bob-moulton-new

In just the past two to three weeks, the U.S. economy has seen a slowdown in economic and job growth. Slowing growth in both sectors usually pushes borrowing costs lower and could continue in the months ahead if this trend lingers.

Gross Domestic Product (GDP), or economic growth, for Q1 2024 fell to 1.3% after a 4.9% rise in Q3 2023 and 3.4% for Q4 2023, which was the smallest increase in almost two years. So, growth is decelerating. Forecasts for growth in the current quarter aren't much better, as evidenced by the Atlanta Fed at 1.8% while the New York Fed sees it at 1.7%.

Car sales fell in Q1 as auto dealers had to lower prices to fuel sales hurt by high interest rates. Consumer spending, which makes up two-thirds of economic activity, slowed due in part to ongoing inflation pressures, which weighed on GDP. If the forecasts of around the mid-1% range hold true for Q2 2024, spending won't be much better. However, heading into the summer, consumers could be spending more given an increase in outdoor activities.

The Federal Reserve's Beige Book Survey, a qualitative review of economic conditions, recently showed that the economy was growing in May, but headwinds from high interest rates are slowing consumer spending. The keywords "are slowing consumer spending."

The job market has seen some cooling over the past month or so, with the closely watched manufacturing sector in the spotlight.

The May reading for the Institute of Supply Management (ISM) Manufacturing Index contracted for the second consecutive month, meaning that people are losing jobs. The April Jobs Report was lower than expected, and while May exceeded expectations, within the numbers it showed many weaknesses. The Job Openings and Labor Turnover Survey (JOLTS) recorded the fewest wanted signs in three years.

Bottom line: Interest rates still have pressure from heavy note and bond supply from the Treasury, along with inflation pressures, which hurt rates. Fed Chair Powell has stated that the Central Bank will not have an appetite to cut rates unless it sees an unexpected weakness in the labor market. We may very well be seeing that unexpected weakness happening now.

Economic Slowdown and Job Growth Decline

Housing News

The job market has seen some cooling over the past month or so, with the closely watched manufacturing sector in the spotlight.

Top 10 Factors To Consider When Choosing a Neighborhood

Home Improvement

Where you choose to buy a house is one of the biggest decisions you'll make alongside purchasing the home itself. Here are 10 factors you'll want to consider when choosing your new neighborhood.

Location: Overall accessibility, transportation options, and even the climate can vary between locations. For this reason, it's important to weigh your options if you're deciding between areas with significant differences.

Budget: Start your search in neighborhoods with housing prices that fit solidly within your budget without stretching you too thin. You'll also want to consider any additional costs associated with your home purchase, such as homeowners' association or other fees if you're considering a condo or deed-restricted community.

Costs: Purchasing a home may also come with additional costs beyond your mortgage. Property taxes, utilities, groceries, entertainment, and the overall cost of living can vary significantly between neighborhoods.

Crime and safety: Crime and safety ratings should be on your list. Research local emergency and community resources, such as medical, fire, and police services, to make sure you have the security you need in a neighborhood.

Schools: If you have kids, you'll also want to do your research on schools. Assess rankings, available programs, and extracurriculars, along with the district's reputation and individual schools. You might also look at different types of schools, including public, charter, or private schools.

Amenities: Make a checklist of your must-have amenities, including shopping, dining, entertainment, parks, and recreation options. As you look for your new home, go down the list to see what's available in each neighborhood.

Proximity: Proximity to family, friends, school, and work is another factor to consider. Think about walkability, driving time, fuel costs, and how close you want to be to important amenities.

Community environment: Get a feel for the overall community. Friendly neighbors and a diverse population can add to the appeal for many homebuyers. Consider the noise levels and overall comfort of the area you're looking at.

Pet-friendliness: For homebuyers with pets, an area with clean and safe walking paths, parks, and other pet-friendly amenities are top priorities. It's also important to consider any potential breed restrictions.

Value and growth: Do some research on the potential value and growth for the neighborhood. This is important because you want to buy in an area with strong anticipated appreciation in case you decide to sell your home in the future.

Weighing these factors against your priorities and budget will help you find the neighborhood that's the perfect fit for years to come.

Sources: Statefarm.com, Tchabitat.org

Q&A

Eco-Friendly Home Improvements That Save You Money

Going green at home is a win-win. Not only is it better for the environment, but making eco-friendly upgrades can help reduce your monthly energy bills and boost your home's value. Here are a few eco-friendly home improvements that can save you money.

Energy-efficient appliances: Replacing older appliances such as refrigerators, dishwashers, washing machines, and dryers with new ENERGY STAR-certified models can cut down your usage and costs. An energy-efficient refrigerator, for example, uses much less electricity than older models.

Smart thermostats: These Wi-Fi-enabled thermostats automatically adjust the temperature when you're away to lower heating and cooling costs. You can also control them remotely from your smartphone for even more efficiency. Utility companies may also offer rebates for installing smart thermostats, helping offset the upfront cost.

Insulation: Upgrading your home's insulation keeps cool air inside during the summer and prevents heat from escaping in the winter, minimizing HVAC energy needs. Proper insulation can also help boost your home's value with the potential of lower energy bills for prospective buyers.

With a few eco-friendly upgrades, you can gain immediate cost savings and add long-term value to your home.

Sources: Realestate.usnews.com, Washingtonpost.com

A Look Into The Markets: We Need More Revenue

Fri, 14 Jun 2024 11:30:00 GMT

A Look Into The Markets

Interest rates dropped to the lowest levels in the last two months. Let's discuss why and what's next.

"The future's in the air, I can feel it everywhere. Blowing with the wind of change" Winds of Change – The Scorpions.

Economic Deceleration

A big driver of interest rates is the state of the economy. In times when the economy is booming, interest rates tend to run higher as both unemployment and inflation creep higher. The opposite is true.

In the past couple of weeks, there have been many economic readings revealing that the economy is slowing. Our gross domestic product (GDP) for the first quarter was revised lower to 1.3%. Coming on the heels of 4.9% and 3.5% for both the third and fourth quarters of 2023, this highlights an economic slowdown. There was also growing sentiment that the second quarter would rebound sharply from the 1.3% reading. However, the Atlanta Fed poured cold water on that idea. They significantly lowered their forecast for the second quarter from over 4% to 1.8%. This downward revision caught the financial markets by surprise, and interest rates declined sharply in response.

Manufacturing Not Manufacturing

Another sour reading on the economy was the Institute of Supply Management (ISM) Manufacturing Index. This report persists in indicating a contraction or absence of manufacturing. This means that people are losing jobs in this sector, which is never a good thing. Bonds like bad news, and this bad news helped bonds last week.

Help Wanted Signs Disappear

The JOLTS report showed that help-wanted signs continue to disappear, meaning there are fewer jobs available and highlighting the loosening in our labor market. Currently, there are just over 8 million jobs available, the lowest reading in three years and well off the high of 11 million seen a few years ago.

This is an important figure to watch because if there are fewer jobs available, people are less likely to quit and are not in any position to demand higher wages, which feeds inflation. This is another case where bad news helps bonds because it fuels the idea that a Fed rate cut could come sooner rather than later.

Unexpected Weakness

Interest rates still have the overhang of debt and inflation pressures, which hurt rates. However, Fed Chair Powell said at the previous Fed meeting that they will not have an appetite to cut rates unless they see "unexpected weakness" in the labor market. We may very well be seeing that unexpected weakness happening now. A Fed cut may be on the near-term horizon if labor market prints continue to show weakening signals.

4.29%

The 10-year Note, which ebbs and flows with mortgage rates, declined to 4.29% last week, the lowest level since early April. Moreover, the yield pushed beneath its important 200-day Moving Average. If the 10-year Note can get comfortable under its 200-day Moving Average, it could lead to stable to lower rates ahead. The incoming news will have a major say if that is possible.

Oil is Lower

Another metric to watch in determining where rates are headed is oil. Oil prices have declined sharply in the last couple of weeks, in tandem with interest rates. This is on the perceived notion of an economic slowdown here and abroad.

Bottom line: The winds have changed in bonds' favor over the past two weeks as a slew of bad economic news has hit the market. It also appears that "bad news is finally bad news," meaning that it supports lower rates.

Looking Ahead

Next week, we have important inflation data and debt being sold by the Treasury. So, while it was great to see rates tick down to the best level in two months, this could all change again very quickly. If inflation comes in hot and/or the Treasury auctions do not go as desired, this rate relief could be short-lived.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have bounced sharply high, providing rate relief.

Chart: Fannie Mae 30-Year 5.5% Coupon

(Friday, June 7, 2024)

Economic Calendar for the Week of June 10-14

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: We Need More Revenue

Fri, 07 Jun 2024 12:00:09 GMT

A Look Into The Markets

This past week interest rates moved sharply higher in response to a host of unfriendly bond news. Let's discuss what happened and what to watch for in the weeks ahead.

"So many tears I've cried. So much pain inside. But baby, it ain't over 'til it's over". It Ain't Over ‘til It's Over by Lenny Kravitz.

We Need More Revenue

This past week was shortened due to the Memorial Day holiday, but it was filled with tall problems which caused rates to spike. It all started on the Friday before Memorial Day when Treasury Secretary Janet Yellen told the world that the path for rates is higher, and we need more revenue.

This was an important statement as it highlights our deficit spending and our need to sell more treasury debt to fund our government.

The debt sales were tested this past week and ended up being a main driver for the spike higher in interest rates. The Treasury sold $183B worth of 2,5 and 7-yr Notes and the auction results were poor where buyers demanded higher interest rates to purchase all the debt. As Treasury yields move higher, mortgage-backed security prices drop, thereby elevating home loan rates.

Higher For Longer

Since the Fed Meeting back on May 1st, where the Fed Chair Powell said they are not hiking or cutting rates, many officials have since been pouring cold water on the idea that a rate cut is coming soon.

This past week, we heard comments like "Don't count out a rate hike" as the next move and "higher indefinitely" was uttered by another Fed official. This means those betting on a rate cut soon might want to reassess their position as the chance for the first cut has now been pushed back to November. And as we have seen over the last year or so, if inflation remains stubbornly high, we may not see a cut at all in 2024.

Higher Oil

Yet another problem for interest rates and the overall economy is energy prices. Oil hit $80 a barrel last week. This is significant as oil and 30-year mortgage rates tend to ebb and flow together. When oil prices edge higher so do mortgage rates. Why? 

High oil prices are inflationary. If inflation readings remain near current levels or even edge higher, there is no way the Fed can cut interest rates which means higher for longer.

Consumer Sentiment Moves Higher

Bonds hate inflation, bonds hate more bonds and bonds hate good news. Despite the uncertainty about higher interest rates and elevated oil prices, the consumer sentiment reading last week was an upside surprise as people felt a bit more optimistic - breaking a trend of recent pessimism.

Bottom line: We should take the Fed at its word that rates will be higher for longer. Deficit spending and high energy prices will help fuel this notion. 

Looking Ahead

Next week is jobs week. The Fed has a dual mandate of promoting maximum employment and price stability. The Fed's higher for longer narrative is based on inflation remaining high, but only if the labor market shows further weakness. The bad news could reignite talks for rate cuts sooner. The Jobs Report is supposed to show 151,000 jobs created.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have backed away from the best levels in a month.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 31, 2024)

Economic Calendar for the Week of June 3-7

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: The Fed is Higher for Longer

Thu, 30 May 2024 12:17:16 GMT

A Look Into The Markets

This past week interest rates inched up as "higher for longer" signs around the globe emerged. Before we get into the news, let's take a moment to reflect on this Memorial Day holiday and its significance.

"I am Red and White and Blue These are Colors that Ring True" "Color me America" by Dolly Parton.

The Fed is Higher for Longer

On Wednesday, the Minutes from the previous Fed Meeting three weeks ago highlighted that most Fed officials do not see the need to cut rates anytime soon.

You may recall at that Fed Meeting, Fed Chair Powell was clear they were not going to hike rates and they were not going to cut either. After sharing the Minutes with the world, we now know the Fed is waiting for inflation to move "sustainably towards 2%" before cutting rates unless the labor market shows weakness.

As of this moment, the chance of a Fed hike has been pushed to November.

The UK is Higher for Longer

Earlier last week, the United Kingdom reported inflation higher than expectations, and this immediately pushed the chance of a rate cut in the region from June until further into the year. As a result, interest rates around the globe spiked higher, including here in the U.S.

Nvidia is also Higher for Longer

On Wednesday, after the bell chip maker, Nvidia reported blockbuster earnings, well beyond expectations. Also helping stocks move higher for longer was Nvidia‘s sales outlook for the future, which highlights that AI or artificial intelligence is moving very fast, and Nvidia is at its forefront.

Dimon says Brace for "Hard Landing"

JP Morgan Chase CEO, Jamie Dimon was speaking in Shanghai where he said there is a chance the U.S. could endure a "Hard Economic Landing" which could also include stagflationary conditions – slower growth and higher prices.

Bottom line: Higher for longer it is, until it isn't. What will change the Fed's position is a change in the labor market or signs inflation is moderating.

Looking Ahead

Next week the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure (PCE) will be released. This is the reading the Fed wants to see move towards 2.00%. Expectations are for the reading to come in at 2.7%, so more work must be done to get inflation to the Fed's target.

Also, out next week will be GDP, Consumer Confidence, and Housing Data.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have backed away from the best levels in a month as the "higher for longer" narrative has gained momentum.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 24, 2024)

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Consumer Slowing Down

Fri, 24 May 2024 12:00:00 GMT

A Look Into The Markets

This past week interest rates have reached the best levels in over a month. Let's discuss what happened and what news to watch next week.

"All right now baby, it's all right now" All Right Now by Free .

Ahhhh

Last Wednesday, the highly anticipated Consumer Price Index was released. Back on April 10th, the previous CPI reading was reported hotter than expected and pushed interest rates to the highest levels of the year. As a result, the market was on edge heading into this report.

The good news? The report met expectations, as the headline inflation figure came in at 3.4% year-over-year. With the markets fearful of an even hotter number, the in-line reading gave the financial markets a sigh of relief. Why? If inflation were to re-accelerate, it would further push out a Fed rate cut.

We are not out of the woods yet as it relates to inflation, but this report did offer comfort that the next move from the Fed will indeed be a rate cut at some point. After this reading the chances of a Fed rate cut in September grew larger.

Consumer Slowing Down

Consumer spending makes up nearly two-thirds of our economy. This is important to know when following reports on the health of the consumer as it relates to Inflation, Federal Reserve policy, and interest rates.

Retail sales for April were reported and the reading was poor. Essentially, the consumer spent money on gas and groceries and little else. Moreover, when adjusting retail sales for inflation, the readings were negative, meaning the consumer is not buying more goods, but simply paying more.

Weak economic readings like this are bond-friendly and a big reason why rates improved last week.

Seeing real Retail Sales, or inflation adjusted Retail Sales turn lower has been a precursor to a recession in the past, so this is a report worth following moving forward.

Global Yields Lower

Also helping our interest rates are Central Banks around the globe telling the world that they will be cutting rates. It now appears the European Central Bank and Swiss National Bank are going to cut rates before the United States. This news prompted a decline in rates around the world and when that happens it puts pressure to push rates lower here in the U.S.

Bottom line: The case for a Fed rate cut sooner has grown, however further rate improvement may only come upon more reports showing inflation is indeed moving lower.

Looking ahead

Next week the Treasury Department will be selling debt to fund our government. These events always carry risks. With yields or interest rates at the lowest levels in a month, markets will be watching the buying appetite. If it is not good, rates will move higher. The opposite is true.

Also, out next week will be Durable Orders, Consumer Sentiment, and Housing Data.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have reached the best levels in a month. The bond does have resistance at $101 which will act as a barrier to further rate improvement.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 17, 2024)

Economic Calendar for the Week of May 20-24

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Debt Remains a Headwind

Fri, 17 May 2024 12:00:04 GMT

A Look Into The Markets

This past week, interest rates held steady or moved sideways after the nice decline we experienced a couple of weeks ago. Let's discuss what happened and look at the news items in the week ahead.

"Hold the Line, Love isn't Always on Time" – Hold the Line by Toto .

Fed Speakers Toeing the Line

"Eventually we'll have rate cuts, but for now monetary policy is in a very good place," New York President, John Wiliams.

A couple of weeks ago Fed Chair Jerome Powell told the world that there will not be a rate hike nor will there be a cut. This past week, several Fed officials (including Williams quote above) reiterated the notion that a Fed rate cut is not imminent and that they will keep rates higher for longer if needed.

The Fed Funds Futures, which prices in the probability of Fed rate hikes and cuts, is now pricing in a rate cut for September. Just two weeks ago, the chance of an initial rate cut was in November. This highlights how fast markets can change.

Debt Remains a Headwind

Last week, our Treasury Department needed to sell bonds to fund our government. The longer-dated bond auctions like the 10-year Note carry added significance because long-term bonds are subject to inflation risk and opportunity cost.

On Wednesday, the Treasury Department sold a record number of 10-year Notes and the buying appetite was not that great. This means there were not a lot of bids to purchase the bonds at current rates, so rates did not improve. However, it could be viewed as a victory. Remember...the previous 10-yr auction on April 10th was very bad and pushed the 10-year Note yield sharply higher and mortgage-backed securities prices sharply lower.

As the U.S. continues to run federal deficits, it needs to sell bonds to run the government. These bonds must be purchased by the investment community and if the appetite going forward remains tepid, it will put a limit to rate improvement.

Initial Claims Rise

In another sign that the labor market is cooling off, Initial Claims for the past week rose well above expectations. This forward-looking index on labor market health shows more people filing for first-time unemployment benefits. If this trend continues and elevates the unemployment rate, it will strengthen the case for a Fed rate cut sooner.

4.50

The 10-year Note, which ebbs and flows with 30-year mortgage rates, has declined from the highs of the year and is residing near 4.50%. For rates to improve further, we want to see the 10-yr move beneath 4.50% and then 4.35%. Look at the chart section below to see similar technical headwinds for mortgage-backed securities and mortgage rates.

Bottom line: We must remember the Fed is not hiking rates and they are not cutting rates, so further improvement will be in response to the data. Next week, things heat up.

Looking Ahead

Next week brings some high-impact economic readings. The main event will be the consumer price index. It was this reading back on April 10th that caused interest rates to spike higher and caused the Fed to move into their higher-for-longer stance. If the CPI reading is hot, bonds will not like it, the opposite is true.

Also, out next week will be Retail Sales, manufacturing numbers, and housing data.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have bounced off the lowest levels of the year. Next week's Consumer Price Index may determine if prices can improve after this sideways move or if they will retreat causing rates to move higher.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 10, 2024)

Economic Calendar for the Week of May 13 - 17

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: May 2024

Wed, 15 May 2024 13:30:01 GMT

A Look Into The Markets: May 2024

"The future belongs to those who believe in the beauty of their dreams." - Eleanor Roosevelt

The decision to purchase a home is a significant milestone for first-time and long-time homeowners. The choice between buying and renting a home can be a tough one. This issue will cover the following topics:

What to Watch - Housing demand has improved from last year despite higher rates and low housing supplies.

Housing - The Pros and Cons of Renting vs. Buying a Home

Home Improvement - DIY Home Improvement Projects That Add Value to Your Home

Q&A - How Much Money Do I Need for a Down Payment on a House?

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What to Watch

Housing Demand is Making a Healthy Recovery

The 2023 spring home buying season was sluggish, as large numbers of homebuyers rummaged through tight housing markets within a high-rate, low-inventory environment. Fast forward to this year's season and the environment has changed a bit.

Overall, housing demand is making a healthy recovery this season compared to last year with purchase applications for 30-year fixed-rate purchase mortgages up from the same period last year, even as the median mortgage rate and median sales price have increased, reports Freddie Mac. First-time homebuyers continue to lead the pack this season, as they make up almost 6 out of 10 purchase applications.

Freddie Mac went on to say that this year's spring homebuying season has started strong. Demand has improved from last year despite higher rates and low housing supplies. However, there is still much uncertainty related to broader affordability problems and how that will impact mortgage application volume. Demand for homes seems unabated so far in the first three months of 2024. And that momentum may very well continue throughout the spring homebuying season.

Looking ahead, after some interest rate-friendly rhetoric from the Federal Reserve in early May, and seeing some weaker-than-expected economic data streaming in, borrowing costs could begin to push lower from their current levels. If interest rates can fall low enough for sellers looking to make a move, the supply problem could ease somewhat. Also, builders have been constructing smaller homes with incentives, and supply in that arena is above average for consumers to consider.

Bottom line: Whether you need to relocate, downsize, or upsize or get out from under-paying rent and want a little space you can call your own, there will always be the right place for those in the hunt to purchase the American Dream of homeownership.

The Pros and Cons of Renting vs. Buying a Home

Housing News

Deciding whether to rent or purchase a home is a significant financial and lifestyle decision. Both paths have distinct advantages and drawbacks that need to be carefully weighed.

A key benefit of renting is flexibility. If you're pursuing new job opportunities in different cities, renting is easier to move quickly without waiting to sell your current home. Renting also requires less upfront capital and makes budgeting for future home-buying costs easier. Renters seldom have property maintenance and repair expenses as they are often included in the rental price.

A downside is that, as a tenant, you don't accrue any equity or investment toward future ownership. This means that every rent payment you make goes to someone else's investment rather than helping to build your net worth.

Homeownership, meanwhile, is like an automatic investment in your financial future. Each mortgage payment increases your equity in an asset that appreciates over time. You can also benefit from tax deductions and settle down in a community.

Purchasing does require large upfront costs, such as a down payment and closing fees. Regular home maintenance, repairs, taxes, and insurance need to be considered in your housing budget. There's also less flexibility should you want to relocate quickly.

Overall, the right path for you depends on your finances, anticipated mobility, and short- versus long-term goals. Renting provides flexibility, simplicity, and open options for future home purchasing. Buying is an investment in attaining equity and stability. Carefully assess your situation to make the best decision based on your lifestyle and future goals.

Sources: Investopedia.com, Moneygeek.com

Home Improvement

DIY Home Improvement Projects That Add Value to Your Home

Home improvement projects can enhance the aesthetic appeal of your property and potentially increase the overall value. With a little creativity and some sweat equity, you can take on DIY projects that add to your home's value and elevate the look and functionality of your living space.

