributed to rising interest rates. A second debt ceiling standoff could not only risk further credit downgrades but also push interest rates even higher. Let’s hope for a timely resolution before we reach a critical point.

Economists’ Views on the Fed’s Future Moves ๐Ÿ“Š๐Ÿ“ˆ

An intriguing survey featured on the front page of the Financial Times gathered the opinions of 40 economists regarding the Federal Reserve’s future actions. Remarkably, 90% of them believe that there’s more work to be done, suggesting the Fed should proceed with at least one more rate hike. Furthermore, 35% of these economists anticipate seeing at least two more rate hikes in this cycle. This news was met with disapproval by the bond market, causing early morning increases in interest rates.

 

Sept 15, 2023

Unfortunately, there’s little hope for significant improvements in mortgage rates at this time. We will continue to maintain a locking bias.

Housing Market Trends ๐Ÿ ๐Ÿ“ˆ

New listing data is painting a picture of historical lows in the housing market. Surprisingly, despite expectations of higher mortgage rates leading to falling home values, we’ve witnessed the largest crash in new listings ever recorded. This scarcity of supply has been a driving force behind the continuous rise in home values.

The critical metric to watch is the number of homes listed for sale. A growing pent-up demand among current homeowners who wish to sell but are hesitant to exchange their 3% mortgages for rates exceeding 7% is building. However, this situation is expected to evolve, either with homeowners accepting the inevitable or with rates decreasing to levels they find acceptable.

Auto Workers Strike ๐Ÿš—๐Ÿ› ๏ธ

The United Auto Workers have initiated a strike as part of contract negotiations, impacting approximately 10% of their workforce. If this strike persists, it could exert upward pressure on new car prices, given the inadequate supply to meet demand.

This situation might also spill over into higher used car prices as consumers explore alternatives when their preferred new cars become unavailable. Let’s hope for a swift resolution to avoid adding further inflationary pressure to the markets.

Consumer Spending Habits ๐Ÿ’ณ๐Ÿ’ธ

American Express provides valuable insights into consumer spending habits. Despite rising prices, consumers continue to spend robustly. This spending spree can be attributed to changes in consumer budgets over the past three years. Many individuals now enjoy low fixed housing costs established in 2020 and 2021, coupled with unprecedented income increases. This leaves them with substantial monthly budget surpluses that they allocate toward entertainment, vacations, and luxury items.

With higher interest rates failing to curb spending, it appears that only higher tax rates and reduced government spending might effectively slow consumer spending and tame inflation.

 

Sept 13, 2023

Unfortunately, there is little optimism for significant improvements in mortgage rates in the near term. Consequently, we will uphold a locking bias.

CPI Report Insights ๐Ÿ“Š

The eagerly awaited Consumer Price Index (CPI) report has unveiled that consumer inflation still surpasses the Federal Reserve’s comfort zone. The headline CPI surged by 0.6%, contributing to an annualized increase of 3.7%. This uptick has been heavily influenced by the recent surge in oil prices.

When we exclude food and energy prices, the Core CPI increased by 0.3%, albeit showing a 0.4% drop compared to the previous year, settling at 4.3%. As the Fed aims to achieve a 2% target on this metric, it’s evident that there’s a substantial journey ahead.

Mortgage Loan Applications Decline ๐Ÿก๐Ÿ’ผ

Mortgage loan application submissions continue to dwindle, reaching lows not witnessed since 1996, a time even before many current industry professionals, including myself, who got in during 1997.

It’s important to highlight that this downturn is proving more challenging for conventional lenders than the 2008 crisis, which primarily affected sub-prime lenders. These are undoubtedly tough times for the mortgage industry, so if you have friends or colleagues in the business, consider sending them a word of encouragement. A little support goes a long way.

Focus on Upcoming Fed Announcement ๐Ÿฆ๐Ÿ“ฃ

With the CPI report now behind us, all eyes are on next week’s Federal Reserve announcement, where the consensus expects the Fed to maintain current interest rates. The pivotal concern centers around the tone set by Fed Chairman Powell during his speech. If he continues to stress the need for future rate hikes, it could spell trouble for mortgage rates.