Update fixtures throughout the home. Replacing outdated faucets, lighting, and cabinetry in the kitchen and bathrooms can instantly modernize the space and add a fresh, contemporary vibe. Similarly, a fresh coat of paint in trendy hues such as sage green, warm terracotta, and moody blues can breathe new life into living rooms, bedrooms, and other parts of your home.

Enhance your curb appeal. Thoughtful landscaping, colorful plants and manicured lawns help create an inviting first impression. Improving the exterior by adding a fresh coat of paint or updating fixtures can further boost your home's street presence and perceived value.

Install innovative tech features. Smart home technology, voice control systems, and other high-tech features can add both convenience and appeal. These modern amenities simplify daily living and cater to the growing demand for tech-savvy homes among buyers.

By tackling DIY projects with care and attention to detail, you can create a more enjoyable living environment and increase the market value of your home.

Sources: Investopedia.com, Marketwatch.com

Q&A

How much money do I need for a down payment on a house?

One of the biggest upfront costs of purchasing a home is the down payment. Lenders look closely at the amount of money you put down because it represents your initial investment and goes toward the total cost of the property. But just how much should you budget for this crucial component of your homebuying costs?

Many homeowners arrange for 20% down to avoid paying private mortgage insurance. This means that to purchase a $300,000 home, for example, you would need $60,000 for a 20% down payment. However, 20% down is just a rule of thumb. Depending on your credit profile, income, and mortgage terms, you may be able to put down less.

For borrowers with excellent credit scores, many conventional loan programs allow for down payments as low as 3%. So, on that same $300,000 home, you'd only need $9,000 down. Federal Housing Administration loans have down payment minimums at 3.5% of the purchase price. First-time homebuyers and low-to-moderate-income borrowers may also qualify for 100% U.S. Department of Agriculture or Veterans Affairs financing, both of which require zero down payment.

But don't just look at the down payment. You also need enough cash reserves for closing costs, such as lender fees, title insurance, prepaid taxes, and home insurance. Closing costs typically run between 2% and 5% of the loan amount. So, for a $300,000 home, you may need another $6,000 to $15,000 on top of the down payment to cover these costs.

Your down payment depends heavily on factors such as your credit and financing path. However, in general, having at least a 3% to 5% down payment plus enough for closing costs and prepaid costs is advisable to avoid high mortgage insurance charges. Plus, the higher your down payment, the lower your overall monthly costs will be.

Source: Nerdwallet.com

A Look Into The Markets: The Fed Meeting

Fri, 10 May 2024 12:00:00 GMT

A Look Into The Markets

The Federal Reserve met this past week and held rates steady for the 6th consecutive meeting. Let's discuss what was said and how the market reacted going into next week.

"Lean on me, When you're not strong, And I'll be your friend " - Lean on Me by Bill Withers .

"I think it's unlikely that the next policy rate move will be a hike."

Fed Chair Jerome Powell.

The Fed Meeting

Last Wednesday, the highly anticipated Fed Meeting took place and with inflation potentially reaccelerating, there were fears the Fed might have to hike rates again.

The good news, as evidenced by the quote above, Mr. Powell led the financial markets to believe that there will be no more rate hikes and the next move will indeed be a rate cut.

This was soothing to the markets that were worried that Powell would signal a potential rate hike.

"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective." FOMC Statement May 1, 2024.

While the Fed said a rate hike is not likely, he also shared that a rate cut is not likely to happen in the near-term either. Until the Fed sees inflation move sustainably towards 2.00%, we should not expect a rate cut in the near-term. The bond market was OK with this, and rates improved. Why would rates improve if the Fed signaled no cut just yet?

The markets see the Fed is serious about bringing inflation back down to its goal of 2.00%. This is good for protecting the value of long-term bonds, like mortgages as inflation erodes its value. If inflation continues to moderate, it will help long-term rates moderate as well.

"Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion." FOMC Statement May 1, 2024.

This announcement was also embraced by the markets as the slower pace of supply of bonds coming into the market can help put downward pressure on interest rates.

Treasury to Sell Less Debt in Q2

Possibly having a bigger impact on rates than the Fed, was the Treasury's announcement that they will not need to sell many more bonds in the 2nd quarter to help fund the government.

This was good news for bonds and rates. Why? Bonds hate more bonds. When the Treasury must sell more and more bonds to fund the government it puts downward pressure on prices and upward pressure on yields. So, this was good news for bonds.

4.70%

As the week was drawing to a close, the 10-yr Note remained beneath 4.70%, which has been a ceiling preventing yields from moving higher. Seeing the 10-yr remain beneath this ceiling after the Fed Meeting was a good sign and could start signaling a peak in rates for 2024.

Bottom line: Interest rates are trying to find a peak and getting past the Fed and this Treasury announcement was a nice hurdle as we move deeper into Spring. While we don't expect much more of an uptick in rates, we should also not expect much improvement either.

Looking Ahead

Next week the Treasury Department will be selling a lot of debt. It will be interesting to see what the buying appetite for bond auctions will be now that the Fed has calmed markets a bit and they will be slowing balance sheet reduction come June. There will also be a lot of Fed speakers hitting the pavement and sharing their thoughts. Will some say rate hikes are on the table?

Mortgage Market Guide Candlestick Chart Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

If you look at the right side of the chart, you can see how prices have bounced off the lowest levels of the year. Next week's auctions and Fed speak could influence whether the current bounce can be sustained.

Mortgage Market Guide Candlestick Chart

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 3rd, 2024)

Economic Calendar for the Week of May 6-10

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Global Rate Cuts Coming

Fri, 03 May 2024 12:00:00 GMT

A Look Into The Markets

This past week interest rates held steady as the markets brace for the Fed meeting this coming Wednesday. Let's discuss what happened and look at the big news events ahead.

"You might think I'm foolish. Or maybe it's untrue" – You Might Think, The Cars .

The Quiet Period

A lot of the big market moves and volatility in the financial markets have been sparked by Federal Reserve members speaking about monetary policy. The good news this week? It was the blackout or quiet period for the Federal Reserve, where Fed members have no speeches or make no comments on monetary policy for 10 days leading into The Fed meeting.

Bottom line ...Fed members did not speak, and markets didn't have to react, and that was good news.

Global Rate Cuts Coming

Economies around the globe are seeing slower economic growth and lower inflation. For this reason, other countries have either cut rates or will begin cutting rates as soon as June. This is going "against the grain" with what the U.S. is doing as we do not expect to be cutting rates until later this year because our inflation remains a bit higher and more persistent.

New Home Sales Jump

In March, New home sales jumped to the highest levels in six months. This leading indicator highlights the pent-up demand for housing as new home sales are counted at the signing of a contract.

Since this report, mortgage rates hit the highest levels of 2024, so it remains to be seen if the strong buying demand will continue.

Demand for U.S. Short-Term Debt

Last Tuesday, the Treasury Department sold a record $69 billion worth of two-year notes. The good news? The buying demand was solid and the yield on the 2-year Note remained beneath 5%.

This is important to follow because if the 2-year Note can remain beneath 5%, it could limit how high long-term rates, like mortgages, rise.

The Buck is Strong

In response to our relatively strong economy and the Federal Reserve not cutting rates in the near term, the U.S. dollar is very strong relative to other countries. One benefit is some downward pressure on oil prices which are priced in dollars. If oil prices go down, that brings less inflationary fears, and this is good for bonds and interest rates.

A strong U.S. dollar also makes imports less expensive, which is good for inflation.

4.60%

The 10-year Note has traded in a range between 4.60% and 4.70%. For long-term interest rates, like mortgages to improve, we need to see the 10-year Note move beneath 4.60%. A move above 4.70% would be bad and likely bring another spike higher in interest rates.

Bottom line: Interest rates are trying to find a peak and next week's Fed Meeting and Treasury Refunding announcement may determine if the peak is here.

Looking Ahead

Next week is Fed week. On Wednesday, the Federal Reserve will announce their monetary policy decision. There is no chance The Fed will cut rates, but what they say about a cut in future months, and possible shrinking of the balance sheet could be big market movers.

Additionally, the Treasury Department is going to release their refunding requirements, or how much debt they will need to sell to fund the government. If the number from the previous reading is not adjusted higher, the bond market will like it. The opposite is true.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have bounced off the lowest levels of the year. Next week's big news may determine whether bonds can bounce higher still or move lower again, causing another rise in home loan rates.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, April 26th, 2024)

Economic Calendar for the Week of April 26-May 3

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Lack of Confidence

Fri, 26 Apr 2024 12:00:01 GMT

A Look Into The Markets

This past week interest rates ticked up to the highest level since November on continued inflation fears. Let's discuss what happened and look at the important news in the week ahead.

"Enough is enough (is enough) - I can't go on" - No More Tears (Enough Is Enough) by Barbra Streisand and Donna Summer.

Lack of Confidence

Federal Reserve Chairman Jerome Powell shared this on Tuesday:

"We've said at the FOMC that we'll need greater confidence that inflation is moving sustainably toward 2% before it would be appropriate to ease policy. The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence. Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us. If higher inflation does persist, we can maintain the current level of interest rates for as long as needed."

Essentially, Powell is saying recent inflation numbers are elevated, it's not clear that inflation is moving towards their goal, and they are going to keep rates higher for longer.

The bond market reacted poorly to this quote, with the 10-year Note spiking to 4.70%...the highest level of 2024.

The financial markets may also be losing "confidence" that the Federal Reserve can get inflation back down towards 2%, without the U.S. economy slipping into a recession because of "higher for longer" rates.

"Sell in May and go Away" Coming early?

Stocks did not like the spike in interest rates and endured a sharp selloff, sending indices to the worst levels since February. There is a saying in the financial markets, "Sell in May and go Away", where investors sell stocks during May to avoid the Summer months and repurchase stocks in the Fall. Maybe investors took this spike in rates and growing uncertainty as an effort to kick off this phenomenon a few weeks early. We shall see.

The Cure for Higher Rates

When interest rates spike like they have over the past week, at some point the higher yields attract investors thereby eliminating the increase in rates. We saw some of this as the 10-year Note hit 4.70% on Tuesday before falling to 4.57% by Thursday.

On Wednesday, in another sign that higher rates attract the buyers, the Treasury Department sold billions of dollars in 20-year bonds, and the buying demand was strong.

Oil Declining

We all know high oil prices are inflationary, and bonds hate inflation. Oil which recently hit $90 a barrel, declined down to $82 on Thursday. Lower oil prices were welcomed by the bond market and was another reason for some of the rate relief from 2024 highs.

Housing Impact

Housing Starts and Building Permits for the month of March came in well below expectations. With a market in need of housing inventory, this was an unwelcome weak signal as we enter the Spring housing market. With rates higher still in April, we may see home builders also express their "lack of confidence" that rates will come down.

Bottom line: With inflation fears elevated and the Fed backing away from a June rate cut, it is tough to see where the relief in interest rates would come from in the near-term. We will need to listen carefully to incoming data on signs that the inflation rate is cooling.

Looking Ahead

Next week is an important one for us in mortgage and housing, as once again we will get an inflation reading, Treasury auctions, and more Fed speak. It was those 3 events which caused this enormous spike in yields back on April 10th. With rates now elevated, how will the bond market react to these events? We will discuss that in next week's issue.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have bounced off the lowest levels of the year.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, April 19th, 2024)

Economic Calendar for the Week of April 22-26

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: April 2024

Tue, 16 Apr 2024 14:30:00 GMT

A Look Into The Markets: April 2024

"Don't sit down and wait for the opportunities to come. Get up and make them." - Madam C.J. Walker

At this time of year, many homeowners are ready to dive into new projects. With renovations comes budgeting, along with spring cleaning. Plus, those who are set on becoming homeowners are looking at ways to obtain mortgage rate locks, which can add some predictability to monthly payments. In this issue, we'll cover these topics, along with the following:

What to Watch - Housing inventories are always a key point when a potential home buyer looks to enter the market whether it be an existing or new home.

How To Create a Home Renovation Budget - Creating a budget for a home renovation project is essential to make sure you don't overspend.

Freshen Up Your Home - Spring is in the air, and it's time to get your home in tip-top shape. Use the helpful tips in this issue to get started.

Q&A - Find out what a mortgage rate lock is and how it can benefit you in a changing market.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What to Watch

Housing Inventories

It's all about housing inventories. Housing inventories are always a key point when a potential home buyer looks to enter the market whether it be an existing or new home. Especially now that the spring homebuying season is underway. Yes, borrowing costs are also a big factor but the focus here will be on inventories.

It is known that low housing inventories often indicate high demand relative to supply, which can drive up prices and create a competitive market for buyers. On the flip side, high inventories potentially lead to downward pressure on prices and longer selling times for sellers.

The current environment for supply is ... LOW and that's for existing homes on the market, which make up about 90% of total home sales. Unsold inventory of existing homes is about three months whereas six months is seen as normal. Freddie Mac's Chief Economist recently said, 'As the spring homebuying season gets underway, existing home inventory has increased slightly, and new home construction has picked up. Despite elevated rates, homebuilders are displaying renewed confidence in the housing market focusing on the fact that there is a good amount of pent-up demand.'

New home sales make up only about 10% of the market. The National Association of REALTORSÂ® predicts that new home sales will rise almost 14% this year as builders ramp up construction and offer more incentives to attract buyers. The National Association of Home Builders recently reported that a lack of existing inventory continues to drive buyers to new home construction. The estimate of new houses for sale at the end of February was 463,000. This represents a supply of 8.4 months at the current sales rate. The Mortgage Bankers Association reports that mortgage applications for new home purchases increased 15.7% compared to a year ago.

What does this mean for the consumer or potential home buyer? There are some glimmers of hope for the inventory problem. Could there be a 'silver tsunami' where older retirees look to downsize and possibly flood the market with inventory? 'Today, there's a demand-supply imbalance where there's too much demand and not enough supply,' said Meredith Whitney, who successfully predicted the 2007-2008 financial crisis and has been called an 'oracle' of the housing industry. 'That's going to invert as more and more boomers start to sell and downsize. Then you'll see a supply-demand dynamic shift.'

How To Create a Home Renovation Budget

Housing News

Planning a renovation project is a big undertaking, and it's important to have an idea of what you can afford. In addition to speaking with a financial adviser, you can take these steps to plan your spending:

1. Research the costs.

Estimate what it will cost to complete each project you have on your list, including essentials such as materials and labor. Even with some rough numbers, you can get an idea of what your budget may look like for the renovation.

2. Get professional quotes.

Contact contractors for estimates on your renovation project. This can help you form a more accurate picture of what you'll be spending.

3. Set your budget.

After doing your research and acquiring contractor quotes, create a detailed budget that covers all the anticipated costs. You may also wish to budget for extra funds in case any issues arise during the renovation.

With proper planning and professionals on your side, you can bring your renovation ideas to life. Be sure to talk with the pros so you establish a budget that fits your means.

Sources: BHG.com, Familyhandyman.com

Home Improvement

Freshen Up Your Home

Spring is here, and you know what that means - time for spring cleaning. As the weather warms up and families spend more time outside, many homeowners are getting ready to do some deep cleaning and yard work. Use these helpful tips to tidy up your home:

Refresh the paint. A new coat of paint can work wonders, and light, airy colors can reflect the freshness of the spring season. Don't forget to touch up the baseboards and trim for a clean, polished look.

Check your HVAC system. Spring is the perfect time to schedule HVAC maintenance and change air filters, inspect vents, and ensure your system is running efficiently. After all, a comfortable home starts with optimal temperatures from proper heating and cooling.

Revive the garden. Whether you have a large garden or a few potted plants on your windowsill, spring is the perfect time to add a pop of color. Plant annuals, trim shrubs, remove weeds, and clean up any debris left from the winter season.

Change the linens. Pack away heavy winter blankets and flannel sheets, and bring out lightweight cotton or linen bedding. Crisp white sheets with a floral duvet cover can instantly transform your bedroom into a serene retreat.

Eliminate odors. Freshen the space with scented candles, essential oil diffusers, or linen sprays. Fragrances such as lavender, citrus, or eucalyptus can add a hint of spring scent, and you can use them throughout your home for an uplifting aroma.

Sources: RD.com, Extraspace.com

Q&A

What Is a Mortgage Rate Lock?

QUESTION: What is a mortgage rate lock, and how can it benefit homeowners?

ANSWER: A mortgage rate lock is an agreement between the homeowner and mortgage lender that guarantees a specific interest rate for a predetermined length of time.

Locking in your mortgage rate allows you to secure a favorable interest rate even if the market conditions change before the loan closes. A rate lock can give you peace of mind and offer more stability and predictability in your mortgage payments.

Mortgage rates change frequently, and a rate lock can protect you from fluctuations that could raise rates before your closing. Rate locks often come with a fee, as you're essentially purchasing this lock as a protective measure to guarantee your mortgage rate.

Because of the benefit of a mortgage rate lock, many homebuyers may consider this option as they're looking at prospective real estate. However, there are some important considerations you may wish to discuss with a lender before deciding to lock in your rate.

Timing for rate locks: When you lock in your mortgage rate will depend on the lender. Some may offer rate locks when buyers are preapproved, while others wait to extend rate locks until the seller accepts an offer. Generally, closing on a new home takes between 30 and 45 days, so many rate locks are established within this period.

Protection against rising rates: While you can lock in a rate to protect against increases within the set period, if interest rates fall, you won't be able to adjust your locked mortgage to reflect the new interest rate.

Overall, a mortgage rate lock is a reasonable option for many homebuyers. If you're looking at locking in the rate on a new home, remember to discuss the benefits and drawbacks with your lender to make the best decision for your financial situation.

Sources: Bankrate.com, CNN.com

Registered Mortgage Broker - NYS Department of Financial Services - All mortgage loans arranged with third party providers. | Licensed by the NJ Department of Banking and Insurance | Licensed by the FL Department of Financial Services, Licensed by Connecticut Department of Banking | All Loans Arranged through third Party Providers | NMLS Consumer Access: http://www.nmlsc onsumeraccess.org) NMLS 876527
© Tabrasa, LLC. All rights reserved.

A Look Into The Markets: Consumer Prices Climbing

Mon, 15 Apr 2024 14:21:28 GMT

A Look Into The Markets

The bond market and interest rates had a rough week, especially on Wednesday when a high inflation print sent interest rates to the highest levels of the year. Let's discuss what happened and look at the fallout ahead.

"You Dropped a Bomb on Me" – You Dropped a Bomb by the Gap Band .

Consumer Prices Climbing

On Wednesday, the Consumer Price Index (CPI) was reported, and all measures came in higher than expectations. This means that the headline number which includes food and energy was higher, the core reading which is inflation without food and energy was higher and the month-over-month readings and the year-over-year readings were higher. How high? The headline number came in at 3.5% year over, which is up from 3.2% from February. CPI bottomed last June at 3.00%.

This is a very important story to follow as inflation is a main driver of long-term interest rates. So, this higher-than-expected reading was very unwelcome and unnerved the markets to start the day.

Adding to the uncertainty and volatility, was recent speculation that the disinflation process or slowing rate of inflation was well at hand. The CPI reading coupled with last month's higher numbers has removed that comfort. With oil prices also at 2024 highs, we have rising fears that inflation will go higher still, which would likely mean higher rates.

Bye-Bye June Rate Cut

The renewed inflation fears have the markets pricing in no chance of a Fed rate cut in June. Right now, the markets are seeing the strongest possibility of a cut in November. This is a major change from when we started the year, as the financial markets were thinking the Fed would cut rates six or seven times, and the Fed said three. Now we could very well not see a rate cut in 2024.

The Fallout

On Wednesday, just hours after the CPI reading, the Treasury Department had to sell $39B worth of 10-year Notes. How would this auction go after a high inflation reading, fears of more inflation, and continued deficit spending? Well, the auction was awful. The Treasury had to issue higher interest rates to attract investors, due to tepid demand. This added to the pressure on rates and pushed the 10-year Note and thus mortgage rates to the highest levels of 2024.

The Fed Minutes

Two weeks after every Fed meeting, the Fed releases their Minutes, which are bullets of what was discussed among members. These are released to give financial markets a peek at what they are saying behind the scenes. Note, these Minutes are carefully packaged to help guide markets. We will not see the full Minutes from these meetings for five years.

The Minutes were about as bad for the mortgage industry as they could possibly be.

Half of the bullets released talked about fear of inflation, persistent inflation, and uncertainty that it will come down. This was not part of the Fed meeting two weeks ago where the Fed Chair Powell led the markets to believe that three cuts were still coming and that inflation was trending in the right direction.

They also said that they want to start slowing the balance sheet reduction, but only in Treasuries and not mortgage-backed securities. This was also unwelcome as the spread between mortgage securities and Treasuries is historically wide and could narrow considerably if mortgage-backed security balance sheet reduction was slowed.

4.50%

This is an important level to watch in the 10-yr Note. For mortgage rates to find their footing and see improvement from this past week, we need to see the 10-yr Note move back beneath 4.50%.

Bottom line: This past Wednesday, changed the landscape for interest rates as we head into the home buying season. With inflation fears elevated, the Fed backing away from a June rate cut, and Treasury auctions not performing well. It is tough to see where the relief in interest rates would come from in the near term. We will need to listen carefully to incoming data on signs that the inflation rate is cooling.

Looking Ahead

The tone has been set with rates higher for longer. Now we will be receiving some moderate impact reports and a bunch of Fed speakers. The latter of which has been sharing that less Fed rate cuts are on the table. And with last week's news, why would you say anything different?

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have touched the lowest levels of the year, representing the highest rates of 2024.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, April 12th, 2024)

Economic Calendar for the Week of April 15-19

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: The Global Showdown

Fri, 05 Apr 2024 12:30:00 GMT

A Look Into The Markets

Mortgage rates improved slightly in this holiday-shortened week. Let's discuss what happened as the first quarter of 2024 comes to an end and we brace for a surprise on Monday, April Fool's Day.

"But what a fool believes he sees" What a Fool Believes – The Doobie Brothers .

Fed Members Not Aligned

At the most recent Fed Meeting, Fed Chair Jerome Powell led the markets to believe there will be three rate cuts in 2024. The Federal Reserve's dot plot, which is a forecast of interest rates amongst the members, also suggested three rate cuts.

Yet to start the week, Atlanta Fed President Rafael Bostic, said he only sees one rate cut in 2024. This lack of unity, amongst the Fed members, creates volatility and uncertainty, which we continue to see in the financial markets.

The Global Slowdown

Interest rates are like bad economic news here and abroad. Over the last couple of weeks, we have seen numerous warning signals from major countries as they either have entered a recession or are threatening to do so. At the same time, there have already been surprise rate cuts by other central banks around the globe, like Switzerland, to stave off a slowing economy. This is important because if rates around the globe move lower in anticipation of a local recession, it puts downward pressure on our interest rates here at home.

Big Friday News, Markets Closed

On Friday, the financial markets are closed in observance of Good Friday. Yet, there are a couple of huge headline risk events taking place. First, the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure index (PCE) will be reported. The Fed wants to see this number move sustainably towards 2%. Expectations are for it to come in at 2.8% year-over-year. If the number is reported hotter bonds may not like it, the opposite is true.

At lunchtime on Friday, Fed Chair Powell will speak and offer thoughts on the economy. You never know what can be said, and how it might move the market.

With financial markets closed on Friday, we will need to wait until Fool's Day Monday, April 1st to see the reaction. Let's hope the markets don't make a fool of us.

Key Levels

Both the Treasury and the mortgage-backed security market are trading right at key levels, placing no large bets in advance of Friday's headline risk. This coming week may determine whether interest rates improve further or get turned away higher.

Springtime Is Here

We are seeing housing inventory perk up across the country for the Spring home-buying season. Many people are finding opportunities with rates stabilizing off the highs of last Fall. Pent-up demand is being released as people finally say life goes on.

Bottom line: The Spring home-buying season may pose a terrific opportunity for those looking to make a move. Interest rates are not expected to decline sharply in the absence of a surprise recession signal. So, it may be wise to take advantage while others may sit on the sidelines.

Looking Ahead

Next week will be interesting. Come Monday, April 1st, the markets will get to react to the Core PCE mentioned above. Then throughout the week, we will see Fed Members offer their opinions on inflation, the state of the economy, and the likelihood of rate cuts. But the main event will be the March Jobs Report on Friday. 183,000 jobs are expected to be created and the unemployment rate is expected to be unchanged at 3.9%. If the numbers come in poorly, it will further the notion of a June rate cut. However, if the numbers are strong, we will see more uncertainty, more volatility, and the chance of a June rate cut fading away.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see prices rising, meaning lower rates. Prices are right near a ceiling of resistance at $101. For rates to improve further, we need to see prices move above this ceiling.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, March 29, 2024)

Economic Calendar for the Week of April 1-5

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Mixed Fed Messages

Fri, 29 Mar 2024 15:37:59 GMT

A Look Into The Markets

The Federal Reserve met this week and reaffirmed rate cuts are coming but, how many and why? Let's discuss what happened and look into the week ahead.

"Communication breakdown, it's always the same Havin' a nervous breakdown, a-drive me insane"... Communication Breakdown by Led Zeppelin

Mixed Fed Messages

On Wednesday, the Federal Reserve met and decided to once again pause and not cut rates. This was widely expected, as inflation has been reported higher than expected of late. It wasn't the lack of action which moved the markets, but the forecast The Fed provided in their statement which helped both stocks and rates improve.

Fed's Forecast

Every three months, the Federal Reserve issues their economic forecasts. This is where they adjust their outlook on the economy, unemployment, inflation, and the path for interest rates. So, what is the Fed thinking?

The Fed now sees economic growth stronger than expected, which is a good thing, and it removes the near-term threat of a recession.

They also believe unemployment will come in lower than previously forecasted and inflation will also come in higher than forecasted.

The head scratcher in all of this is that despite the Fed seeing stronger growth, less unemployment, and more inflation, they held their forecast to cut rates three times this year.

With just 6 Fed meetings remaining in 2024, it means rate cuts are coming soon. How soon? The financial markets are pricing the first rate cut in June with a current probability of near 75%. This will of course change as economic readings are reported.

Slowing the QT

In a measure that may help interest rates improve down the road, the Federal Reserve said they are going to start slowing their balance sheet reduction, quantitative tightening (QT), very soon. Part of the upward pressure on long-term interest rates the past couple of years has been QT. So, less QT, could be a good thing.

The Market Reaction

Interest rates improved modestly, and stocks hit all-time highs once again. You can see the chart of mortgage-backed securities below which highlights the nice price gains and rate declines this week.

4.35%

The 10-year Note moves up and down with mortgage rates and it is easy to follow. Watch 4.35%. If rates move above this level, they will be going higher still. The good news? As of press time, rates remain beneath that level.

Bottom line: Rates have improved this week and after the Fed's call for cuts, therefore we should expect lower rates ahead.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see prices rising, meaning lower rates.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, March 22, 2024)

Economic Calendar for the Week of March 25 - 29

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Consumer Prices Remain Elevated

Fri, 22 Mar 2024 13:00:01 GMT

A Look Into The Markets

This past week interest rates ticked up, amidst higher inflation numbers and U.S. debt being sold. Let's look at what happened as we approach the important Fed Meeting next week.

"Wanna make the world dance, Forget about the Price tag" Price Tag by Jessie J

Consumer Prices Remain Elevated

The Consumer Price Index (CPI) for February came in above expectations with shelter and energy making up a large portion of the reading. The higher numbers have pushed the chance of a Fed rate cut to June.

Long-term rates, like mortgages, which are driven by economic expectations and inflation, also didn't like the reading and moved off of the best levels of the week.

Fed Chair Powell has been very clear that they will not cut rates until they see inflation move "sustainably" towards 2%. The last few months of CPI have shown month-over-month readings of .03% to .04%. Annualized, this is much hotter than the 2% inflation target of the Fed.

Producer Prices Higher Too

The Producer Price Index, a leading indicator to consumer inflation, also came in hotter than expected. There is a concern here. If it costs more to produce/create goods and services, they are forced to pass those additional costs to consumers.

Weak Retail Sales

Retail Sales is an important measure on the health of the economy. Consumer spending makes up two-thirds of economic growth or GDP. If consumers slow down spending, economic growth slows. Retail Sales for February came in below expectations, highlighting the consumer is being cautious and feeling the pinch of inflation. Another sign of inflation's impact on the consumer is, when you adjust retail sales for inflation, retail sales have been essentially flat for almost two years. This means that consumers are not buying goods and services – they are just paying more.

Deficit Spending Continues

The Treasury Department sold billions of dollars of bonds this past week to help fund our government. These auctions bring a weight to the market, which pushes prices downward and elevates rates. We watched this play out again this past week as rates pulled back from the best levels in a month.

Bank of Japan Ending Negative Rates

There is growing speculation that the Bank of Japan will be the last country to keep negative rates. This has started to push their yields to the highest levels of the year. As their rates edge higher, it puts pressure on our rates here in the U.S.

Bottom line: Rates are moving sideways to higher on inflation fears and the notion the Fed will be cutting rates later than anticipated. The 10-yr Note has a closing high of 4.32% this year. Watch that level carefully as we enter Fed week.

Looking Ahead

Next week is all about the Federal Reserve. They are slated to meet on Wednesday and there is no chance of a rate cut. What will be market moving is what the Fed says about cuts in the future. There is growing speculation the Fed may not even cut in June. It's this uncertainty that is making volatility in the bond market and interest rates.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have backed away and moved lower from the $101 level. There is a lot of support at the $100 level and that floor will be important to hold as we go through Fed week.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, March 15, 2024)

Economic Calendar for the Week of March 18 - 22

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Labor Market Loosening

Fri, 15 Mar 2024 12:30:00 GMT

A Look Into The Markets

A good week for rates as they ticked to the best levels in a month. Let's discuss where they are headed, why and what's next.

"It feels good, yeah. It feels good" – Feels Good by Tony! Toni! Tone!

Fed Says Higher for Longer – Mortgage Rates Improve

There was nothing stopping rates from improving this past week, not even Fed Chair Powell on Capitol Hill reiterating they are not cutting rates just yet.

The Fed "does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." Jerome Powell, 3/6/24.

This quote highlighted the Fed's position that they are in no rush to cut rates until they are confident inflation is headed towards 2.00%.

Mortgage Purchase Applications up 11% on the Week

This positive headline from the Mortgage Bankers Association is good news but needs to be taken with a grain of salt as application volume is low and any move creates large percentage swings. Nonetheless, this number also didn't take into effect the full decline in rates from week to week. If you consider the "lag effect" or delay as to when consumers learn about the improvement in rates, it feels like even better days might be ahead for housing.

Labor Market Loosening

There were a couple of signs the labor market continues to loosen. First, the ADP Report, which shows private jobs created (versus government jobs) came in below expectations. Also, the JOLTS report, which shows how many "help wanted “signs or jobs that are available, came in below expectations.

The decline in jobs available is a welcome sign to the Fed, because if there are less jobs available, it lessens the need to pay more and thereby fuel inflation. Further loosening of the labor market will help pull forward Fed rate cuts.

Market Fed Cut Expectations

The Fed Funds Futures, which prices in the probability of rate cut/hike activity, is now pricing in the first rate cut in June at about 68%. It is important to note that the Fed Funds Futures have been very inaccurate in forecasting rate hike/cut activity. The only accurate source for Fed hikes has been the Fed and if they say they are coming later with the hike, that may very well happen. As the saying goes, "Don't fight the Fed".

Bottom line: Rates improved nicely this past week on the weaker labor market data and confirmation that the Fed will be cutting rates at some point. What's next? Read on...

Looking Ahead

Next week it is about inflation once again. The Consumer Price Index and Producer Price Index will be released. If these reports come in with hotter than expected inflation, rates will struggle. The opposite is true. These reports may very well determine whether this relief in rates will continue to have legs.

Mortgage Market Guide Candlestick Chart

Note on the right side of the chart several consecutive Green Candles highlighting the price and rate improvement. Price needs to push higher from here to make this interest rate improvement sustainable.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, March 8, 2024)

Economic Calendar for the Week of March 11 - 15

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: March 2024

Wed, 13 Mar 2024 15:00:00 GMT

A Look Into The Markets: March 2024

"You're only here for a short visit. Don't hurry, don't worry. And be sure to smell the flowers along the way." - Walter Hagen

Attending an open house can be a great way to learn more about a home if you know the right questions to ask. In this issue, we'll discuss some key questions to ask at an open house, along with the following topics:

What to Watch: The Fed, economic data, inflation, continued heavy Treasury debt and the housing sector are on the radar of market participants as well as the U.S. consumer.

Questions To Ask at an Open House: Discover some questions you should ask a seller at an open house.

Make Over Your Garden With These Tips: If your garden looks a little rundown after winter, follow these tips to make it vibrant once more.

Q&A: Is Earnest Money the Same as a Down Payment? Learn what earnest money is and what you should know before paying it.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What to Watch

Treasury Debt and the Housing Market

The Fed, economic data, inflation, continued heavy Treasury debt and the housing sector are on the radar of market participants as well as the U.S. consumer.

The Fed. Back in January and early February the market was pricing in an almost 100% chance of a cut to the short-term Fed Funds Rate in March but that quickly receded to the point that now the first rate cut may come in June. Recent positive economic data and a reignition in inflation are the catalysts behind the reverse in sentiment. And where the inflation rate has dropped significantly from the highs seen in June of 2022, the Consumer Price Index in recent months has remained above the 3% level year-over-year.

The Economy. Weekly Initial Jobless Claims remain near historic lows while job growth was above a robust 300,000 mark in December and January. The recent national ISM Manufacturing Index and construction spending came in above expectations. Consumer Sentiment in February rose more than expected.

The Treasury. The elephant in the room and a big factor in the bond markets is the enormous Treasury debt offerings through notes, bills, and bonds to fund the government which are designed to minimize the cost of financing the national debt. Simply put, if there are more sellers than buyers, note and bond prices will fall and yields and rates will rise with the opposite being true. Speaking of debt, the U.S. national debt is at a record $34 trillion plus with household debt at a record $17.5 trillion.

The Housing Market. The recent Existing Home Sales report showed an uptick in housing inventory, says the National Association of REALTORSÂ®. Redfin released findings that have listings rising 10% year-over-year during the four weeks ending February 18th, the biggest increase in two months. Sellers are hoping to take advantage of high prices: Sale prices are up 6% year-over-year, the biggest increase since October 2022.

Bottom line: You can take all the data and statistics but what it comes down to are two factors. Are potential home buyers in a sound job environment and are they able to afford the payments? The right opportunity is out there in the home-buying market but in the current state of the market, one must be a step ahead of the competition.

Questions To Ask at an Open House

Housing News

An open house allows you to explore a home and ask the listing agent some questions. If you're interested in making an offer, don't leave an open house without asking these questions.

How long has the home been up for sale? There are a few reasons a home might sit on the market for a while. The sellers may have priced it too high initially, or the home might have some issues. Either way, knowing how long a property has been on the market can allow you to reach a deal effectively. If the sellers have struggled to find a buyer, you may have more room to negotiate, resulting in a better deal.

How old are the appliances, roof, and utilities? An aging roof or a decades-old plumbing system can lead to major problems and expenses down the road. Ask this question to learn whether you might have to replace those systems during your ownership. In addition to the roof and plumbing, ask about the washer and dryer, stove, water heater, and HVAC unit.

What's the neighborhood like? This is a good question if you're moving from a different city or state. Ask about nearby amenities, such as trails or parks. You can also inquire about the school system and businesses in the area. After the open house, spend some time driving around the neighborhood to learn more about other homes, traffic, and noise levels.

By asking these questions, you can learn more about a home and the surrounding neighborhood. Write down what you want to ask before attending an open house so you don't forget.

Source: Homebuyer.com, Bankrate.com

Home Improvement

Make Over Your Garden With These Tips

Spring is in the air, and now is the time to start planning your garden. If your outdoor space could use some TLC, consider these tips.

Weeding. Nothing brings a garden down more than a bunch of pesky weeds. Spend some time pulling unwanted plants from your flower beds and yard. When weeding, pull from the roots so they don't grow back. To prevent regrowth, you can also create a border using bricks, blocks, or pavers.

Paint your fence. Even outdoors, paint can instantly transform a space. If you have a shabby or rundown fence, a new coat of paint can do wonders for your garden. Choose a traditional wood stain, or go bold with an unusual color, such as blue or pink. Consider matching the paint color to the flowers in your garden for a fun look.

Choose some new pots. After winter, some pots and planters in your garden might look a bit worse for wear. Purchase some new ones from a lawn and garden store. Choose containers in different textures, or add some variety with hanging pots. Don't want to spend much? Use items you might already have, such as pans, baskets, or even old boots.

Add a mirror. If you have a small garden, make it appear larger with a mirror. Hang a mirror from a nearby fence or shed, or place a standing mirror in the corner of your garden. If you don't want to have a mirror outside, consider adding some other glass features, such as wind chimes or mosaics.

Spending time in the garden can be good for the soul. Follow these tips to make your garden a place you can enjoy throughout the spring and summer.

Sources: Homesandgardens.com, Melaniejadedesign.com, Emagazine.com

Q&A

Is Earnest Money the Same as a Down Payment?

QUESTION: What is earnest money?

ANSWER: Earnest money is a deposit you make to show the seller you're serious about buying a home. Typically, a buyer makes this deposit before closing on a home. At closing, the earnest money goes toward their down payment. Essentially, earnest money is a deposit on a down payment.

In some cases, earnest money can be refundable. Usually, a buyer gets this deposit back if an inspection reveals previously undisclosed issues with the home. At this point, you can either choose to renegotiate the deal or back out, in which case you'll most likely get your earnest money back.

Some other contingencies can allow you to get your deposit back. For example, if an appraisal shows the home has a lower value than the purchase price, you can usually get a refund on your earnest money. However, if all the contingencies are met and you ultimately decide not to purchase the home, you'll probably lose this deposit.

The amount you can expect to pay in earnest money depends on the home you buy. Usually, this deposit ranges between 1% and 2% of the home's purchase price. On a $200,000 home, for example, you might pay $2,000 in earnest money. In competitive markets, you might consider paying more in earnest money to improve your offer.

When paying earnest money, it's essential to read the fine print and understand the contingencies. If you do this, you can feel confident making the deposit, as long as you're serious about buying the home.

Sources: Theinvestorsedge.com, Bankrate.com, Investopedia.co m

Registered Mortgage Broker - NYS Department of Financial Services - All mortgage loans arranged with third party providers. | Licensed by the NJ Department of Banking and Insurance | Licensed by the FL Department of Financial Services, Licensed by Connecticut Department of Banking | All Loans Arranged through third Party Providers | NMLS Consumer Access: http://www.nmlsc onsumeraccess.org) NMLS 876527
© Tabrasa, LLC. All rights reserved.

A Look Into The Markets: Debt Remains an Issue

Fri, 08 Mar 2024 13:35:16 GMT

A Look Into The Markets

This past week, interest rates held steady amidst a slew of market-moving events. Let's discuss what happened and see what lies in the week ahead.

"I gotta go back, back, back to school again" – Back to School Again, The Four Tops

Fed Has Been Right

Over the past couple of months, the bond market has adjusted to the idea that the Fed will only be cutting rates three or four times this year. The first of which is likely to happen in June. This is the main reason why the 10-year Note yield has climbed from 3.85% to 4.30% and 30-year fixed mortgage rates are back above 7%.

The Fed's Favored Gauge of Inflation

On Thursday, the Core Personal Consumption Expenditure (PCE) Index was reported and met expectations at 2.8% year-over-year. The bond market breathed a sigh of relief upon this report as there were fears of a hotter than expected reading heading into the release.

The Fed wants the 2.8% to move significantly towards 2% before cutting rates. Eighteen months ago, this reading was twice as high, so it does appear like inflation continues to moderate despite the recent fears of re-acceleration.

If this reading continues to decline, we should expect the Fed to cut rates, which should ease pressure on long-term rates.

Debt Remains an Issue

Early last week the Treasury Department unloaded a record amount of two-and five-year notes, a total of $127 billion sold within a couple of hours and the bond market didn't like it. The overwhelming amount of new bonds or supply that is being sold due to our deficit spending, has added weight on bond prices and has limited any further rate improvement. Longer-term, with deficits as far as the eye can see, Treasury auctions and the bond market appetite will be an ongoing story to follow for us in mortgage and housing.

Durable Goods Orders was Not Good

A sign that the consumer may be feeling the pinch, Durable Goods Orders, purchases of items intended to last multiple years, like dishwashers and ovens, came in well below expectations. Why is this important? The consumer makes up two-thirds of our economic growth. If the consumer contracts or spends less, the economy slows and the threat of a recession rises. 

4.32% Still Standing

In addition to all the news we must watch key levels, and the key level in the Treasury market is 4.32% on the 10-year Note yield. We have not seen the 10-year yield close significantly above this level in 2024. If the 10-year moves above this level rates are going higher. The opposite is true.

Fed Speak Stirring Commotion

If watching the news and numbers were not enough, the markets must navigate Fed speak. This past week it was clear that the Fed was not only noncommittal as to when rate cuts could begin, but it's unclear as to what economic signals will prompt the Fed to cut rates.

"Should the incoming data continue to indicate that inflation is moving sustainably toward our 2% goal, it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive. In my view, we are not yet at that point." Fed Governor Michelle Bowman.

Well, as we just shared above, inflation is well into the 2's after being twice as high 18 months ago. The question the market is asking is: Has inflation moved "sustainably toward" the Fed's 2.00% target?

Bottom line: Rates are moving sideways the past couple of weeks and the bond market was able to leap a few big hurdles such as debt, inflation and uncertain Fed speak. The next move for the Fed will be a cut and continued progress on lowering inflation will ensure that it comes sooner rather than later.

Looking Ahead

Next week it is about Jobs. We are scheduled to see multiple readings on labor market health, including ADP, JOLTS, Initial Claims, and the all-important Jobs Report on Friday. Currently, expectations are for the unemployment rate to remain steady at 3.7%, while 188,000 jobs are to be created in February. If this number is strong, it emboldens the Fed's case to hold off cutting rates. The opposite is true.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see how prices have stepped lower on a staircase and moved sideways on a step for the past couple of weeks. We shall soon find out if prices walk off this down escalator which would mean rate improvement or will prices "step" another leg lower, meaning higher rates ahead.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, March 1, 2024)

Economic Calendar for the Week of March 4 - 8

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Fed Meeting Minutes Released

Fri, 01 Mar 2024 16:00:59 GMT

A Look Into The Markets

This past week interest rates ticked up to the highest level of the year, as the Minutes from the Fed's last meeting were released. Let's discuss what happened and look at the week ahead.

Minute by Minute - The Doobie Brothers

Fed Meeting Minutes Released

Last week's main event was the release of the Minutes from the January Fed meeting. Fed Chair Powell made it clear that a rate cut in March was not their "base case". Upon the Minutes being released, it became clear it was the same sentiment amongst most Fed members.

Most Fed members agreed they need to proceed carefully on cutting rates and not do it too soon as inflation remains above their intended 2% target.

Yet, at the same time, some Fed officials expressed concern about keeping rates too high for too long. This lack of consensus and mixed messaging highlights the uncertainty surrounding where inflation and the economy are headed, and when rate cuts are coming.

As always, the Fed reiterated they will be data-dependent and will rely on incoming inflation and economic readings to determine if and when to cut rates. The market is currently pricing in a rate cut this June, which is a lot different from a March cut priced in just one month ago.

So overall the Fed confirmed what we knew back in January - rate cuts are off the table for now and they need to see more disinflation for the Fed to move rates lower. But there was one note that could help long-term rates like mortgages in the future.

"Noting reductions in overnight reverse repo usage many officials said it would be appropriate to start in depth balance sheet reductions at next meeting." FOMC Minutes Feb 21 2024.

The Fed's balance sheet reduction is another form of tightening monetary policy, and it is a reason why long-term rates, especially mortgages, are higher. If the Fed starts to slow balance sheet reduction, it could lead to stabilization and possibly improvement in long-term rates.

Debt Everywhere

As mortgage and housing professionals, we must watch events around the globe. On Wednesday, during a day with not much news here outside the Fed Minutes, a German bond auction went off poorly and caused rates around the globe to rise.

Shortly thereafter, our Treasury Department sold $16 billion worth of 20-year bonds, and that auction also went off poorly… meaning investors needed to be compensated with more yield to buy the bonds. As those rates move higher, it causes mortgage rates to move higher as well.