However, we remain hopeful that Powell will recognize the progress made and advocate for a period of observation in the coming months. There’s an expectation that he will keep the door wide open for a potential hike in November, which could trigger apprehension in the bond market.

 

Sept 11, 2023

Over the past few weeks, mortgage rates have been gradually moving higher. Given this trend, we maintain a locking bias for the time being.

Housing Credit Resilience ๐Ÿ ๐Ÿ“‰

While credit card and auto loan delinquencies are on the rise, the housing credit market continues to demonstrate strength. Homeowners are consistently meeting their mortgage payments, mainly because a majority secured mortgages with interest rates below 4%. This advantageous rate environment means most homeowners pay less for their mortgage than they would for renting equivalent properties in today’s market.

Furthermore, homeowners are enjoying all-time high levels of home equity, providing strong incentives to stay current on their mortgage payments. Interestingly, it appears that consumers are prioritizing mortgage payments over other expenses, even relinquishing expensive cars to maintain their home investments.

Price Adjustments in the Housing Market ๐Ÿ’ฐ๐Ÿก

Recent weeks have seen an increase in price reductions within the housing market. Some pundits have used this as a basis to downplay the market’s true strength. It’s important to note that home sales typically slow as the academic year begins, and we approach the holiday season.

Additionally, some home sellers who initially priced their properties above market value may opt to lower prices as they observe reduced interest from potential buyers. This phenomenon occurred even during the frenzied housing market of 2021. Moreover, home sales are closely tied to mortgage rates, which currently hover above 7%. A drop in rates below 6% could significantly enhance housing affordability, potentially attracting a new wave of homebuyers.

Credit Trends and Concerns ๐Ÿ’ณ๐Ÿ’ฐ

While the banking industry continues to tighten credit standards, many consumers are resorting to high-interest rate options to bridge financial gaps, both in their households and businesses. This has led to credit card balances reaching new all-time highs. With credit card interest rates well above 20%, this trend may eventually pose a crisis. Furthermore, the Federal Reserve’s ongoing threats of additional rate hikes could exacerbate the cost of credit. It is hoped that we are nearing the end of this rate cycle, offering consumers some much-needed relief.

 

Sept 08, 2023

Mortgage rates are now facing a strong floor of support that could cause rates to move a bit higher in the near term. We suggest a locking bias.

The Agent Commission Battle๐Ÿก๐Ÿ’ฐ

There has been a significant development in the battle over buyer agent commissions this week. Real estate company Anywhere has agreed to pay a staggering $83.5 million and has also committed to changing their approach to including buyer’s agent commissions in the price of a listing. This is just a small fraction of the damages that are expected to exceed $40 billion throughout the industry.

According to Steve Murry, co-founder of Real Trends Consulting, there are three likely scenarios for how buyer agents will be compensated in the near future. Firstly, the broker representing the buyer will need to directly negotiate their fee with the buyer, and sellers will no longer be obligated to offer blanket compensation in order to secure a listing on the MLS. Secondly, more buyers may choose to approach the listing agent directly to avoid paying buyer’s agent fees. And finally, a new buyer/broker model may emerge, where a flat hourly fee is charged to represent buyers.

If you’re a real estate agent and want to learn more about how these changes will impact your business, please email me back.

Fed’s Rate Rollercoaster ๐ŸŽข

Anticipation is building as the next meeting of the Federal Reserve on September 20th approaches. Speculations suggest that a rate hike may be skipped this time, but the door will be left open for a potential increase in November. This uncertainty leaves the bond market in a state of limbo, unsure of when we will reach the peak rate.

Consequently, mortgage rates will experience heightened volatility as investors analyze incoming data each day. However, for the sake of long-term stability, it would be preferable if the Fed were to hike rates one more time in September and declare it as the peak. This initial hit would pave the way for a downward trend in rates.

The current prolonged uncertainty is akin to a slow and agonizing demise, affecting numerous parties, including mortgage companies.

Economic Rollercoaster Ahead ๐ŸŽข๐Ÿ“Š

The unemployment rate has reached its lowest point in decades, providing strong evidence to economists that we are heading towards a smooth transition. However, historical data suggests that the real concern for a recession arises not when the unemployment rate is high, but when it hits its lowest point in a cycle and then starts to rise.