LEI is BAD

The Conference Board's Leading Economic Indicator report showed the U.S. slowed quickly between December and January, highlighting the uncertainty around the strength of the economy. On one hand, we have strong labor market data, and on the other, we see numbers that suggest recession threats rising.

4.32%

The 10-year Note has a yield existence at 4.32%, which held yields from going higher the last week or so. If that level holds, it will keep long-term rates from moving higher. The opposite is true.

Bottom line: Uncertainty exists in the financial markets as to the strength of the economy and when the Fed will be able to cut rates. This means in the near term, any improvement in long-term rates may be short-lived. Upon clear data and direction, we will see further stabilization in interest rates.

Looking Ahead

Next week we get the critical Core Personal Consumption Expenditure Index (PCE). There is fear that this number will come in higher than expectations much like the recent CPI and PPI numbers. If it does, the bond market could have another rough time. However, if that reading were to come in below expectations, the bond market could celebrate. Why? The core PCE is the Fed's favored gauge of inflation.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see prices are at the lowest levels of the year, which means the highest rates of the year.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, February 23, 2024)

Economic Calendar for the Week of February 26 - March 1

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Higher inflation, Higher rates

Fri, 23 Feb 2024 13:52:41 GMT

A Look Into The Markets

This past week interest rates spiked to the highest levels since November. Let's review what happened and what to watch for in the week ahead.

"Can you take me higher?" - Creed

Higher inflation, Higher rates

The high-impact Consumer Price Index (CPI), a closely watched gauge of consumer inflation, was reported higher than expectations. The headline reading, which includes food and energy, was expected to come in at 2.9% year-over-year, but instead came in hotter at 3.1%.

The all-important core reading, which excludes food and energy, came in at 3.9% year-over-year, still well above the Fed's target of 2%. Bonds and rates loathe inflation, and they didn't like this number. In response to the reading, the 10-year yield spiked from 4.18% to 4.31% in a matter of moments. And mortgage-backed securities, which drive mortgage interest rate pricing, fell to their lowest levels since November.

What caused the high reading of inflation? Shelter. The shelter component of Core CPI made up nearly 70% of the 3.9% climb in prices. There has been a lot of speculation that rents are declining, and it takes time for it to seep into the consumer price index. We haven't seen that happen just yet.

Fed's Next Move

This hot inflation number certainly creates an issue for the Fed. Back in 2022, the Fed said there would be "pain" and that higher rates were needed to slow economic growth and elevate unemployment so that it could tamp down demand and lower prices. Here we are seven months after the 11th rate hike and unemployment remains below 4% and inflation is near 4%. Yes, prices have come down from much higher levels, but did the Fed rate hikes make that happen? Looking through this lens, one would ask, how does the Fed cut rates? They will certainly not cut in March and right now the Fed Funds Futures have already removed two of their six forecasted rate cuts this year from the table.

This uncertainty and volatility surrounding economic readings and the Fed's next move is what has increased instability in the bond market and interest rates.

Japan Enters Recession

Last Thursday, Japan, the world's third largest economy, reported it entered a recession. This is happening just as China is mired in an awful deflationary slump and property crisis. Recessions generally lead to low economic activity and lower inflation. So, if the globe slows down and prices decrease, we import lower prices which could help limit how high rates increase.

Price Discovery Mode

Last week, the 10-year yield broke out of a range, and above 4.18%, which led to a spike in yields. The market is in price discovery mode, trying to assess what bonds and interest rates are worth with inflation threatening to move higher. Soft economic data will allow rates to come back down. The opposite is true.

Bottom line: Interest rates broke above key levels and are now waiting for the next high-impact reading to determine whether this spike and yield is justified or not.

Looking Ahead

Next week is light on economic readings, but we have the Minutes from the last Fed Meeting. At that Fed Meeting, Chairman Powell suggested no rate cuts in March and inflation was still too high. Based on the inflation news since the Fed Meeting, the markets now agree.

Mortgage Market Guide Candlestick Chart

If you look at the right side of the chart, you can see prices are at the lowest levels of the year, which means the highest rates of the year.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, February 16, 2024)

Economic Calendar for the Week of February 19 - 23

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Volatility Continues

Fri, 16 Feb 2024 12:52:15 GMT

A Look Into The Markets

This past week there were only a few economic reports for markets to digest. As a result, rates remain stuck near key levels. Let's talk about what happened and look at next week's calendar as things heat up.

"Stuck in the middle with you" - Stealers Wheel

Volatility Continues

Interest rates have moved all over the place since the beginning of the year. The 10-year Note yield, as a proxy for mortgages, started 2024 at 3.85% and climbed to 4.18% in mid-January. Then we watched it decline sharply back to 3.85%, only to spike up to 4.18% in the last several days.

Volatility has mimicked the economic readings, which has shown a lot of good news and bad news. On top of that, the chance of a Fed rate cut in March has disappeared, eroding some of the optimism for lower rates coming sooner. This range that bonds are stuck in will be broken by a high impact news item, and last week didn't offer enough big news to drive bonds out of this range.

China Deflation

China, the world's second largest economy is having a rough go. Aside from real estate woes, and an overall economic malaise, they are now dealing with deflation…an outright decline in prices. On Thursday, it was reported that prices declined year-over-year by 0.8%. That sounds great right? Prices are moving lower. As the saying goes "Be careful what you wish for". Deflation is very harmful to an economy. It makes cash worth more and prices of real assets decline. For housing, it is awful, as people wait on the sidelines for prices to drop further before buying. Let's hope any whiffs of deflation that we may import from China doesn't grow into a larger issue.

Debt Remains a Headwind

Last week, the Treasury department sold over $100 billion worth of Treasuries, $42 Billion of which in 10-year Notes, the largest auction size in the history of our country for that security. This is a story to follow, as longer-term debt like 10-year Notes and 30-year bonds, carry more risk because of the time premium. We have seen investors demand higher interest rates to take the risk of purchasing longer term debt. If this story continues throughout the year as we continue to run deficits, it will be difficult for rates to meaningfully improve.

Fed Speak in Full Bloom

On the heels of last week's Fed meeting, Fed officials were out and about pouring cold water on the notion that the Fed will cut rates in March. In fact, most towed the same line and shared that a cut might not happen until the summer. This is yet another reason why long-term interest rates are stuck in a range. We entered 2024 with the Fed telling us they were going to cut rates three times, and the Fed Funds Futures pricing in as many as six or seven. Now it's clear that the Fed is only going to cut a few times based on some of the stronger than expected economic news of late.

Bottom line: In the short term, any improvement in interest rates may be fleeting as we look for clear signals in the next direction. If the 10-year Note yield moves above 4.20%, rates are heading higher. And if the 10-year yield moves beneath 3.85%, rates are going to move nicely lower.

Looking Ahead

Next week we get the Consumer Price Index (CPI). Inflation has shown itself to be moving in the right direction. In fact, the Fed's favorite gauge of inflation recently was reported at 2.9%, the lowest in three years and within striking distance of their target of 2%. Nonetheless, rates have remained stubbornly high on fears that inflation may be re-accelerating. So, this week's CPI will have a big impact on what happens with rates.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices are sliding lower from the best levels of the year.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 9, 2024)

Economic Calendar for the Week of February 12 - 16

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: February 2024

Thu, 15 Feb 2024 14:00:01 GMT

A Look Into The Markets: February 2024

"Imperfection is beauty, madness is genius, and it's better to be absolutely ridiculous than absolutely boring." - Marilyn Monroe

Whether you're buying your first home or your fourth, creating a budget is essential to ensure you can reasonably afford the house you want. In this issue, we'll discuss some tips for setting a homebuying budget, as well as the following:

What to Watch - Where are mortgage rates headed as the 2024 Spring Buying Season approaches?

How To Set Your Homebuying Budget - Take a look at your finances to establish a budget for your home purchase.

How Curtains Can Revamp Your Home - Curtains are an easy way to transform a space and update your home.

Q&A: What's the Ideal Credit Score for a Mortgage? - The credit score you need to get approved for a home loan depends on the mortgage type.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What to Watch

Rates and the Spring Buying Season

With February now in midstream, seeds of the spring buying season are beginning to sprout as potential buyers are surely making a game plan. Let's get into the mechanics of the season and what is relevant to buyers and sellers.

Rates: Although rates have come down from the 8% highs we saw in 2023, the current direction remains uncertain in the near term. There are a few factors contributing to this trend. These include worries about the national debt, an unexpectedly robust economy, the possibility of inflation picking up again, and diminishing odds of a rate cut from the Federal Reserve in March. Looking ahead, the focus will be on upcoming economic indicators such as GDP and the Core PCE (the Fed's preferred measure of inflation) and the potential impact of a large volume of Treasury supply.

On a positive note, according to a recent report from Redfin, 2024 is expected to be a bustling year for both homebuyers and sellers, surpassing the activity levels of 2023. This is due to an increase in mortgage applications and new listings. The significant drop in borrowing costs has also contributed to this trend, with the 30-year fixed mortgage rate falling from almost 8% in the mid-fall of 2023 to a current range of mid-6%. The decrease in borrowing costs has resulted in a decrease in monthly payments for the average U.S. homebuyer and, that data suggests a promising market for both homebuyers and sellers in the upcoming year.

Spring Buying Season: Generally refers to a period in the real estate market when there is an increased level of home-buying activity during the spring months. This trend is often observed nationwide, and several factors contribute to the occurrence. As March sets in, the weather should begin to shed winter's harsh conditions and temperatures become milder while the days grow longer. Spring also brings green lawns and blooming flowers which add to curb appeal. Homeowners with families that may be looking to move usually make plans to purchase in the spring and make the move in the summer due to school and activities. In addition, Uncle Sam may help with a spring purchase if you are due a tax refund. And because spring embodies renewal and a fresh start, it could push people to consider some transformative changes, like purchasing a new home. As the season approaches new listings tend to increase, which the market desperately needs in the current environment.

Bottom line: All year round there will always be potential buyers by individuals, couples, and families, for there is always someone in the market looking for a home.

Source: Mortgage Market Guid e

Housing News

How To Set Your Homebuying Budget

When purchasing a home, the amount you need to finance may seem astronomical. Instead of focusing on the size of the loan, consider the monthly mortgage payments you can reasonably afford. Use these tips to set a homebuying budget.

Consider the 28% rule. The 28% rule states you shouldn't spend more than 28% of your gross monthly income on a mortgage and other housing expenses, such as homeowners insurance. It's a good starting point if you're unsure how to budget for a home purchase. However, make sure you take your other monthly expenses into account. For example, if you have student loan payments or other debts, you may choose to spend less of your income on housing.

Save for a down payment. Factor your down payment into your homebuying budget. The more you can put down on a home, the less you'll need to finance. In addition, you can avoid private mortgage insurance by making a 20% down payment. You may be eligible for a second mortgage to help close the down payment gap and avoid mortgage insurance. Or you may choose to save for a larger down payment.

Account for closing costs. In addition to a down payment, make sure you account for closing costs. These costs usually include the application, appraisal, and origination fees. Typically, you can expect to pay closing costs ranging from 2% to 5% of the sale price.

There are a lot of variables to consider as you create a homebuying budget. If you need additional guidance, work with your mortgage advisor who can help determine how much you can afford and what options work best for you.

Sources: Businessinsider.com, Myhome.freddiemac.com, Investopedia.com

Home Improvement

How Curtains Can Revamp Your Home

Want an easy way to transform a space in your home? Hang some curtains on the windows. Consider these tips to make an impact with a new pair of curtains.

Incorporate color. While neutrals have their place, a bright pop of color can instantly brighten a space. Incorporate some color by hanging curtains in a rich color. Make sure you choose a shade that complements the rest of the room for a cohesive look.

Play with pattern. Show off your personality with a bold print. Patterned curtains can create a dramatic effect in a room. Use them to create a natural focal point in a bedroom, dining room, or living room. They can also add a touch of whimsy in certain spaces, such as a kid's bedroom.

Create height. If you have low ceilings, curtains allow you to create the illusion of height. Hang them above the windows to make the room appear more spacious. You can even hang them from the ceiling for a dramatic effect. When hanging curtains to create height, choose a pair long enough to touch the floor.

Pair curtains with blinds. You don't have to choose between curtains or blinds. Instead, pair them together for a classic look and extra privacy. Plus, this combination allows you to bring additional textures into a room, creating a cozy and intentional space.

Window dressings offer a simple way to update a room. Follow these tips to add curtains to your home.

Sources: Goodhousekeeping.com, Energizingspaces.com, BHG.com

Q&A

What's the Ideal Credit Score for a Mortgage?

QUESTION: What credit score do you need to buy a home?

ANSWER: When you apply for a mortgage, your credit score will be a major factor in the amount you're approved to borrow and the loan terms. So, what score should you aim for? The answer is it depends on the type of mortgage and its requirements. Your loan officer can help determine what mortgage types and terms are the best fit for you.

Conventional loan: For a conventional mortgage, the most common type of home loan, you'll need a minimum credit score of 620. However, some lenders may prefer borrowers to have credit scores of 680 or above. Plus, you'll usually get better rates with a higher credit score.

Federal Housing Administration loan: An FHA loan usually has lower credit requirements than a conventional loan. Typically, you can qualify for an FHA loan if you have a credit score of 580 and can make a 3.5% down payment. If you can make a higher down payment, you may be eligible for an FHA loan with a credit score as low as 500.

U.S. Department of Agriculture loan: The USDA insures loans for low- to middle-income borrowers who purchase homes in rural areas. There are no official credit requirements for USDA loans. However, you'll usually need a score of 580 or above to qualify - similar to an FHA loan.

Veterans Affairs loan: Like USDA loans, there's no minimum requirement for VA loans. However, you usually need a minimum credit score of 620. In some cases, you may get approved with a credit score as low as 580.

The credit score you need for a home loan depends on the type of mortgage. Before applying, work to improve your credit score by making on-time payments and paying off other debts.

Sources: Bankrate.com, Time.com, Creditkarma.com

Registered Mortgage Broker - NYS Department of Financial Services - All mortgage loans arranged with third party providers. | Licensed by the NJ Department of Banking and Insurance | Licensed by the FL Department of Financial Services, Licensed by Connecticut Department of Banking | All Loans Arranged through third Party Providers | NMLS Consumer Access: http://www.nmlsc onsumeraccess.org) NMLS 876527
© Tabrasa, LLC. All rights reserved.

A Look Into The Markets: March Rate Cut Off Table

Fri, 09 Feb 2024 13:30:06 GMT

A Look Into The Markets

This past week the Federal Reserve paused a hike of rates for the fourth consecutive time. Interest rates ticked down to the best levels in nearly a month. Let's discuss what happened and look at the events to watch next week.

"Nobody told me there'd be days like these" - Nobody Told Me – John Lennon.

Sustainably Toward 2%

As mentioned above, the Federal Reserve did not hike rates. In fact, they removed any reference to future hikes in their Policy Statement. So, the good news is that the next move will indeed be a rate cut, the bad news is when.

Fed Chair Powell said he wants to have greater confidence that inflation is moving "sustainably towards 2%". He repeated this phrase several times in his press conference. What was unclear to the market is the measure the Fed is looking at to determine if inflation is moving sustainably towards 2%.

A couple of weeks ago the Fed's "favored gauge" of inflation, the Core Personal Consumption Expenditure (PCE) Index came in at 2.9%, the lowest level in years. Powell made it clear, he needs to see more data and confirmation that inflation is still moving lower before the Fed considers rate cuts.

March Rate Cut Off Table

After the Fed's statement and press conference the chance of a rate cut in March went from a probability of 60% to just 30%. Even Fed Chair Powell said a chance of a rate cut in March is not his base case. So now we must look to the April/May meeting for a potential rate cut, unless of course surprising data comes in to support one sooner.

 Good News is Bad News 

In addition to the Fed Meeting, which helped lower rates, there was a slew of bad economic news which also helped support bond prices and push rates lower.

Additionally, the ADP Report which shows the number of private payrolls created in the economy, came in at just over 100,000 job creations for the month of December. This was well below expectations and a downright weak print. Adding to the inflation story was the employment cost index, another gauge the Fed likes to watch, which showed inflation is indeed moving lower.

Consumer Remains Confident

Despite the elevated rates, and some of the bad news in the labor market, the consumer remains confident. Consumer Confidence came out last Tuesday and was reported to be the highest level in three years highlighting that consumers feel there may be better days ahead...lower inflation and lower rates.

As we discussed in previous issues of MMG weekly, 4% is a key level to track on the 10-year Note. Why? If rates stay above 4%, then 4% is about as good as rates can get. This means mortgage rates can't improve further. The opposite is true. There is some good news here as the 10-year Note dipped beneath 4% for the first time in several weeks in response to the Fed meeting. Remaining at or beneath current levels could very well lead to lower rates ahead, hence the renewed optimism amongst consumers.

Home Activity is Responding

Every time we have seen a downtick in interest rates, we see a flurry of activity in the housing market. This time is no different. With the Fed's next move being a rate cut and Spring quickly approaching, things may end up being better than expected for housing. Just a few short months ago in October rates were 8% and the housing market was frozen. That is not the case today.

Bottom line: Markets changed quickly back in October, and no one was expecting to see interest rates decline like they have in such a short period. We now know the Fed's next move will be a cut, and it's coming sooner rather than later. With life wanting to move on and pent-up demand in housing, we should expect better days in the months ahead.

Looking Ahead: Next week is all about debt. The economic calendar is light on reports but the Treasury will sell $121 billion in 3,10 and 30-yr bonds. If the auctions go well, rates could improve. If they don't, interest rates could spike higher. Through it all, expect Fed officials to offer their thoughts on the economy and future rate cuts.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have gone sideways over the last 6 weeks. We shall soon find out if rates will resume their move lower or have they bottomed in the near-term.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 2, 2024)

Economic Calendar for the Week of February 5 - 9

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Debt Remains a Big Issue

Fri, 02 Feb 2024 13:18:06 GMT

A Look Into The Markets

This past week interest rates ticked up to the highest levels in over a month. Let's talk about the drivers for this move as we approach the big Fed meeting next week.

"Bye Bye Miss American Pie" American Pie by Don McLean

Good News is Bad News

For the last couple of weeks economic readings here in the U.S. have been positive. For instance, the recent initial jobless claims are near record lows, which means the unemployment line is at record short levels. Jobs buy homes, so that is a good thing.

It's clear that the consumer remains active, as recent Retail Sales figures came in above expectations. Seeing that consumer spending makes up nearly two-thirds of our economic growth, it's tough to see any near-term recession, which also means it's tough for the Fed to cut rates as aggressively as some were thinking as we entered 2024.

Gross Domestic Product (GDP) Not Gross

On Thursday, the first reading of 3rd Quarter GDP came in at a solid 3.3%, well above expectations of 2.00%. This reading is of course backward-looking, but it does highlight that the economy is nowhere near a recession; which is two quarters of negative growth.

Bye-Bye March Fed Rate Cut

Earlier this month there was nearly an 80% chance that the Federal Reserve was going to cut rates in March. In reaction to the recent round of positive economic news, that chance has slipped to below 50%. As a result, this has led to upward pressure on longer term rates like mortgages.

Debt Remains a Big Issue

This past week the Treasury Department needed to sell $160 Billion worth of bonds to fund our government. This is a lot of supply that puts downward pressure on prices and upward pressure on rates. As evidence on Wednesday when the five-year note auction received a D minus rating. This means the buying appetite was not robust, and the Treasury had to issue higher interest rates for investors to buy the bonds. If Treasury yields climb, it's impossible for mortgage rates to improve.

Next week there is a huge announcement by the Treasury Department as to how much debt they will have to sell in the first quarter to fund the government. If the number is larger than expected, bonds and interest rates could continue to have problems.

4.15%

The 10-yr Note broke above a ceiling at 4.00% and has continued to hover above key levels in response to everything we shared above. For home loan rates to improve, we need to see the 10-yr move back beneath 4.00%. The forthcoming Fed meeting next week may determine this.

Bottom line: Interest rates are essentially at the same level for the last month; this is a good sign as we want to see stabilization. At the same time, the labor market remains tight and there is no chance of a recession. This is a solid backdrop for housing as we quickly approach the Spring market.

Looking Ahead

Next week is a big one. Besides the Fed Meeting on Wednesday and its multiple reactions, the Treasury Department will announce how much debt they will have to sell in the 1st quarter to fund the government.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have gone sideways to slightly lower; highlighting home loan rates moving sideways to slightly higher.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, January 26, 2024)

Economic Calendar for the Week of January 29 - February 2

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Global Inflation Still an Issue

Fri, 26 Jan 2024 13:41:02 GMT

A Look Into The Markets

Financial markets continue their bumpy ride in 2024, as interest rates crept higher while stocks sell off. Once again, the Federal Reserve is front and center and a reason for the volatility. Let’s discuss what happened last week and preview the events to watch in the week ahead.

"Thunderstruck, you've been thunderstruck" Thunderstruck by AC/DC .

Waller Wallop

"When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully," Fed Governor Christopher Waller.

Mr. Waller offered multiple thoughts on the economy and interest rates. Like the quote above, none of which were bond friendly. He essentially said the Fed should move slowly on cutting rates, pouring cold water on the notion of a Fed rate cut in March. He also said the Fed should continue allowing mortgage-backed securities to run off their balance sheet; a move that has helped keep home loan rates elevated.

Wallers’ speech set off a sharp response in the bond market. The result sent interest rates spiking and immediately eroded the probability of a Fed rate cut in March from 80% to just 55%.

Global Inflation Still an Issue

The United Kingdom reported higher than expected inflation. Their central bankers also spoke tough while shunning the idea of cutting rates too soon. As you can imagine, the global bond markets didn’t like any of that, which also added to the upward rate pressure.

Retail Sales an Upside Surprise

Retail sales is a measure of consumer spending which makes up two-thirds of our economic growth. The good news? Retail sales came in better than expected, which lowers any recessionary fears. The bad news? The bond market hates good news and as a result, rates crept higher.

4% Plus

Unfortunately, the unfriendly bond news, coupled with the tough Fed talk, pushed the 10-yr Note yield above a key level of 4%. Why is it so important? If the 10-year yield can remain in the 4% range, it would be about as bad as rates can get. Now that it has edged above 4%, that level could be about as good as rates can get in the near term.

Unemployment Line

This past week 187,000 people filed for first time unemployment benefits. This was a historically low number. It remains to be seen if the frigid weather conditions kept people from filing. If future readings remain low, it will suggest the labor market remains tight which is terrific for housing.

Bottom line: Interest rates are essentially at the same level for the last month. That is to be expected after a historic improvement between November and December. The markets will have a clearer picture as to what the Fed will likely do this Spring and beyond at the next Fed Meeting on January 31st.

Looking Ahead

Next week brings plenty of headline risk once again. We will have important readings on inflation and economic growth with the Treasury Department selling a load of new debt. The good news will be the blackout or quiet period for the Fed as they do not offer speeches or comments until Thursday, February 1st.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have gone sideways to slightly lower; highlighting home loan rates moving sideways to slightly higher.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, January 19, 2024)

Economic Calendar for the Week of January 22 - 26

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Job Reports - Not So Rosy

Fri, 19 Jan 2024 13:06:39 GMT

A Look Into The Markets

After a multi-month decline in interest rates, we are seeing positive momentum in housing emerge. Let's look at some of the numbers from this week and highlight events to watch for in the weeks ahead.

"Your groove, I do deeply dig". Groove is in the Heart by Dee-Lite

Spring in January?

Not quite, but we have seen an uptick in inventory and mortgage applications over the last couple of weeks. This should be no surprise as interest rates moved sharply lower between the months of November and December. Much like we saw last year, with any dip in rates, housing activity picks up.

If rates remain near current levels or slightly improved, and the labor market remains tight, we should see far more purchase activity in 2024. As Lawrence Young, Chief Economist of the National Association of Realtors stated, "life goes on". There is a lot of pent-up demand and housing could have a surprise year in activity.

4.00%

The 10-year Note has been hovering around the 4% mark for the past few weeks; a further sign of some stability in the bond market. There is still much debate and uncertainty surrounding how many Fed Rate hikes we will see this year. Currently, they are forecasting three rate hikes in 2024. The Fed Funds Futures which price in the probability of rate cuts, are suggesting the Fed will cut rates six or even seven times. Someone is going to be right, and someone is going to be wrong. If the Fed cuts rates more aggressively, interest rates will decline. And the opposite is true.

Jobs Report, Not so Rosy

The recent Jobs Report reading for December showed 216,000 jobs were created in the economy. The media and others were celebrating the strong headline number. However, interest rates, which hate good news, didn't rise in the days since the release. Why? A closer look under the hood of the report, showed that the economy lost 1.5M jobs in December as shown in the Household survey within the release. And we hit a record high of 8.5 million people working multiple jobs. So overall, the jobs report was not so good when you look at some of the internals. If future labor market readings show similar weakness, it would prompt the Fed to cut rates sooner than the middle of the year, which is their current forecast. Once again, the opposite is true.

Consumer Inflation Mixed

The December Consumer Price Index was reported on Thursday and overall, it was in line to slightly higher. Shelter remains the largest contributor to overall inflation, making up nearly two-thirds of the Core CPI (which removes food and energy prices).

Bottom line: The trend in inflation remains lower; the economy is slowing, and the labor market is loosening. All of this should help lower rates while also avoiding a deep recession or a recession at all. This is potentially wonderful news for housing.

Looking Ahead

Next week there is lower impact economic news, but we will get many readings on the housing market. Last year every dip in rates was met with housing activity. We shall see if these readings support NAR's Lawrence Yun's take that housing activity has indeed picked up.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have gone sideways to slightly lower, highlighting home loan rates moving sideways to slightly higher.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, January 12, 2024)

Economic Calendar for the Week of January 15 - 19

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: January 2024

Mon, 15 Jan 2024 14:00:01 GMT

A Look Into The Markets: January 2024

"To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment." - Ralph Waldo Emerson

If you're ready to purchase a new home this spring, you're not alone. In this issue, we'll discuss how to buy a home during the competitive spring season, along with the following topics:

What to watch - The rate of inflation has eased in 2023 from the 40-year highs witnessed in 2022. If inflation can continue to ease, it will be a positive for the housing market.

T ips for Spring Home Buying - Spring is usually one of the busiest times for home buying, so learn how to make your offer stand out in a crowded field.

Ways To Make Your Living Room Cozy - Make your living room a place where everyone wants to gather with these simple tips.

Q&A: What's the Right Mortgage for You? - Review the common types of mortgages to learn which one is right for you.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What to Watch

Lower Growth Could Spur Lower Rates

With the new year upon us, potential buyers will be on the lookout for, hopefully, a decline in prices and an uptick in the supply of homes for sale on the market. Also, on the radar will be how the U.S. economy fares, will the inflation rate continue to decline, and how the job market plays out.

A recent report out of Redfin says that home prices were up 0.6% from October, the smallest monthly increase since June, and were up 6.4% from a year earlier. Redfin also said that indicators have suggested a re-invigoration of buyer and seller participation in the housing market.

After bottoming out at a 2.6-month supply of homes on the market in February and March of this year, supply has increased to 3.5 months where normal levels are seen at six months. From a supply perspective, we don't want to see a huge drop in borrowing costs because that could trigger big demand for housing, further deteriorating supply.

The U.S. economy saw a frothy 5% increase in Gross Domestic Product in Q3 2023 with the St. Louis Fed's NowCast (GDP forecast) at 1.6% in Q4. The Congressional Budget Office (CBO) sees the U.S. to slow to 1.5% in 2024 while the Federal Reserve is forecasting 1.4% GDP growth next year. Lower growth could usher in lower rates.

The rate of inflation has eased in 2023 from the 40-year highs witnessed in 2022. If inflation can continue to ease, it will be a positive for the housing market. The last metric to watch is the job market. When consumers feel stable in their jobs and able to move to another position with somewhat ease, that is also a positive for housing.

All the above are key points when making the big decision to jump into the pool of the American Dream of home ownership. Once in, the water is fantastic given the positives of ... financial stability, financial strength, tax deductions, a permanent home, and a sense of belonging in your community.

4 Tips for Spring Home Buying

Housing News

Once the chill of winter thaws, people become more motivated to buy and sell homes. By following some of these tips, you can be ready to purchase your next home this spring.

Work with a real estate agent. The spring housing market can be competitive. Work with a real estate agent who can help you navigate the process. An agent can notify you when new homes go on the market. They will also work to get you the best deal on a home, even when you're competing with other buyers.

Get pre-qualified. A mortgage pre-qualification can make all the difference when you're making an offer in a tight housing market. Many sellers prefer to work with buyers who are already pre-qualified. As a bonus, a pre-qualification can help you set a budget and stick to your maximum threshold.

Be ready to make an offer. In the spring, new homes can hit the market and get offers in hours, not days. Don't hesitate to view a home immediately if it's in your desired neighborhood and within your budget. When you find a home you love, be prepared to make an offer quickly - or risk losing out to another bidder.

Schedule an inspection. If you do need to make an offer quickly, an inspection can give you peace of mind before finalizing the deal. A home inspection will tell you whether there are major problems with the home, such as foundation concerns or roof problems. In the spring, an inspector can also survey the outside of the home for potential water damage.

Spring can be a great time to buy a home, but you may need to act fast. Use these tips to find your dream home and make an offer quickly.

Sources: BHG.com, Retirebetternow.com

Home Improvement

Easy Ways To Make Your Living Room Cozy

The living room is a place where many families spend most of their time together, so why not make it as cozy as possible? Consider these easy ways to make your living room feel more inviting.

Incorporate dark colors. Some people may feel intimidated by darker colors, but when you incorporate them thoughtfully, they can add instant coziness. Choose shades in your preferred color palette, such as navy blue, dark maroon, or forest green. You can make a big impact by painting the walls a deep, rich color. For subtle touches, add some dark-hued throw pillows, blankets, or decor.

Add textures. Different textures can elevate a space and make it feel warmer. Lush textures, such as faux fur and velvet, can make you want to snuggle on the sofa for hours. Natural wood tones can also create a warm, rich space. Consider adding wood beams or a paneled accent wall to increase the coziness.

Use different lighting sources. Make sure you have different lighting sources in your living room. In addition to an overhead fixture, add a floor lamp or table lamp for layered lighting. Add a soft glow to the room with accent lighting, such as recessed lights, string lights, or even candles. Use warm lights to create a cozy effect.

Everyone will want to spend time in the living room when you make it warm and inviting. Follow these tips to make your living room feel extra cozy for you and your loved ones.

Sources: Homesandgardens.com, Inoleds.com, HGTV.com

Q&A What's the Right Mortgage for You?

QUESTION: What type of mortgage is right for me?

ANSWER: When purchasing a home with a mortgage, you have various options for financing. The right mortgage for you will depend on a few factors, including your credit score, down payment, and budget.

If you have a good credit score, usually 620 or above, a conventional mortgage typically offers the lowest rates. In most cases, you'll also need a 3% down payment to qualify. If you put down less than 20%, be aware that you may need to pay private mortgage insurance, which can increase the total loan amount.

For those who may not qualify for a conventional loan, a Federal Housing Administration (FHA) loan can be a good option. The federal government insures FHA loans. Usually, you can secure an FHA loan with a credit score of 500 and a 10% down payment. You may qualify for a lower down payment if you have a credit score of 580 or above.

Other types of mortgage loans include:

VA loans backed by the U.S. Department of Veterans Affairs. You may qualify for this mortgage if you're an active-duty military member or veteran.

USDA loans offered by the U.S. Department of Agriculture. This type of loan is designed for low to middle-income buyers who purchase homes in rural areas.

Jumbo loans for buyers purchasing expensive homes. A jumbo loan allows you to borrow money above the conforming loan limits. You'll need good credit and a sizable down payment to secure this loan.

Mortgages vary widely, and the right mortgage depends on your budget and needs. Work with a lender who can guide you on the right type of mortgage for you.

Sources: Creditkarma.com, Credible.com, Investopedia.com

A Look Into The Markets: Fed Minutes Released

Fri, 12 Jan 2024 13:50:06 GMT

A Look Into The Markets

Financial markets started off the new year on the wrong foot, and interest rates inched higher. Let's discuss what happened and look at next week's events.

"Funky new year. Oooooo, it's a funky new year" - Funky New Year by the Eagles

Fed Minutes Released

On Wednesday, the minutes from the December Fed meeting from two weeks ago were released. Overall, the minutes amplified Fed Chair Jerome Powell's take, "The Fed" is likely done hiking rates and we'll begin cutting this year. And thankfully, the bond market liked it, which halted the spike higher in rates.

However, there was a line in the Minutes that did not grab a lot of attention in the media, but is worth following for us here in the mortgage and housing industry...

"Several participants suggested it would be appropriate to begin discussing technical factors about slowing balance sheet run-off well before such a decision was reached."

This is an important line as some Fed Members are "starting to talk about talking about" how to slow the shrinking of their balance sheet which is filled with Treasury and Mortgage Bonds. What does this mean for mortgage and housing? The Fed would slow the balance sheet run-off by reinvesting the proceeds from returned principal on bonds that have matured as well as refinance and purchase activity. If the Fed is buying bonds, it will attract other buyers. This could help spreads between Treasuries and Mortgage Bonds narrow, which would go a long way to help home loan rates decline further.

Leading Indicator on Labor Market Health

The JOLTS report is a leading indicator on the labor market. It shows how many "help wanted" signs are posted (jobs available) and how many people are quitting their job. In a case of bad news is good news, the readings show less jobs available and quitting at three-year lows. It's bad news economically, but it is exactly what the Fed wants to see to help lower inflation and slow demand - elevate unemployment.

Let's break it down further. People are less likely to quit if they can't find a job and if there are less help wanted signs or jobs available. The next shoe to drop is higher unemployment. Why? First, businesses stop hiring - check. Next, hours get cut and lastly if conditions do not improve, companies lay people off. The good news? Even if inflation ticks back above 4.00% which the Fed is forecasting, that would still be a historically low unemployment rate and great driver of housing.

Looking ahead

Next week the Treasury will auction off more bonds, which could generate market excitement. The main economic report is the December Consumer Price Index (CPI), a reading on consumer inflation. If this report meets or falls beneath expectations, it would ensure the rate hike back in July was indeed the last.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have gone sideways to slightly lower, highlighting home loan rates moving sideways to slightly higher. The good news is the trend remains our friend, meaning higher prices and lower rates over time.

Economic Calendar for the Week of January 8 - 12

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Home Loan Rates Improving

Fri, 05 Jan 2024 13:36:04 GMT

A Look Into the Markets

Home loan rates have improved once again finishing the year at the best levels since May. Let’s look at what happened in the final trading week of the year and discuss what to watch as the new year begins.

"May we all have a vision now and then. Of a world where every neighbor is a friend" Happy New Year by ABBA

3.83%

The 10-year Note continues to hover near 3.83%, exactly where 2023 began. But as we all know, this is an enormous improvement in rates. In just the last nine weeks, the 10-year note declined from 5.11% to current levels.

The two-month decline in Treasury yields is the largest since 2008, when the Federal Reserve was aggressively cutting rates.

This decline in Treasury rates have helped mortgage rates immensely. In late October, 30-year mortgage rates went from 8% to something in the 6’s. That is amazing relief!

Why the Improvement and Rates?

Rates around the globe are declining. Countries like Germany and the UK are watching their government bond rates slide lower as their economies are in poor shape. The German 10-year bund is at the lowest yields since late 2022. As rates around the globe move lower, so do rates here in the States.

Yet, our rates have not improved as much as others around the globe. Why? Our economy, while slowing, is performing far better than others around the globe. Additionally, our unprecedented amount of deficit spending is applying upward pressure on interest rates, so yes, rates have improved, but not as much as other countries around the globe.

Fed Rate Cuts in 2024

Entering 2023 interest rates were in a similar position, but in 2023 the Fed hiked rates multiple times through July. In 2024, it is widely expected that the Fed will start cutting rates. There is a difference of opinion, as to how many rate cuts we will see. The Fed, who is a very bad forecaster on the economy, inflation and interest rates, is suggesting they will only cut rates three times. However, the Fed Funds

Futures market which prices in the probability of Fed hikes/cuts is currently pricing in as many as six rate cuts.

This is a big difference between what the Federal reserve is thinking and what the markets are thinking. Incoming data will decide when and how much the Fed cuts rates. It is an election year and history has shown the Fed is more likely to cut rates sooner rather than later.

Again, if history is any gauge, the first rate cut comes about eight months after the last hike setting us up for a cut by April.

Looking ahead

The Big news may not come from the economic calendar, but from the turning of the calendar itself. Every year we see a lot of volatility in stocks and bonds as institutions and traders take positions and place bets. Last year we watched the 10-year Note go from 3.83% to 3:20% in January. Who knows what will happen this year, but we should expect a sharp move one way or the other.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 5.5% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

On the far right side of the chart, you can see how prices continue to move sideways to higher over time - meaning lower rates over time. We may very well find out in this first week of January if this great trend will continue.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, December 29, 2023)

Economic Calendar for the Week of December 25 - 29

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: 3rd Quarter GDP in the Books

Fri, 29 Dec 2023 14:00:01 GMT

A Look Into the Markets

The "Santa Claus Rally" in stocks is an often-discussed phenomena in the markets, but it was the bond market that has displayed some holiday cheer this year. Let's discuss what happened last week and look into the final trading days of the year.

"All I Want for Christmas" - All I want for Christmas - Mariah Carey

Crazy 8's

In late October 30-yr mortgage rates hit 8%; the highest in this century. Since that time, the bond market has been on a tear with rates declining for 8 consecutive weeks.

Reasons for the sharp decline:

1. Inflation moving lower.

2. Anticipating the Fed is done hiking rates.

3. Labor market is loosening up.

4. Oil prices have declined sharply.

5. Fears of recession are throughout the globe.

6. Israel/Hamas war and uncertainty.

3rd Quarter GDP in the Books

U.S. Gross Domestic Product (GDP), like many economic reports, issues multiple readings before submitting a final report. In the case of GDP there are three reports. Last Thursday, the final reading for 3rd quarter GDP was released and it came in at a strong 4.9% clip. The market took the good news in stride. Why? Because of the 3rd quarter which ended in September. This means the markets are not paying much attention to the backward-looking reasons and are more focused on where the economy is headed. The Atlanta Fed GDP

Now, which had been accurately forecasting the strong GDP reading for the 3rd quarter, is currently forecasting 4th quarter GDP to come in at 2.7% or roughly half the pace of the 3rd quarter. So the economy is indeed slowing and is a reason why the Fed's next move is to cut rates.

3.84%

If the 10-yr Note yield finishes the year beneath 3.84%. Rates will be lower on the year, which is a crazy thought after the historic spike late summer.

Bottom line: The bond market is finishing off the year in fine fashion and interest rates will be right where the year began. Except, unlike this year where the Fed hiked rates, they will be cutting in 2024.

Looking Ahead

Next week should be quiet, there are a bunch of moderate impact economic releases, which should not move the markets too much. But what could derail the party is a series of Treasury auctions. If the appetite for the bonds is not good, rates could rise. The opposite is true.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.5% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

On the far-right side of the chart, you can see how prices have gone straight up for eight consecutive weeks making for the wonderful decline of 8% 30-yr loans to something in the 6's%.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, December 22, 2023)

Economic Calendar for the Week of December 25 - 29

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: The Fed Delivers Early Christmas Gift

Fri, 22 Dec 2023 13:45:00 GMT

A Look Into the Markets

This past week the good vibes in the financial markets continued. Interest rates hit their best levels since the Summer and continued their historic run lower. Let's discuss what happened and look at the week ahead.

"Let's Dance" – Let's Dance by David Bowie

Fed Delivers Early Christmas Gift

"Rate cuts will be a topic of discussion going forward" Fed Chair Jerome Powell.

The main event last week was the Fed Meeting which included their decision on interest rates, and their updated forecast on the economy. The release of the statement, and the subsequent press conference could not have been more bond friendly as interest rates tumbled throughout the day.

Here are the main takeaways from the Fed Meeting:

Inflation is headed lower.
The economy is slowing with no recession on the horizon.
The labor market will remain somewhat strong.
The next move by the Fed is a rate cut.

How soon will the rate cut come? Well, as we discussed last week, history has shown that the first rate cut comes about 8 1/2 months after the last hike; setting the stage for an April cut. Heading into yesterday's meeting there was virtually no chance of a rate cut in March. Now there is a 70% chance the Fed will cut rates at the March meeting.

Three is a Charm

"Fed doesn't need a recession to cut rates"...Powell.

The Federal Reserve also added an additional cut to their outlook, and now sees three rate cuts next year. Fed Funds Futures, which price in the probability of Fed activity, are pricing in as much as six .25% cuts bringing the Fed Funds Rate down to 3.75% by Dec 2024. The incoming data will determine whether the Fed must cut more than presently forecasted.

What we learned over the last few weeks is what happens all the time in financial markets...things can change very quickly. Back in October when the 10-year note was yielding over 5%, there was no one on the planet forecasting that the 10-year yield would touch the 3's before the end of the year...yet here we are.

As of this press time, the 10-year note is yielding beneath 4% which until now, has been a floor of yield support preventing rates from getting better. If the 10-yr Note can remain in the 3's for a few days, 4% could suddenly turn into a ceiling of yield resistance, which would mean 4% would be about as bad as rates could get...quite the change of fortune.

Bottom line: The Federal Reserve has finished hiking rates, and their next move will be a cut. This removes uncertainty from the financial markets. At the same time, long-term rates like mortgages have started repricing this reality over the last few weeks. We can't expect rates to continue to move in a straight line lower, but this last week was an incredible development for mortgage and housing and should give us a better Spring than we could've imagined just weeks ago.

Looking Ahead

Next week we do get the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure Index (PCE). After the recent turn of events this week, this reading would have to be reported shockingly high to derail the shift in sentiment from the Fed to cutting rates as their next move.

On the far right side of the chart, you can see how prices have gone straight up for seven weeks, capping a historic decline in interest rates.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, December 15, 2023)

Economic Calendar for the Week of December 11 - 15

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Winning Streak Extends to Six

Fri, 15 Dec 2023 13:30:00 GMT

A Look Into the Markets

Home loan rates have enjoyed the 6th consecutive weekly decline as bond friendly news continues to hit the wires. Let's review what is happening in the financial markets, the economy and prepare for a big news week ahead.

"Yeah, it's alright, we're doin' fine, so fine. Thunderstruck, yeah, yeah, yeah" Thunderstruck by AC/DC .

Winning Streak Extends to Six

Through late October, we were experiencing one of the worst bond market/interest rate trends in our lifetime. But a culmination of weak inflation data, weak labor market news and rising expectations of an economic slowdown has prompted one of the sharpest rate improvements in decades.

How good has it been? Home loan rates have improved for six straight weeks after touching 8.00% in October. So, like the old hit show was titled "Eight is Enough".

Fed is Done

Part of the reason for the rate improvement is the idea the Fed has finished hiking rates. We will likely find out for sure over the next week as there is a ton of important data and a Fed Meeting. As of this moment, the Fed Funds Futures market is pricing in no more hikes and a reasonable chance of a rate cut by March.

History is on our side. If you look back at the previous four rate hiking cycles over the last 30 years, on average the first rate cut comes 8.6 months after the last hike. In this cycle, the Fed last hiked rates in July, which means, by historical standards we could see a rate cut by April.

Markets are forward looking, so the improvement in rates we have seen is the bond market expecting the Fed to be done.

Help Wanted Signs Disappearing

October showed the number of jobs available declined by 617,000 to 8.7 million. This number was less than expected and highlights the slowdown in the labor market. This is what the Federal Reserve wants to see as it slows demand and tamps down inflation. It is also yet another data point to support the Fed's next move being a rate cut as they want to be very careful not to push the economy into a recession with excessively higher rates.

The Quote of the Week

"Persistently high interest rates would present a "somewhat greater challenge" for the government." Treasury Secretary Janet Yellen

Quotes like these remind the world that higher rates are a problem and seeing this decline continue is both likely and welcome.

4.00%

The 10-year Note yield has declined from 5.00% to just above 4.00% in the past six weeks, highlighting the rapid rate improvement we discussed above. The 4.00% level is worth following closely. It may take even more bond-friendly news to push yields into the 3's, which virtually no one was forecasting six weeks ago.

Bottom line: Interest rates have improved at a record pace the last six weeks. Now our eyes are set on yet another huge news week, which may very well define whether rates can improve another level or not.