ย With the rate currently at 3.8% after bottoming out at 3.4%, it’s time for forward-thinking economists to start predicting a potential recession. Keep a close eye on this figure as we may witness a significant increase in the coming months.

 

Sept 05, 2023

Mortgage rates continue their upward trajectory. We maintain a locking bias in response to this trend.

Recession Odds Revised ๐Ÿ“‰

Goldman Sachs has adjusted its assessment of the likelihood of a US recession, lowering it from 20% to 15%. This adjustment is noteworthy given the prominent warning signs suggesting an impending recession. Goldman Sachs cites cooling inflation and the resilient labor market as indicators that the Federal Reserve might conclude its current rate-hiking cycle, aiming for a “soft landing.” In terms of mortgage rates, a US recession could expedite the rate-cutting process, potentially resulting in faster declines in mortgage rates. It is hoped that the Fed can adjust rates promptly to prevent a recession from taking hold.

Examining Inflation Factors ๐Ÿ’น

Federal Reserve Chairman Jerome Powell’s recent speech at the Jackson Hole symposium attracted attention. Powell attributed current inflation challenges to factors like the war in Ukraine and opportunistic price hikes by companies during the COVID-19 pandemic.

Some argue that the Treasury Department’s substantial spending on COVID-19 relief programs, funded by the Fed’s money printing and US Treasury debt purchases, injected trillions of dollars into the economy. This sudden increase in money supply chasing a limited supply of goods is a classical recipe for inflation. Powell’s omission of this crucial aspect has added to concerns about leadership trust in challenging times.

Housing Market Trends ๐Ÿก

Realtor.com reports a 3.5% increase in new listings in August, marking a notable improvement from the 20-25% annual declines seen over the past five reports. The slowdown in new listings hitting the market began around one year ago. Consequently, while the annual change is lower, it is due to comparisons with smaller numbers from the past 12 months. As more homeowners opt for the homes they desire over favorable interest rates, it is anticipated that additional listings will enter the market, hopefully sooner rather than later.

 

Sept 01, 2023

Following the BLS report’s slightly stronger performance, mortgage rates have inched higher. Expect continued market volatility as it processes this data. Safe play is to lock.

Job Data Update ๐Ÿ’ผ

According to the Bureau of Labor Statistics (BLS), the US economy added 187,000 jobs in August, surpassing the market’s expectation of 170,000. However, there were downward revisions to the job numbers from the previous two months, totaling 110,000, highlighting ongoing concerns about the accuracy of BLS data. Another noteworthy development is the rise in the Unemployment Rate from 3.5% to 3.8%, indicating a labor market that is progressively weakening and likely to continue its slowdown.

Manufacturing Index Report ๐Ÿญ

The ISM Manufacturing Index, gauging the health of the US manufacturing sector, exceeded market expectations. While it remains in a range denoting a “retraction,” this positive sign offers hope for a potential recovery in a sector that has grappled with recessionary conditions for a considerable duration.

Student Loans Are Back๐ŸŽ“

A significant change has taken place as student loan borrowers will once again accrue interest on their balances. After more than three years of interest-free forbearance, borrowers will now be subject to the interest rates they had when the forbearance began. This continuity is beneficial for those with adjustable rates, preventing potential spikes in their interest costs. The next challenge for many will be next month when actual loan payments resume, impacting households accustomed to deferred payments.

 

Aug 31, 2023

Tomorrow’s BLS report introduces significant uncertainty. If you’re not inclined to take on risk, now could be an opportune time to lock in.

PCE Report and Inflation Insights ๐Ÿ›’

This morning, the spotlight was on the Fed’s favored gauge of consumer inflation, the Personal Consumption Expenditures (PCE) report. The report unveiled a modest 0.2% increase in consumer inflation for July. While this growth rate is reasonable, attention has centered on the annual rate, which rose from 3% to 3.3%.

It’s essential to note that the yearly number’s computation has influenced this change. In a hypothetical scenario with 12 consecutive months of 0.2% growth, the resulting annual inflation would be 2.4% after a year. This is an acceptable figure, markedly lower than the 9% reached last year.