Looking Ahead

Next week's high-risk events will need to be digested by investors and the markets. The big event will be a two-day Fed meeting which kicks off on Tuesday and ends on Wednesday with the release of the monetary policy statement. Also, consumer inflation data from the

Consumer Price Index (CPI) and wholesale data from the Producer Price Index along with a reading on consumer spending will be delivered. Job growth has been declining while the frothy Gross Domestic Product in Q3 2023 is now seen far lower in Q4. If this CPI report shows a much-needed decline in inflation (achieved because rents and energy prices are declining), it may very well confirm the Fed has finished raising rates.

On the far-right side of the chart, you can see how prices have been on a sideways to an upward staircase after having been on a downward staircase up until the end of October.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, December 8, 2023)

Economic Calendar for the Week of December 11 - 15

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: December 2023

Thu, 14 Dec 2023 14:21:34 GMT

A Look Into The Markets: December 2023

"You only live once, but if you do it right, once is enough." - Mae West

As a homeowner, you're responsible for a variety of expenses, including homeowners insurance. You can save money on this insurance with a few simple steps. In this issue, we'll cover these tips, as well as the following:

What to Watch - The Federal Reserve has signaled that it may have contained inflation by hiking rates. The last hike in July to the Fed Funds Rate, which brought it to 5.5%, could be the high point of the cycle.

How To Save on Homeowners Insurance - Discover various ways you can lower the cost of your homeowners insurance to save money.

4 Home Improvement Projects for Winter - Get some ideas for home improvement projects you can do in the colder months.

Q&A: How Do You Know How Much Home You Can Afford? - When determining your budget for a new home, there are many factors to consider, such as your debt-to-income ratio and ongoing expenses.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

Fed Signals it May Have Contained Inflation

What a difference a few weeks make in the financial world. Near the end of October, the closely watched 10-year yield rose just above 5% to highs not seen since 2007. At the same time, the 30-year fixed rate mortgage flirted with 8%, the highest since the turn of the century. Rising interest rates, heavy borrowing from the U.S. Treasury, inflation pressures and a hot job market were factors that helped to push borrowing costs higher.

But since the historic rise in yields and home borrowing costs, a sort of pivot has taken place as the Federal Reserve has signaled that it may have contained inflation by hiking rates. The last hike in July to the Fed Funds Rate, which brought it to 5.5%, could be the high point of the cycle.

Why? The closely watched Consumer Price Index, which hit multi-decade highs in June 2022 of 9% annually, has fallen to 3.2%. As inflation has declined, the bond markets have responded positively as prices increased and yields fell. As yields fall, so do mortgage rates.

The hot job market is now showing signs of cooling evidenced by the recent decline in monthly job growth while weekly initial jobless claims have been increasing. Also, the number of jobs available has been slowly decreasing.

The canary in the coal mine for the mortgage market and yields is the increasing debt load of the U.S. government. As the debt load grows, the Treasury must issue more and more Treasury Bills, Notes and Bonds to pay for the debt. More supply could lead to lower bond prices, higher yields and higher borrowing costs.

The takeaway ... falling inflation and a cooling job market should help to push home borrowing costs lower over the next several months and if the Federal Reserve cuts rates in 2024, mortgage rates could push even lower.

How To Save on Homeowners Insurance

Housing News

Homeowners insurance is a necessary expense to protect your home from weather, theft, and other damage. But the cost of this insurance can quickly add up, especially when you're paying for other expenses, such as a mortgage and property taxes. Here are some tips to help you save money on your homeowners insurance.

Bundle your policies. Many insurers will offer discounts if you purchase multiple policies from them. For example, you may bundle your auto and homeowners insurance policies to receive a discount. Ask your insurance company about the bundling options.

Ask for a discount review. If you've made changes to your home recently, ask your insurance company for a discount review. For example, you might get a discount if you've installed a new home security system. Renovations you make to your home, such as new plumbing or wiring, may also qualify you for a lower insurance rate.

Research discount options. You may qualify for a discount on your premiums without even realizing it. Research different discount options you may have. Many insurers offer lower rates to loyal customers, military members, retirees, and even certain types of professionals.

Compare quotes from different companies. If you believe you're paying too much for homeowners insurance, get quotes from a few different companies. Compare these quotes to see if you could save money by switching to a different provider. It's a good idea to review your homeowners insurance and compare quotes every couple of years or so.

Knowing about different discount options can help you save money on homeowners insurance. Use these ideas to lower the cost of your premium.

Sources: Forbes.com, Policygenius.com, Bankrate.com

4 Home Improvement Projects for Winter

In the winter, it can be tempting to hibernate in the warmth of your home, choosing to save home improvement projects for the spring. However, winter can be an excellent time to tackle some projects on your home to-do list.

Replace hardware. Take advantage of the extra indoor time by replacing hardware on your kitchen cabinets and bathroom vanities. You can even swap out a sink faucet to make a statement. These small changes can have a big impact in a room.

Remodel the laundry room. Winter is a great time to give some attention to neglected spaces, such as the laundry room. Make your laundry space feel more inviting with a fresh coat of paint or peel-and-stick wallpaper. Add functional items, such as shelves and bins, to make the room work better for you.

Paint the walls. If there's a room in your home that's desperately in need of a paint job, tackle this task in the winter. The cooler air allows paint to dry more quickly than in the summer. Use low-volatile organic compounds paint so you don't have to open the windows on a cold day.

Upgrade the lighting. Winter brings shorter days and more darkness, making it essential to have the right lighting in your home. Make your home bright by swapping out dull or old bulbs for new ones. You can also upgrade your lighting with apps or dimmers so you can control the amount of light in a room.

You don't have to neglect the projects on your to-do list just because the weather gets colder. Use these ideas to make some updates to your home in the winter.

Sources: Houselogic.com, Angi.com, Forbes.com

Q&A

How Do You Know How Much Home You Can Afford?

QUESTION: How do I set my budget for a house?

ANSWER: When you purchase a home, you never want to spend more than you can afford, otherwise you'll end up house poor. Before you start shopping for a new home, set a budget by calculating your debt-to-income ratio, determining a down payment, and planning for ongoing costs.

When lenders review your mortgage application, they'll typically consider your debt-to-income ratio, which is how much you pay in debts compared to how much you make each month. You can calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. As a general rule, experts recommend your mortgage payment shouldn't exceed 28% of your monthly income.

Your down payment will also have an impact on how much you can afford to spend on a new home. A good goal is to make a 20% down payment in cash so you can avoid paying private mortgage insurance. If you can't afford a 20% down payment on a home, it might be worth looking at less expensive houses where your money will go further.

Finally, don't forget to account for ongoing expenses when setting a budget for a new home. Homeownership comes with many ongoing costs besides your mortgage payment. For example, you'll have to pay for property taxes, homeowners insurance, and utilities. Plus, you'll be responsible for maintenance and upkeep, such as lawn care, pest control, and appliance repairs.

Buying a home is a big investment. Take these steps to set a budget so you purchase a home you can reasonably afford.

Sources: Myhome.freddiemac.com, Nerdwallet.com, Investopedia.com

A Look Into The Markets: Inflation Continues to Decline

Thu, 07 Dec 2023 21:50:58 GMT

A Look Into The Markets

Home loan rates continued their decline which started at the beginning of November. Let's look at what happened this past week and prepare for the big news ahead.

"Closing time, every new beginning. Comes from some other beginning's end, yeah" Closing Time by Semisonic.

Bonds Enjoy the Best Month in Forty Years

So how good has the bond market been in November? According to Bloomberg's widely followed U.S. Aggregate Bond Index, the 4.3% gain in November was the largest since 1985. During the month, we have watched the 10-yr Note, which ebbs and flows with mortgage rates, move from 5.00% down to 4.25%.

Sensing the Fed is Finished

If the decline in inflation continues "for several more months ... three months, four months, five months ... we could start lowering the policy rate just because inflation is lower," Fed Governor Christopher Waller.

Likely the biggest driver of interest rates over the past couple of weeks is the idea that the Federal Reserve has finished hiking rates. Fed Governor Waller, quoted above, is one of several Fed officials suggesting the Fed's next move could indeed be a rate cut.

Bill Ackman, CEO of Pershing Square, who shook the markets in late October when he said he covered his bet against higher rates, recently suggested that the federal reserve may need to cut rates aggressively in the first quarter of 2024 to avoid a hard economic landing. It is worth noting that he is alone on that consensus, but he was also alone last month when he said Treasuries yielding 5% is too high in this risky world.

If the Fed is indeed done hiking rates, it means the last rate hike was in July and, that is when the clock starts as it relates to when a rate cut would happen. For reference, over the last four rate hiking cycles in the past 30 years, the Fed cut rates on average of 8.65 months after the last hike. So, if history is any guide, the Fed would cut rates by their April 30th /May 1st, 2024 meeting.

GDP Was Not Gross, Markets Move On

The second reading of our 3rd Quarter gross domestic product (GDP) was reported at a robust 5.2% from a previous reading of 4.9%. Normally, such a strong reading would mean higher rates, and possibly more Fed Rate hike activity. But the markets are forward looking, and it is widely expected that the fourth-quarter GDP will reside somewhere near 2%, a sizable decline from the current rate. Moreover, the GDP number was bloated because of excess government spending, which is unsustainable. Bottom line, the economy is growing, but it is not overheating, and does not require more Fed hikes.

Inflation Continues to Decline

The Fed's favored gauge of inflation, the Core Personal Consumption Expenditure (PCE) index, came in at 3.5% year-over-year, the lowest level in a couple of years. It remains well above the Fed's target of 2%, but it is headed in the right direction which is lower. This is yet another data point to allow the Fed to pause hiking rates and let the series of hikes over the last couple of years further set into the economy.

Bottom line: It appears that the Federal Reserve has finished hiking rates, and the peak in long-term rates is in. If you or someone you know is interested in buying a home now would be an incredible time, because if rates continue to drift lower it is going to attract more buyers and increase competition.

Looking Ahead

Next week we will see important readings on the labor market, including the ADP Report, Jolts Report, and the November Jobs Report. If the readings continue to show signs the labor market is cooling and unemployment is rising, it's likely and a good bet that the Fed is done hiking rates. There will also be Fed speakers out sharing their opinions on the economy and interest rates. All of this could determine whether rates will improve further in the near-term.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.5% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower, and vice versa.

On the far-right side of the chart, you can see how prices have broken to the upside out of the downtrend, which highlights the recent rate relief. If prices can close above $102 and the 10-yr Note can move sharply beneath 4.35%, the rate relief will likely continue. The opposite is true.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, December 1, 2023)

Economic Calendar for the Week of December 4 - December 8

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Where Are The Rates Headed?

Fri, 01 Dec 2023 13:34:03 GMT

A Look Into The Markets

Happy Thanksgiving to you and yours. With all financial markets closed on Thursday for the Thanksgiving Holiday, this week's shortened edition will focus entirely on interest rates.

History of Thanksgiving

Sarah Joseph Hale campaigned for a national Thanksgiving in the United States during the 19th century, eventually winning President Abraham Lincoln's support in 1863. He and subsequent presidents proclaimed a National Day of Thanksgiving annually for the last Thursday in November. In 1870, Congress passed legislation making Thanksgiving (along with Christmas Day, New Year's Day, and Independence Day) a national holiday. On December 26, 1941, President Roosevelt issued a proclamation designating the fourth Thursday in November (which is not always the last Thursday) as Thanksgiving Day.

The Where, Why and What's Next for Rates

Where are rates headed?

Near term it is lower. The Thanksgiving holiday appeared to come a week or so early from an interest rate perspective as home loan rates have declined to the lowest level in over two months.

The decline in interest rates is not limited to long-term interest rates, like mortgages. Short-term interest rates have also declined and the financial markets are pricing in no more rate hikes. In a reminder of how fast markets can change, there is currently a chance the Fed cuts rates as soon as March 2024.

Why?

The economic news of late has been "bond-friendly". Inflation has started to ease; unemployment is ticking higher and reports on the economy show continued softening. In addition to weaker economic news, the geopolitical landscape carries a lot of risk with fears of tensions in the Middle East escalating. We are also seeing recession fears escalate around the globe. Add it all together and it likely means the Fed has finished hiking rates, with the peak or terminal rate achieved in July.

What's Next?

Next week we will get the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index. Expectations are for the annualized inflation rate to come in at 3.7%. When the Fed says they are holding rates higher for longer until inflation hits 2.00%, the Core PCE is what they are talking about. If the readings come in hotter than expected, rates could suffer. The opposite is true.

We also have some Treasury auctions, where the US sells debt to fund our government. After the recent decline in rates, the 10-yr Note has moved from 5.00% to 4.40%. The markets will be looking at the buying appetite after a decline in rates. If investor demand is tepid, the Treasury Department may have to increase yields (offer higher interest rates) to sell all the debt.

Mortgage Market Guide Candlestick Chart

The good news? You can see how bonds have broken off a down escalator with rates moving higher over time. It now appears as though rates are at the beginning stages of creating an up escalator where rates move sideways to lower over time. The forthcoming news and confirmation that inflation is moving lower will decide whether a new trend of lower rates emerges.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, November 24, 2023)

Economic Calendar for the Week of November 27 - December 1

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into the Markets: Inflation is Declining

Fri, 24 Nov 2023 14:00:01 GMT

A Look Into the Markets

This past week interest rates held near the best levels in two months in response to bond-friendly news. Let's review what happened last week and look at what to watch for this coming week.

"She says, Let's go" - Let's Go by the Cars

Inflation is Declining

Disinflation, or the rate of inflation declining, is in full bloom. The Consumer Price Index was reported on Tuesday and showed the rate of inflation continues to decline. This is great news. The Federal Reserve's dual mandate is to promote maximum employment and maintain price stability. They want to see unemployment start to rise and prices start to fall. On the former, the last jobs report did show the labor market showing signs of cracking. Now, we are seeing consumer prices start to drift lower.

The takeaway? It likely means the Federal Reserve has finished hiking rates. It also means the last rate hike was back in July. This is also important because when the Fed says, "higher for longer", we must remind ourselves that the clock starts ticking in July as to when we will see a rate cut. Fed Fund Futures are currently pricing in a small possibility as early as next March.

Don't Tell the Fed

Despite a rash of economic news, suggesting that the Federal Reserve should be finished hiking rates - don't tell the Federal Reserve that. Fed officials were out in full glory, suggesting that the Fed may not be done with hiking rates yet. Why would they say such a thing when the data suggests that economic conditions are moving in the right direction for the Federal Reserve to pause? Likely, they do not want to take a victory lap.

Inflation is coming down, the labor market is indeed starting to loosen, and the economy is slowing. This is what the Fed wants to see and the rally we have seen in both stocks and bonds supports the likelihood that the next Fed move will be a rate cut.

Shorts Get Scorched

Markets are made with people on both sides. There are those betting on higher prices, and the other side betting on lower prices. Over the last several months, there has been rising short interest in the bond market. This means many people are betting on higher rates.

Well, as you can imagine over the past couple of weeks with interest rates improving, folks betting on higher rates, really got hurt. What the rising short interest has also done, is exaggerate and quicken the pace at which interest rates have improved from the peaks of this year. In the matter of just a couple of weeks, we watched the 10-year note move from 5% to under 4.50%.

What to watch for? Data or news that gives those betting on higher rates, a reason to celebrate. Any unfriendly bond news could quickly erode the nice rate relief we have experienced.

Looking ahead

There are a host of economic reports that can move the financial markets, but what may move the market even more? Treasury auctions. Our rising debt must continue to be sold in the Treasury markets. After the recent decline in interest rates, will investors buy the bonds at current rates, or will the Treasury have to issue higher yields/interest rates to entice buyers? We shall see.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have broken to the upside out of the downtrend, which highlights the recent rate relief. If prices can close above $101 and the 10-yr Note can move sharply beneath 4.50% then rate relief will likely continue. The opposite is true.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, November 17, 2023)

Economic Calendar for the Week of November 20 - 24

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Lower Oil Equals Lower Rates

Fri, 17 Nov 2023 13:27:51 GMT

A Look Into The Markets

This past week, interest rates held steady and near the best levels in over one month. Let's look at what happened last week and peek into the week ahead.

"I have to admit it's getting better (better)" – Getting Better by The Beatles

Treasury Selling More Debt

Last week, the Treasury Department sold over $100 billion worth of Treasuries, to fund the government. The increase in our deficit spending and subsequent debt downgrade during the summer was a reason for the spike higher in interest rates. So, every time there's an auction, markets are on edge as to what the appetite will be to purchase these bonds. If buyers do not have a strong appetite to purchase our debt at current interest rates, the Treasury Department must give higher yields or rates to entice buyers to purchase the bonds. And as treasury rates go higher, so do mortgage rates. 

The auction results this week were OK, meaning the Treasury Department was able to sell all the new debt without increasing rates – however, the purchasing demand was less than stellar.

"If the rise in bond yields is sustained, the Fed will have to think about the tightening impact of those credit conditions on economic performance, and would there be dangers of overshooting" - Chicago Fed President Austan Goolsbee.

Fed Officials Soften Tone

A host of Federal Reserve officials were out and about this week. As always, they never speak in unison and say the same thing about monetary policy and economic conditions. However, a common undertone amongst the officials was that higher long-term interest rates have tightened financial conditions and are doing the job of the Fed. For example, with mortgage rates hitting 8% a few weeks ago, housing activity and thus economic activity slowed, thereby removing the need for the Fed to raise rates. As of this moment, the Fed Funds Futures, which prices the probability of Fed rate activity, are pricing in no further rate hikes. This is good news, as the last Fed rate hike was in July and as time passes, the chance of a Fed rate cut increases.

Lower Oil Equals Lower Rates

Oil has dropped to the lowest levels in months, falling beneath $80 per barrel. This, as China and other countries around the globe teeter on the brink of recession. Oil prices move on supply and demand. So as demand slows because economic activity slows, prices go lower. Lower oil prices help lower inflation expectations, which ultimately help long-term bonds like mortgages.

4.50%

The 10-yr Note yield, which ebbs and flows alongside home loan rates, has declined nicely from a recent peak of 5.00%. Watch 4.50% as a floor of yield support which is currently halting any further decline in rates. If the 10-yr Note moves beneath 4.50% that floor will become a ceiling which could help halt an increase in rates.

Bottom line: Long-term interest rates, like mortgages, have improved nicely from the highest levels in the century. The sideways trading action we witnessed this week is a good sign as the markets try to consolidate the fast gains. We may have very well seen the peak and long-term interest rates, but it will not be a straight move to lower rates ahead.

Looking Ahead

Next week carries a ton of high impact economic readings. The main event will be the consumer price index (CPI). Recent economic news has shown unemployment starting to rise, and the economy slowing down. The next sign for the Fed to confirm that they are done raising rates could be a soft inflation reading. If this CPI report shows a much-needed decline in inflation (achieved because rents are declining), it may very well confirm the Fed has finished raising rates.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices have moved sideways after a nice rise in prices. This highlights the sideways path for rates as we head into this week's market moving reports.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, November 10, 2023)

Economic Calendar for the Week of November 13 - 17

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: November 2023

Wed, 15 Nov 2023 15:30:00 GMT

In This Issue

"It is never too late to be what you might have been." - George Eliot

When you're ready to buy a new home, price is probably at the top of your mind. In this issue, we discuss how you can get the best possible deal on a home, along with the following topics:

What to Watch - The Federal Reserve, housing prices, borrowing costs, and home inventories are on the radar.

Tips for Getting a Fair Price on a Home - With some helpful tips, you can negotiate a fair price on your new home.

How Lighting Can Transform Your Home - Learn how to use lighting to make an instant impact in your home.

Q&A: How Long Does It Take To Close on a Home? - Know what time frame you can expect before you get the keys.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What To Watch

Housing Prices, Borrowing Costs, and Inventories

The Federal Reserve, housing prices, borrowing costs, and home inventories are on the current radar. And of the four, you might think the Fed is not part of the group but they are all tied together.

The Federal Reserve (the Fed) is the central bank of the U.S. and is responsible for setting monetary policy, controlling inflation, and maximizing employment. On the employment front, the Fed's goal is to create conditions where employment can thrive without causing runaway inflation. The Fed must strike a balance between fostering job growth and maintaining price stability (inflation).

If a potential home buyer feels that their current employment is stable and can easily secure another position, this lends to a positive environment in the home-buying decision. If the Fed can control inflation, this means that borrowing costs, which are tied to inflation, could remain relatively low.

In the past few years, inflation has been on the rise topping out in June of 2022 but has been declining. During that time and up to today, borrowing costs (30-year fixed) for home buyers have nearly tripled from 3% to almost 8%. This has significantly increased the cost of a loan.

At the outset of the pandemic in March 2020, the Fed looked to stabilize the capital markets, which were under severe pressure as the country "locked down." The Fed stepped in and through Quantitative Easing, was able to stabilize the markets and lower rates pushing the 30-year fixed-rate mortgage to a record low of 2.65% by the end of 2020.

Low rates created a boom for potential home buyers as staying at home meant working from home. This sparked a huge demand for housing. And with this huge demand combined with the lockdowns, inventories were depleted. As a result, it led to a low inventory environment and the frothy prices we are experiencing today.

So, we can see how all the above are tied together with the Fed.

Bottom line: Although home prices remain high, these gains will eventually cool off as all types of hot markets usually do. We will have cycles that are both negative and positive. In today's market, you need the right timing and secure employment to take advantage of home ownership. Remember, it is not a right to own a home. It takes hard work, planning, a down payment, and the ability to repay the loan.

4 Tips for Getting a Fair Price on a Home

Housing News

You've found your dream home, and you're ready to make an offer. But in today's market, how do you make sure you get a fair price?

Here are four tips you can use to negotiate the price and get a good deal.

Determine market trends. Know the market trends so you can make a strong offer on a home. Gather information about recently sold homes and review comparable properties to learn about their sales prices. Use this information to negotiate a fair price that's based on the current market.

Consider future appreciation. When determining a fair price on a home, consider the future appreciation you can expect. For example, a home in a neighborhood with planned future development, such as new roads, may be worth more in the future. Do your research to estimate the projected valuation of a property to make sure you're getting a good price.

Get an appraisal. Negotiate an appraisal contingency so you can be confident you're not paying more than the home is worth. An appraiser will evaluate the home and research similar properties to determine the fair market value. If the appraisal reveals the home is worth less than the offer price, you may choose to ask for a lower price.

Work with a real estate agent. When purchasing a home, a real estate agent can help you get a fair price. They understand the market trends in your area and know what comparable properties have sold for recently. They can also negotiate with the seller to secure the best possible deal.

With some research and preparation, you can make sure you get a fair price on your new home. Follow these tips to negotiate a good deal with confidence.

Sources: Upscalelivingmag.com, Investopedia.com, Masterclass.com

How Lighting Can Transform Your Home

Lighting can have a tremendous impact in a space, but it's often overlooked. Consider these ways you can use lighting effectively to transform your home.

Use different light sources. For the best lighting, use different light sources in a room. For example, in a kitchen, you may have recessed lighting, pendant lights, and under-cabinet accent lights. Consider the placement of each light source and how it can work with other lights in a room to create balance.

Choose the right size. When deciding on a light fixture for a room, consider its size. The light fixture should be proportional to the room and its other features. For example, in a room with low ceilings, you may choose to use table lamps, rather than a floor lamp. In a large room, you might use a light fixture as a statement piece, such as a chandelier.

Highlight a specific feature. In addition to the overall lighting of a room, you can also use lights to highlight specific features of a space.

For example, you may use accent lighting to highlight a bookshelf or a piece of art. You can use various light sources as accent lights, such as a table lamp, track lights, or even string lights.

Good lighting can make your home feel comfortable and welcoming. With these tips, you can use lighting intentionally to create the space you want.

Sources: Rockfordmutual.com, Sparksdirect.co.uk, Inoleds.com

Q&A

What's the Time Frame for Closing on a Home?

QUESTION: How long does it take to close on a home?

ANSWER: The timeline for closing on a home can vary based on several factors, including how you pay for it. On average, it takes between 30 and 60 days to close on a home with a conventional mortgage. If you're paying for a home in cash, the process may go quicker. On the other hand, certain types of mortgages, including Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans, can take longer to close.

Once a seller has accepted your offer, here are the steps you can expect to take during the closing process.

Sign the purchase agreement. First, you'll need to negotiate the purchase agreement with the seller. Usually, this agreement includes the closing date. If there are no delays, this is the date you will close on the home.

Complete your mortgage application. At this point, you will complete a mortgage application with your lender. You'll need to submit documentation, such as bank statements, tax returns, and pay stubs. If you have a preapproval offer, this process can go more quickly.

Schedule an appraisal. If you're taking out a mortgage, your lender will require you to get a home appraisal. While the appraisal itself only takes a few hours, you may have to wait for an appointment. Some appraisers are booked out as far as two weeks.

Get an inspection. While usually optional, an inspection can provide insights into potential issues with the home. Like appraisers, home inspectors can have a waiting list, so it's best to schedule an inspection as soon as possible. It can take a few days to get the inspector's final report.

When you're ready to move into your new home, it can be tough to wait. Know what to expect so you can move through the closing process as quickly as possible.

Sources: Fastexpert.com, Investopedia.com, Realestate.usnews.com

A Look Into The Markets: Treasury Borrowing Less

Fri, 10 Nov 2023 13:32:09 GMT

A Look Into The Markets

This past week, the Federal Reserve did not raise rates, and long-term rates, like mortgages, declined to the best levels in a month. Let's discuss what happened and discuss the big news items to watch for this coming week.

"Wavin' them worries goodbye I'm feelin' them good vibes". Good Vibes by Chris Janson

The Fed

On Wednesday, the Federal Reserve issued its monetary policy statement and decided to hold rates steady at 22-year highs. The main reason? Long-term rates have risen of late, which has caused financial conditions to tighten, thereby slowing the economy, and doing the job of the Fed.

The bond market loved the news and the lack of tough talk during Fed Chairman Jerome Powell's press conference, pushing rates lower.

But the good news for bonds and rates didn't stop there.

Treasury Borrowing Less

This week the Treasury Department announced slightly less borrowing needed to fund the government for the last quarter of the year.

They also stated they are likely to issue fewer long-term bonds like the 10-year note and 30-year bond. This was also good news for the bond market as it meant less supply had to be sold which meant less pressure to provide higher interest rates or yield to attract buyers.

It wasn't all good news that helped bonds improve and push rates lower.

U.S. Manufacturing Continues To Contract

On Wednesday the Institute of Supply Management (ISM) Manufacturing Report showed the 12th consecutive month of contraction. This tells us manufacturing in our economy is not doing that well and any bad economic news is good for bonds and rates.

It wasn't just U.S. news here that helped interest rates improve.

Europe Sees Disinflation

Across the pond, many countries in Europe reported lower-than-expected inflationary numbers. Inflation is a major driver of long-term rates. As it goes up, so do rates. The opposite is true.

Additionally, the bond market is global. As yields in other parts of the globe decline, so do ours. And again, the opposite is true.

5.00% Is The Ceiling To Watch

A couple of weeks ago the 10-year note touched 5% a couple of times but did not close above that key level. It has since retraced lower to 4.69% on Wednesday. If the 10-year note can remain beneath 5%, long-term rates like mortgages have an opportunity to stabilize, and potentially improve further from here.

Bottom line: It was a welcome sight to see rates improve. For rates to improve further, we must continue seeing more headlines like this week. If economic data doesn't heat up again, the Fed may very well not hike rates again...which is terrific news.

Looking Ahead

We are going to watch and see if bonds can continue their winning ways and build on last week's nice interest rate decline. No major economic reports are set for release, but we do have a bunch of Treasury auctions, which in the past have pressured rates higher. It will be interesting to see how these auctions perform with rates having ticked lower.

Mortgage Market Guide Candlestick Chart

On the far right side of the chart, you can see 10 green candles in the past 11 trading days, which highlights the buying momentum at the price lows/rate peaks of the year. Mortgage bonds appear close to breaking their long-term downtrend, which would be a very positive development for rates.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, November 3, 2023)

Economic Calendar for the Week of November 6 - 10

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: More Money, More Problems

Fri, 03 Nov 2023 12:25:40 GMT

A Look Into The Markets

This past week, home loan rates hovered near the highest levels in this century. Let's look at what moved the markets and look into the week ahead.

"Every Little Thing She Does is Magic" – Every Little Thing She Does Is Magic by The Police.

European Central Bank Pauses Rates Hikes

European Central Bank (ECB) President Christine Lagarde did not hike rates this past week, citing economic weakness. This action and statement from Lagarde helped bonds hold steady and improve from the worst levels. Markets sense our Fed will follow suit next week and beyond.

Blackout Period

One uncertainty was removed last week as Federal Reserve officials were in the blackout or "quiet" period heading into the Fed Meeting. This is where Fed members do not make any speeches or comments on monetary policy 10 days before the next Meeting. Unfortunately, the financial markets were not so quiet.

More Money, More Problems

One big problem for interest rates throughout the summer has been the increased government spending and the need for the Treasury Department to sell bonds to fund the government. This past week was more of the same, as the Treasury Department sold $140 billion worth of bonds and the appetite from investors was not so great. Meaning, that to entice investors to buy the enormous amount of bonds, they had to give higher interest rates. And as interest rates in the Treasury Market go higher, it puts upward pressure on mortgage rates as well.

New Home Sales Up In September

New home construction continues to be a bright spot in housing, despite high interest rates. Sales in September came in at an annual rate of 759,000; well above expectations and the best reading since February 2022. Price concessions and rate buy-downs were made by builders to help sell homes.

Shorts Are Back

After a week, where legendary hedge fund owner, Bill Ackman said this was not in the environment to bet against higher rates, his peers thought otherwise. The fast spike in interest rates that we witnessed in response to the poor Treasury auctions mentioned above, was amplified by traders placing large bets on higher rates in the future.

3rd Quarter GDP

The first reading of 3rd quarter GDP (economic growth) showed the economy grew at the fastest rate in 2 years which was fueled by consumer spending. This strong report may not influence the Fed's decision to hike rates again as the report is backward-looking and most economists expect the growth rate to slow sharply in the 4th Quarter. The good news? The economy is not close to a recession.

5.00%

The 10-yr Note is hovering near a ceiling of yield resistance at 5.00%. If the 10-year yield breaks above this ceiling, it will likely accompany another leg higher in interest rates and 5.00% could go from being about as bad rates could get to about as good as they could get. So, this is something to watch closely.

Bottom line: Home loan rates have hit the highest level of this century. However, as evidenced by New Home Sales, the demand to purchase new homes remains high. There are key levels to watch to avoid another spike higher in interest rates.

Looking Ahead

The quiet period comes to an end. On Wednesday, Nov 1st at 2pm ET, the Federal Reserve will release its monetary policy statement and interest rate decision. The financial markets are not expecting any more rate hikes and will be listening closely to what the Fed says about the spike in long-term rates and its impact on housing and the broader economy.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices were at the lowest level of the year, which also happens to represent higher mortgage rates in this century. If the 10-yr Note yield remains beneath 5.00% we may see mortgage bonds stabilize here. The opposite is true.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, October 27, 2023)

Economic Calendar for the Week of October 30 - November 3

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Headwinds

Fri, 27 Oct 2023 15:13:09 GMT

A Look Into The Markets

This past week home loan rates touched the highest levels in this century. Let's talk about the recent headwinds for interest rates and other big events as we march toward the next Fed meeting on November 1st.

"And usually it's too late when you, realize what you had" Hold on Loosely by 38 Special

Headwind #1 - QT

Back in 2020, to stabilize the U.S. bond markets, the Federal Reserve began a process called quantitative easing (QE). This involved the Federal Reserve purchasing Treasuries and mortgage-backed securities and adding them as assets on their balance sheet. This process helped stabilize the bond market during the pandemic and lowered rates beneath 3.00%.

Today, to fight inflation and slow demand, the Federal Reserve is doing the opposite, in a process called quantitative tightening (QT) or balance sheet reduction. This is where the Fed allows matured Treasuries and refinanced mortgage bonds to roll off their balance sheet. This process has put upward pressure on long-term rates, with 30-yr Fixed rates hitting 8.00% this week.

In the absence of the Federal Reserve stopping or slowing the quantitative tightening process, we should expect the trend of higher interest rates to continue.

Headwind #2 – Debt

The U.S. has amassed a record $33T in debt with no signs of the deficit spending coming to end. This means our government will have to issue more Treasuries to collect the money needed to run the country. Every couple of weeks, the Treasury sells these bonds, however the buying appetite has been weak, so the Treasury Department has to pay more yield to attract the buyers.

Headwind #3 China And Japan Are Sellers

Japan and China are the largest foreign countries in the world holding U.S. debt, with close to $1.5T between them. Both countries have been sellers of our bonds as opposed to purchasers of our debt. Why? Inflation. The U.S. dollar has been strengthening mightily throughout the year, causing foreign currencies to decline in value and making commodities and imports more expensive. China and Japan have been selling some of their vast holdings while using the proceeds to purchase their own currencies to limit the effects of inflation.

Headwind #4 Short Sellers Betting On Higher Rates

In the financial markets, one can bet on prices going up or prices going down. Short-sellers or people who are betting on Treasury prices, and mortgage bond prices going down and rates going up realize that the Federal Reserve is shrinking their balance sheet, growing our debt while Asia and other countries around the globe are selling U.S. debt. This short selling is adding to the volatility and sharp move higher in rates.

These are just four of the headwinds long-term bonds are facing now, as there are more. How does this trend of spiking long-term rates end? One way to quickly stop this rise, is for the Federal Reserve to announce a slowing or outright stopping of quantitative tightening or balance sheet reduction. This would put a buyer in the market, push back the sellers and take pressure off Asia to sell their U.S. bonds.

This is not currently in the cards but is a story that could change very quickly.

Housing, which is interest rate sensitive, and a main driver for the economy has slowed significantly with mortgage applications at the lowest levels since 1995. There is a moment coming where the Federal Reserve may be forced to pivot and change direction as the current trend is unsustainable.

Bottom line: Home loan rates have hit the highest level of this century with housing activity slowing and leaders in mortgage and housing sounding the alarm for help…each day is closer to a shift in policy.

Looking Ahead

The good news? The Federal Reserve will not be speaking as it is the blackout or quiet period in advance of the Nov 1st Fed Meeting. However, there will be a ton of market moving reports, including 3rd quarter GDP and the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure Index (PCE).

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices were at the lowest level of the year, which also happens to represent higher mortgage rates in this century. The trend lower remains intact and as we mentioned above, something has to change as the trend is unsustainable.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, October 20, 2023)

Economic Calendar for the Week of October 23 - 27

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Safe Haven Trade

Fri, 20 Oct 2023 13:08:55 GMT

A Look Into the Markets

This past week, the war between Israel and Hamas sparked a "safe-haven" trade into the U.S. bond market. Let's discuss what it all means and look into what economic reports can move the markets this coming week.

Safe Haven Trade

When uncertain geopolitical risks arise, like the Hamas attack on Israel, investment money around the globe, look for a safe haven, and that safe haven has always been the U.S. dollar and the U.S. bond market. It was no different this time, as the 10-year note dipped to 4.54%...the lowest level in a couple of weeks.

How long can the safe haven trade last, with money flowing into Treasuries, preventing interest rates from rising? No one knows. It depends on how long the conflict continues in Israel and Gaza, and whether it escalates or not. Besides, helping interest rates improve, it appears it has changed the outlook for the Federal Reserve.

"The recent rise in long-term U.S. Treasury yields, and tighter financial conditions more generally, could mean less need for the Federal Reserve to raise interest rates further”, Dallas Fed President Lorie Logan.

Just days after Friday's strong jobs report, which would've normally prompted Fed officials to offer statements like the need for more rate hikes, we have since heard the opposite in the quote above. This is a big departure from what Fed officials were saying a week ago, and the financial markets are now pricing a strong probability of the Fed no longer hikes rates.

What could derail the improvement in rates and possibly require the Fed to hike again? Oil and inflation. When Russia attacked Ukraine in February 2022, oil went from $90 to $130 a barrel in a very short time. So far, oil has remained in the mid $80 range per barrel and below recent highs.

Consumer Inflation Remains High

Last Thursday the Consumer Price Index was reported, and it showed inflation remains a problem. The Shelter and energy components of CPI made up most of the price increases. Should energy move higher in the weeks ahead, it could prompt the Fed to reconsider hiking rates.

Bottom line: Expect high volatility with news emerging from the Middle East, along with the threat of higher oil prices.

Looking Ahead

Expect the news out of Israel and the Gaza Strip to dominate the headlines and markets in the days and weeks ahead. The economic calendar here in the U.S. will be somewhat light. Wednesday's Building Permits and Housing Starts is likely to be a weak reading considering the increase in rates and energy.

Mortgage Market Guide Candlestick Chart

On the far right side of the chart, you can see how prices are trying to stabilize at 2023 price lows. A failure to hold at these levels will likely cause home loan rates to rise to another level.

Chart: Fannie Mae 30-Year 6.5% Coupon (Friday, October 13, 2023)

Economic Calendar for the Week of October 16 - 20

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

October 2023: What To Watch

Mon, 16 Oct 2023 12:30:00 GMT

In This Issue

"You'll never do a whole lot unless you're brave enough to try." - Dolly Parton

In today's economic climate, high interest rates and fears of a possible recession have made some feel hesitant about buying a home. In this issue, we'll offer some tips for purchasing a home in a declining market, along with the following topics:

What to Watch - Bank credit declining, tightening lending standards, inflation, and what's going on in the job market are all on the radar and "What to Watch" in the near future.

How To Buy a Home in a Difficult Market - Know the ways you can prepare to purchase a home in a declining market.

Ways To Use Natural Wood in Your Home - There are numerous ways to use wood throughout your home to add texture and warmth.

Q&A: What's Next After Closing on a House? - You've signed all the paperwork and received the keys to your new home. What do you do next?

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What To Watch

Inflation On The Rise...Again

Bank credit declining, tightening lending standards, inflation, and what's going on in the job market are all on the radar and "What to Watch" in the near future.

The St. Louis Fed tells us that lending activity from banks continues to decline due in part to the recent abrupt deficit in capital spurred on by the huge drop in Treasury securities on the books. As yields surged, Treasury notes and bond prices dropped which reduced the value of trillions of dollars in fixed-rate bonds and loans that banks hold. This leads to reduced lending.

As banks tend to lend less during the above scenario, lending standards become tighter for consumers. It is now a bit harder to obtain a loan which the market has seen the Great Recession from 2007 to 2009, and more recently, the Covid-19 recession in 2020.

So, what's the takeaway? If it is harder for consumers and businesses to borrow, that means less economic activity which could lead to an economic slowdown.

On the inflation front, after seemingly bottoming in early summer, inflation looks to be on the rise again as the monthly Consumer Price Index jumped in August while oil prices gushed. Higher oil prices lead to higher prices at the pump which is an added tax on the consumer and is seen as inflationary.

The job market has been whacky at best. In 2023, job growth had been declining while prior month's data had been revised lower for each of the previous months. Just recently, the government's Job Opening and Labor Turnover Survey saw a jump in available positions, the September ADP Private Payrolls were anemic while the government's Jobs Report saw a huge gain in the headline Nonfarm Payrolls data. However, in the Household survey, where the unemployment rate is derived, the numbers are not nearly as good. The labor force pool only expanded by 90,000 and only 86,000 more people were employed which is a fraction of the 336,000 in the headline report.

Will lending and lending standards tighten further? Will inflation pressures increase? Will the labor market remain volatile, and will the Fed have to continue to hike rates and hold them higher for longer? Will there be an economic slowdown? These are the questions that may be answered as 2023 comes to a close.

3 Tips for Buying a Home While the Market Is in Decline

Housing News

In a declining market, knowing when it's the right time to look for a new home can be difficult. Use these tips for buying a home in a tough economy.

Know how much home you can afford. Before you start attending open houses, set a budget. Look over your finances and consider how much you can put toward a down payment. Once you know this number, determine how much you can afford to pay each month toward a mortgage. When you know how much home you can afford, you can select houses that are within your budget.

Get preapproved. After choosing a lender, get preapproved for a mortgage so you know much you're eligible to receive. Usually, the preapproval process involves submitting financial documents to your lender. When you're ready to make an offer, you can present a preapproval letter to the seller as a way to show them you're serious about the offer.

Work with a real estate agent. When buying a home in a declining market, it's best to work with a real estate agent who can help you navigate the process. An agent will know the average value of homes in the neighborhood you're considering. They can also help you secure the best deal on a home, even in a tough market.

It might be more difficult to buy a home in a declining market, but it's certainly not impossible. With these tips, you can find and purchase a new home that's right for you, no matter the current market.

Sources: Bankrate.com, Money.com, Thebalancemoney.com

Home Improvement

How To Use Natural Wood To Add Warmth To Your Home

Natural wood elements can bring warmth and texture to your home, plus it's a classic look that never goes out of style. Here are some ways to add natural wood to your interior decor.

Install hardwood floors. Hardwood floors are a popular, timeless way to add natural wood to your home. You can find hardwood floors in various styles, like oak, bamboo, and walnut. Lighter wood can brighten a space, while dark wood floors can create a cozy, rich ambiance. Staircases are another place where you can add wood flooring for warmth.

Create an accent wall. If you don't want to commit to wood floors, create an accent wall instead. Choose a wall as a focal point for the room and add wooden slats as paneling. In addition to wooden slats, you can use wood to create board and batten, geometric accents, and other types of unique paneling for texture and interest.

Use wood furniture. For an easy way to add warmth to a room, use wood furniture. Items like wooden coffee tables, dressers, and bookcases can make a space feel complete. Choose the type of wood furniture that goes best with your personal style, such as a distressed wood dining table or an elegant mahogany bed.

Bring in wooden accessories. When using wood in your home, don't forget to use accessories to tie the space together. Accessories like shelves, vases, and decorative knickknacks can add character to a room. You can find unique wooden accessories at thrift shops, vintage stores, and even local craft fairs.

Natural wood elements make your home look classic and cozy. Consider these ideas to bring additional warmth to your space.

Sources: Woodgrain.com, Customhomegroup.com, Talesbytrees.com

Q&A

What's Next After Closing on a House?

QUESTION: What do I do once I close on a house?

ANSWER: Closing is the final step in purchasing your new home. Before you officially move in, take the time to handle these final tasks.

Organize your closing documents. Buying a house involves a lot of paperwork. Organize these documents and store them in a secure place, such as a safe deposit box or fireproof safe. If you have electronic documents, upload them to a secure cloud-based storage website. Closing documents may include the mortgage, deed, and promissory note.

Change the locks. You have no idea who has keys to the current locks in your new home. To be safe, change them all as soon as you move in. You can install new locks on your own, or you can have a locksmith change them for you. Make sure you also change the codes to any programmable keypads.

Do a deep clean. Some sellers are better than others at cleaning their homes before moving out. For peace of mind, give your new home a deep clean. This process might include cleaning and disinfecting kitchen and bathroom surfaces, mopping and vacuuming the floors, and wiping down all the baseboards. If that sounds too overwhelming, consider hiring a professional cleaning service for the task.

Meet your new neighbors. In all the hustle and bustle of closing on a home, don't forget to introduce yourself to your new neighbors. Go around the neighborhood and make an effort to meet everyone. You can also search online for groups in your neighborhood to connect with others.

Closing on a home and moving in can be stressful. Follow these tips to make the process easier.

Sources: Living.geico.com, Mymortgageinsider.com

A Look Into The Markets: Debt And Deficit Spending

Fri, 13 Oct 2023 12:04:24 GMT

A Look Into The Markets

It was another wild week in the financial markets with interest rates backing away from the highest levels in decades. Let's discuss what happened and look at the news to watch for this coming week.

"The tide is high but I'm holding on" The Tide is High by Blondie .

JOLTS Report Jolts The Markets

On Tuesday, the JOLTS report, which shows how many jobs are available, ticked up much higher than expectations. As a result, the knee-jerk reaction caused interest rates to spike to the highest levels in 16 years. Why? Fear that the labor market remains too tight, and the Fed will have to continue to hike rates and hold them higher for longer.

The market reaction seemed overdone as a look into the details showed that the number of people quitting and the number of people hiring continue to slow, suggesting that the labor market is cooling down to the Fed's liking.

Hump Day Surprise

The negative vibe in interest rates quickly changed by Wednesday morning when the ADP payroll report showed there were only 89,000 private job creations in September. This number was essentially half of expectations and the lowest reading in over 2 1/2 years. This report along with other weak economic data around the globe sent oil prices sharply lower. Oil goes lower on the perception of less demand from a global slowdown. This was all good news for bonds and rates which improved nicely on the bad economic news, and softer inflation fears which come with lower oil prices.