Fed’s Ongoing Rate Dialogue ๐Ÿฆ

Amidst the dialogue on higher rates, varying opinions among Fed members have surfaced. While some argue for the necessity of elevated rates, others suggest that current levels are sufficient, indicating that the Fed might halt future rate hikes. The September 20th Fed announcement is eagerly anticipated, representing a significant moment in this rate cycle. While there’s an expectation that the Fed might leave room for potential future hikes, most economists predict no action at this meeting. The hope is for continued signs of labor market slowdown and sustained downward pressure on consumer inflation.

Anticipating BLS Jobs Report ๐Ÿ’ผ

Tomorrow brings the Bureau of Labor Statistics (BLS) Jobs Report, providing insights into August’s job creation estimates. The market anticipates the addition of approximately 170,000 jobs, with the Unemployment Rate projected to remain at 3.5%. A weaker-than-expected figure could lead to a downward shift in mortgage rates, while a strong report could yield the opposite outcome.

 

Aug 29, 2023

The bond market is at a juncture where we could witness a significant improvement or rapid deterioration. Presently, the momentum favors improvement; however, maintaining a floating position carries risk.

Steady Growth in Home Values ๐Ÿ“ˆ

Case Shiller reports reveal that US home values experienced a robust 0.65% growth in June. This brings the estimated annual growth rate for 2023 to an impressive 5%, representing a substantial increase.

For those who opted to wait for lower rates before purchasing their first home, the opportunity cost is evident โ€” missing out on a remarkable $25,000 appreciation for a $500,000 property. This appreciation would have more than compensated for any increased payments due to higher mortgage rates.

Labor Market Insights Await ๐Ÿ’ผ

This week is pivotal for mortgage rates, with multiple labor market reports set to be released. Kicking off the week, the JOLTS report revealed a significant drop to 8.8 million job openings in July. This marks a substantial decline from recent months and places us at a 2.5-year low. All eyes are on Friday’s BLS report, where the market expects 170,000 new jobs to be created in July, with the unemployment rate remaining at 3.5%.

With past reports facing downward revisions of 46,000 jobs per month, there’s skepticism surrounding the credibility of the BLS. Hopefully, this upcoming report will offer a realistic view of the US economy’s strength.

Consumer Confidence in Decline ๐Ÿ“‰

Consumer Confidence is on the decline, plummeting from 117 to 106. Of greater concern, future expectations have dropped to 80, a level often associated with impending recessions. The decline in consumer confidence aligns with the Fed’s goals, as a slowdown in consumer spending is one of their key objectives.

 

 

Aug 28, 2023

Mortgage rates are anticipating fresh labor market data due this Friday to chart their course. In the interim, we recomend locking for potential rate volatility.

๐Ÿก Shift in Real Estate Commissions

Legal disputes regarding buyer real estate commissions are on the horizon, and their outcomes could reshape industry norms. There’s a possibility that buyer’s agents’ commissions might transition from being paid by sellers to being directly covered by homebuyers. This adjustment would entail homebuyers negotiating commission-inclusive prices directly with their assisting agents.

If you’re interested in more information or participating in a mastermind group focused on navigating this new environment, please respond to this email.

๐Ÿ“‰ Projected Home Sales and Market Impact

Fannie Mae’s insights suggest that US home sales will continue to weaken in 2024, regardless of a potential “soft landing.” Wage growth levels deemed too high by the Fed for rate cuts are expected to exert a substantial drag on the housing market well into the coming year. With higher and prolonged rates and a majority of homeowners enjoying sub-4% mortgages, many might shy away from relinquishing their favorable rates for a 22-year high. Without a sufficient inventory of available homes, achieving a thriving housing market remains an uphill battle.

๐Ÿ’ฐ Federal Debt Interest and Economic Concerns

Federal debt interest payments have surged to encompass 20% of total income taxes collected. This ratio paints an unhealthy picture and is predicted to continue expanding. Without measures such as tax increases and reduced federal spending, we risk reaching a point where our debt payments inhibit economic growth. Swift action from our elected officials is essential to avert further deterioration.