Fed Still Talking Tough

Despite recent weaker economic data of late and the run rate of inflation headed towards the Fed's target zone, Federal Reserve officials continue to talk about the need for more rate hikes and the idea of holding them higher for longer. With mortgage rates at multi-decade highs in response to rising Treasury yields, we are seeing a sharp slowdown in housing. But do not say that to Atlanta Fed President, Raphael Bostic who uttered this gem last week: "Rising long bond yields not having an excessive impact on the economy".

The financial markets are not buying all the tough Fed talk as the Fed Funds Futures market is currently pricing no more rate hikes.

Debt And Deficit Spending

Interest rates have ticked higher throughout the Summer as the U.S. Treasury Department demanded more money than previously expected to fund our government. This action led to a downgrade of our debt as Fitch Rating agency cited "fiscal deterioration."

It's not truly clear if interest rates are pricing in all this deficit spending or if rates will go higher still as our federal government requests more money to fund operations.

Bottom line: Bad news is good news as we've seen with ADP helping interest rates improve. On the other hand, our excessive debt is applying upward pressure on rates. With the Fed still talking tough and the trend of higher rates still intact, there's a lot to follow.

Looking Ahead

This coming week carries a bunch of headline risk with the Consumer Price Index (CPI) inflation reading, as well as the Producer Price Index and Consumer sentiment. Another potential market catalyst will be another boatload of Treasury supply. Will buyers demand more yield or higher rates to purchase these bonds? We shall see.

Mortgage Market Guide Candlestick Chart

On the far-right side of the chart, you can see how prices are trying to stabilize at 2023 price lows. A failure to hold at these levels will likely cause home loan rates to rise to another level.

Economic Calendar for the Week of October 9 - 13

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Housing Impact

Fri, 06 Oct 2023 12:59:27 GMT

A Look Into The Markets

This past week interest rates touched the highest levels in decades. Let's discuss what happened and see what to watch for as the 4th Quarter begins.

Oh, oh, oh, shake it up, just like bad medicine. There ain't no doctor that can cure my disease" - Bad Medicine by Bon Jovi

Ouch

The U.S. bond market has been struggling since April, continuing a disturbing pattern of higher rates over time. Despite market expectations and even the Federal Reserve saying rate hikes are nearing the end, rates continue to tick higher. Why?

A big reason is oil. It is not a coincidence that interest rates and oil hit 2023 highs on the same day this past week. Higher oil leads to inflationary pressures and counters the Fed's efforts of lowering inflation to their 2% target. Oil hit $94 a barrel on Thursday, in response to lower-than-expected oil stockpiles in Cushing Oklahoma.

Another big reason for the continued rise in rates is debt. Back in July, the Treasury Department requested an additional $275 billion to fund the government between August and September. This action led to a downgrade of U.S. debt. This week, Moody's rating firm said that a government shutdown would likely lead to an additional credit downgrade. Like any consumer with high debt problems and the ability to repay being questioned, they pay a higher rate. We are seeing that play out in the U.S. Treasury market as the 10-yr Note yield hit 4.69%...the highest since 2007.

Housing Impact

Despite interest rates hitting the highest levels in decades, home prices remain elevated. This is largely due to a lack of available inventory. Should inventory increase, it would likely lead to home prices returning some of the frothy price appreciation achieved during the pandemic. New construction was filling some of the inventory void of late as home builders took advantage of an incredible opportunity to fill robust housing demand by offering incentives to offset the climb in interest rates. But with interest rates moving another leg higher, it has made it tough for homebuilders to come up with enough incentives to offset the uptick in interest rates.

Last Thursday, Pending Home Sales for August declined sharply, and the National Association of Realtors Chief Economist had this to share: "Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers. Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets."

Ironically, it is this sort of bad economic news that will lead to the Fed doing less and rates ultimately coming down.

Bottom line: Interest rates and oil touched 2023 highs at the same time. Housing will continue to struggle in the absence of rate relief, and it is this very struggle, which could lead to slower overall economic activity and thus lower rates.

Looking Ahead

Next week brings even more headline risk. Front and center will be whether the government can avoid a shutdown. If the government can make a deal, markets will be looking at how much new debt will be added and as we have shared, debt is a problem. From an economic standpoint, the Jobs Report on Friday is the main event.

Mortgage Market Guide Candlestick Chart

On the right side of the chart, you can see how prices are trying to remain near 2023 lows at $100. If the Bond can stay above this key level, we could see some stabilization and improvement, the opposite is true.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, September 29, 2023)

Economic Calendar for the Week of October 2 - 6

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Upside Inflation Risks

Fri, 29 Sep 2023 13:25:11 GMT

A Look Into the Markets

This past week, the minutes from the July Fed Meeting were released. The news didn't help home loan rates, which ticked up to the peaks of last year. Let's look at what happened and talk about the headline risk in the week ahead.

"Here I go again on my own. Going down the only road I've ever known" Here I Go Again by Whitesnake

"Uncertainty of the U.S. economic outlook remains elevated"... FOMC minutes from the July Fed Meeting.

The Fed Minutes kicked off with this statement, which sums up the last 18 months. It remains unclear if inflation will continue to come down, if the Fed will continue to hike rates and if the economy can avoid a recession. And for all of these reasons, interest rates have been volatile with no clear signs of stability.

"Most participants (Fed Members) saw continued significant upside inflation risks "

This line was like kryptonite to Superman as bond/interest rates hate inflation. The fact that we are still enduring significant upside risk was enough for bonds to sell off and push rates higher.

"Participants still saw below-trend growth, softer labor market as necessary to restoring economic balance."

Here the Fed is reminding the markets that they want to keep rates higher for longer until unemployment rises further, and the economy potentially slows further. Looking into the months ahead we should expect continued slower economic growth and price highs but continuing to come down slowly. For this reason, we should expect home loan rates to also retreat lower and slowly.

The good news? After all this uncertainty and tough talk on inflation, the markets are currently pricing the probability of a Fed rate hike in September at just 11%. However, more data will come in which could change things. But as of now, the Fed is not going to hike rates.

Bottom line: Rates have ticked higher on the heels of our recent debt downgrade and uncertainty around inflation and no recession. Maybe next week things change...read on.

Looking Ahead

Next week brings the Jackson Hole Symposium, with our Fed Chair Jerome Powell speaking on Friday. History has shown this event could typically generate big market and interest rate moves. While there will be plenty of other headline risk and reports throughout the week, they are second fiddle to this event...stay tuned.

Mortgage Market Guide Candlestick Chart

Prices have now touched levels last seen in 2009. Next week's Jackson Hole event may determine whether rates continue to rise or if the Fed says something important to help rates stabilize and possibly recover.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, September 22, 2023)

Economic Calendar for the Week of September 25 - 29

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Tale of Two Inflations

Fri, 22 Sep 2023 13:10:09 GMT

A Look Into The Markets

Inflation perked up, yet interest rates improved from key levels. Let's walk through the big financial news of the week as we approach next Wednesday's Fed Meeting.

"Yeah, it's coming up. Coming up, on the hour" Coming Up by Paul McCartney

Tale Of Two Inflations

Last Wednesday, the Consumer Price Index (CPI) for August increased by 0.6% for the month, lifting the annual rate to 3.7%, both of which were higher than expected. The month-over-month rise was the highest this year. The main culprit? Energy. Oil soared by nearly 11% for the month as a barrel has gone from $65 to $89 between June and September.

The Core CPI, which excludes food and energy and is more closely watched by the Federal Reserve, did decline to 4.3% from 4.7% year-over-year and appears to be trending in the right direction...lower.

The bond market and interest rates must have liked the decline in Core CPI as the post-news reaction watched the 10-year Note yield decline from 4.35% down to 4.25%.

Oil Hits 2023 Highs

As mentioned, oil prices were the main reason for inflation rising in August. Prices have continued their rise this month with a barrel hitting 2023 highs last week. Should it continue, we should expect the September CPI to also show headline inflation remaining high and confirm that inflation bottomed this June.

The Blackout Period Continues

With the Fed Meeting approaching this coming week, Federal Reserve officials do not make any speeches or comments on monetary policy. This quiet or calm before the storm helped lower interest rate volatility and kept rates from moving above 2023 peaks. All this will change next week.

As of this moment, Fed Fund Futures, which price the probability of interest rate moves are showing a nearly 100% chance of no rate hike at this Meeting.

Japan Interest Rates Climbing Too

Interest rates around the globe have moved higher and now Japan has joined the club. With inflation in the region hitting 40-year highs, their Central Bank has allowed their 10-year government bond to touch .70%, the highest level since 2014. It appears their central bank could allow this interest rate to rise further. If it does, it could apply upward pressure on all global yields, including our 10-year Note.

Bottom line: Interest rates remain near the highest levels of the year and there is a threat of headline inflation reaccelerating, due to energy prices. This will be important to watch in the months ahead because if inflation moves higher, it may force the Fed to hike rates further.

Looking Ahead

This coming Wednesday, the Federal Reserve will release its Monetary Policy Statement and interest rate decision. Just prior to the Blackout period, where officials do not comment. Several Fed Members talked about the need to be "patient" and likely "pause" further hikes and wait to see how the economy evolves. Those terms, along with coinciding economic data do have the markets sensing no rate hike this coming week and a 50/50 chance of one in November.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

On the right side of the chart, you can see how prices are trying to stabilize above 2023 price lows, which could lead to further rate improvement if it continues. However, should the Bond move beneath $99, it would likely lead to another leg higher in home loan rates.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, September 15, 2023)

Economic Calendar for the Week of September 18 - 22

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In This Issue: September 2023

Thu, 21 Sep 2023 14:57:18 GMT

In This Issue

"Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time." - Thomas A. Edison

In a housing market with more demand than supply, you might have to get creative to compete with other buyers for a home. In this issue, we'll cover how to purchase a home in a tough market, along with the following:

What to Watch - Rental prices decline as low supply and high borrowing costs continue to plague home sales.

Tips for Purchasing a Home in a Tough Market - When your offer may be just one of many, consider the ways you can stand out from other buyers.

How To Beautify Your Kitchen on a Budget - You might not have your dream kitchen yet, but you can make simple, affordable changes to update the space.

Q&A: How Can Home Buyers Negotiate the Price? - As a buyer, there are ways you can negotiate to get the best deal on a home.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

In recent years both home prices and rental prices surged but that trend may be cooling off, at least in the rental space.

Rentals and Home Sales

A report by Apartment List showed that for the first time since the beginning of the pandemic, year-over-year rent growth turned negative in August. Today it stands at -1.2%, meaning that on average, apartments across the country are 1.2% cheaper today than they were one year ago. This is a major plunge from recent years when annual rent growth was up 18% nationally and surged to over 40% in some cities.

One major reason for the decline in rental prices is the big supply of new multiple-dwelling listings constructed over the past year to the tune of 460,000 units, a 50-year high. Looking ahead, rental supply should remain on the high end which could push prices even lower through 2025.

In the housing sector, low supply and high borrowing costs continue to plague the purchase market. But there have been some positive signs. Mortgage originations rose in Q2 2023 to $393 billion after $344 billion in Q1 which was the lowest total since Q2 2014. And this from the NAR's Lawrence Yun, "Home sales are essentially bottoming out this year ... before an anticipated upturn going into next year. But this is contingent on mortgage rates falling."

Many housing experts don't see a crash in the housing market so don't think that prices will fall substantially in the next year or two. The housing market in 2023 is much different than in 2008 with many mortgage holders currently having positive equity across the nation.

The bottom line is that if you are secure in your job and feel that you can easily obtain a new job, the path to homeownership can be challenging but yet not hard to obtain.

4 Tips for Purchasing a Home in a Tough Market

Housing News

In a housing market with less inventory, you might compete with several other buyers â€” or more â€” for your dream house. Follow these tips to improve your chances of having your offer accepted.

Get preapproved. In a competitive housing market, sellers know they have the upper hand. But unless they get an all-cash offer, they're often going to prioritize the offers with the highest chances of closing on time. A mortgage preapproval shows the seller you meet a lender's requirements for income, down payment, and credit. Speak with your loan officer about how to get preapproved.

Identify wants versus needs. Sure, a three-car garage would be nice, but do you need it? Before you start visiting open houses, make a list of both "must-haves" and "nice-to-haves" for your next home. This list can help you move quickly on a home in a limited inventory market. Once you determine it meets your essential needs, you can consider whether it has enough features from your wish list to be worth an offer .

Make a competitive offer. When you're ready to make an offer, think about the ways you can stand out from other buyers. For example, you might offer a higher price than what the seller is asking. You can also make a larger down payment or negotiate the closing date to benefit the seller. Find ways to sweeten the deal so the seller takes notice of your offer.

In a housing market with a lot of competition, purchasing a home often comes down to the offer you make. Follow these strategies to be competitive so you can buy the right house for you.

Sources. NAR.realtor, Rightbyyoumortgage.com

How To Beautify Your Kitchen on a Budget

If your kitchen would look more at home in the last millennium, there are ways you can modernize the space without breaking the bank.

Here are some simple ways to beautify your kitchen on a budget.

Paint the cabinets. Paint can instantly transform your kitchen while updating your cabinets at the same time. Choose a bright color for a modern look, or go with white cabinets for a classic style. Since you have to remove the hardware to paint anyway, add new knobs or handles to the cabinets. You can even spray-paint the current hardware for a budget-friendly update.

Swap out the light fixture. A new light fixture can make a bold statement in your kitchen. Search for affordable options online or through big-box retailers. Natural textures, like rattan, tend to be inexpensive, and they can add texture and warmth to your kitchen.

Add accessories. The kitchen may not be the first room you think to accessorize, but you can easily inject some style with a few touches here and there. Search thrift stores to find ceramic jars, wooden cutting boards, or porcelain mugs you can display on the countertops or open shelves. Choose pieces that are stylish as well as functional to get the most value for your money.

Making subtle changes in your kitchen can give you a new appreciation for the space. Use these tips to beautify your kitchen while you save up for a remodel.

Sources: Makeitright.ca, BHG.com, Realhomes.com

Q&A

How Can Home Buyers Negotiate the Price?

QUESTION: How do you negotiate the price of a house?

ANSWER: When buying a home, you might feel like you have less room for negotiation than the seller. After all, you're the one trying to purchase their house. But even as the buyer, there are ways you can negotiate the price of your next home.

Work with a real estate agent. While you can find homes on your own, working with a real estate agent is one of the best ways to negotiate the price of a home. A real estate agent has no personal investment in your home purchase, so they can be an impartial negotiator on your behalf. They also understand the housing market in your area, along with interest rates, property values, and taxes.

Write a letter. Appeal to the seller's emotions with a personal letter as part of your offer. In your letter, explain why you want to live in the home. Add some details about what you plan to do in the home. For example, you might write about your plans to get a dog who can play in the spacious backyard.

Get an inspection. You can negotiate the final selling price after a home inspection, especially if the inspector finds some problems. An inspector will check the foundation, roof, and major systems, like plumbing and electrical. If they alert you to issues, you can negotiate with the seller for a lower price on the home. You can also ask the seller to make those repairs or pay some of your closing costs.

When you're ready to make an offer on a home, plan ways you can negotiate with the seller. By using these tips, you can feel confident you're getting the best deal.

Sources: Lendingtree.com, Bankrate.com

A Look Into The Markets: Oil Gushing Higher

Fri, 15 Sep 2023 14:00:00 GMT

A Look Into The Markets

September has been a rough month so far for bonds and rates. Let's discuss the big headlines this week in the financial markets.

"Ba-dee-ya, say, do you remember Ba-dee-ya, dancin' in September" September by Earth, Wind and Fire .

Oil Gushing Higher

The price of oil has been on the rise, hitting 10-month highs, due to lower supply levels and production cuts from Saudi Arabia and Russia. This rise has also led to a spike in both jet fuel and diesel. The latter is a concern because we learned last summer how higher diesel prices elevated food inflation as it is everywhere within the food supply chain. Diesel is used in mills, factories, and shipping so if diesel goes higher, food costs are going higher.

Bonds loathe inflation so any news showing that it may be on the rise is bad for rates. And bad it was, the 10-year note yield rose to 4.30%, after touching 4.05% on September 1st.

This news may very well confirm that inflation bottomed out in June at 3% and is creeping higher. The Cleveland Fed is now expecting inflation to rise closer to 4% in September, and their forecast does not include this recent rise in oil, which will undoubtedly make inflation higher still.

There are two ways to lower oil prices. One, global demand slows thereby creating more supply. And two, the U.S. creates more supply. Seeing that the U.S. is not ramping up energy production, we have hope that demand slows to lower prices. The problem? Russia and

Saudi Arabia just extended their oil production cuts for another 3 months, which means any demand slowdown could be offset by less supply, hence elevated prices and inflationary pressure.

U.S. Dollar Is Strong

The dollar has been strengthening over the past couple of weeks, as the U.S. once again outperforms virtually all other global economies. Europe appears like it's heading into a recession in the second half of this year. China and other countries throughout Asia are also struggling. This leads to dollar strength. Typically, a strong dollar would help oil prices to some degree, but the production cuts and an already lower supply are keeping oil prices high.

A strong dollar has also created another problem. The yen in Japan, and the yuan in China have weakened sharply against the dollar making imports more expensive. Both countries have spoken out about the need to keep their currency strong. How would they do this?

Well, the two countries combined own close to $2 trillion worth of Treasuries. What they have been doing of late and what they could threaten to do is sell Treasuries to purchase their own currency to prop it up against our strengthening dollar. Should this come to pass it could put further upward pressure on rates.

Fed Rate Hike Chances

As of this moment, the chance of a rate hike in September is very small. But the chance of a rate hike in November is about 50% or a coin toss. Should oil rise further it will put pressure on the Fed to raise rates once again. Yes, this is a bad setup as we move into the Fall.

Bottom line: In the absence of a surprise shock to the markets, any relief in rates in the near-term will be minimal and fleeting, much like we've seen over the past several months. Watch 4% on the 10-year note as a pivot point. If the 10-year note yield moves beneath 4%, we will likely see sustained rate relief. The opposite is true.

Looking Ahead

Next week, we will see the last of five reports the Federal Reserve said to watch prior to the September Fed Meeting. That would be August's Consumer Price Index (CPI). As we shared this week, inflation is likely to be higher than in July and there is fear of an upside surprise because of oil.

Mortgage Market Guide Candlestick Chart

Mortgage Bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

On the right side of the chart, you can clearly see how prices have rebounded higher from the exact price lows/rate peaks of October. If prices remain above these bottoms, we will see some stabilization in rates. But if prices fall beneath this floor, we will see home loan rates rise to the highest level in this century.

Economic Calendar for the Week of September 11 - 15

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Less Is More

Fri, 08 Sep 2023 12:15:00 GMT

A Look Into The Markets

Interest rates improved amidst a huge week of economic news. Let's look at what happened and take a peek into the week ahead.

"Well, I went to the bossman Tried to get a break. But the boss said 'No dice, son, You gotta work late' - Summertime Blues by The Who

Bad News Is Good News

Bonds and interest rates like bad economic news as it lowers the threat of more Federal Reserve rate hikes. This week, we did see some worse-than-expected leading indicators on the health of the labor market and it sparked a rally in bonds, which resulted in a nice decline in rates.

Less Is More

The JOLTS report was released last Tuesday and showed the amount of help wanted signs shrunk to the lowest levels since March 2021.

Why is this important? The Fed wants to see the hot labor market show signs of slowing and this could be that sign. Which means maybe the Fed can stop hiking rates.

If we think about the labor market and business...first, companies stop hiring, then they might cut hours or reshuffle employees, and then, if necessary, companies start reducing staff and cutting jobs.

Adding to the bond-friendly news in the report was seeing fewer people quitting. This is also good for rates and the Fed because it means available jobs are less plentiful and people will not be able to easily jump for more pay like they have in the past. If there is less pressure on businesses to pay people more to retain or attract employees, there's less upward pressure on inflation which is also good news.

Consumer Losing Confidence

In August, Consumer Confidence declined as those surveyed stated jobs were less available (which the Fed wants to see) and the current family financial conditions showed growing pessimism about their present financial situation. This sour tone on how consumers felt in August was good news for bonds and rates.

Core Inflation Remains Elevated

The Fed's favored gauge of inflation, the Core PCE index, was reported meeting economists' expectations but did edge higher from June to July. Like the CPI inflation recently reported, inflation may have bottomed in June/July and there is a fear it could reaccelerate this Fall.

Bottom line: Home loan rates made a nice improvement in the last week and a half. For rates to improve further, we likely need to see more economic data as we live in a world where bad news is good news. The downtick in rates was quickly felt in housing as a sharp uptick in activity and locking loans took place.

Looking ahead

Next week is a holiday-shortened week with Labor Day on Monday. Wednesday's Global PMI could be a market mover as the recent data around the globe shows a sharp economic slowdown, which is good for rates

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the

Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, September 1, 2023)

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Housing, A Tale Of Two Markets

Fri, 01 Sep 2023 12:24:47 GMT

A Look Into The Markets

As summer nears the end, home loan rates took a pause on their recent uptick. Let's discuss what happened and look at the important week ahead.

"Stop! In the name of love, before you break my heart"... Stop! In the Name of Love - The Supremes

Mortgage Rates At 21 Year Highs

The big news in mortgage and housing has been the recent and rapid rise in home loan rates. Early in the week, they reached 7.50%, to levels last seen in 2002.

What has been causing rates to climb in recent weeks?

The big increase started when the Treasury Department requested an additional $275B in late July to fund the government between August and October.
The increase in spending prompted Fitch Ratings to downgrade U.S. debt, citing "fiscal deterioration".
Fears of a recession have evaporated.
The Fed is close to finishing rate hikes, yet inflation remains high.
Oil has climbed which is elevating inflation fears.
Japan and China selling their holdings of Treasuries.

The good news? On Wednesday, interest rates declined sharply, helping rates improve from these multi-year highs.

So, what created the pause in the rise in rates this week?

Bad news is good news. Global economies are slowing rapidly leading to a decline in global bond yields.
A sharp decline in oil, back under $80 a barrel, lowering inflation fears.
Anticipation of next week's action-packed economic report calendar. Markets are not placing any large bets.
Mortgage Bonds hit exactly at the October price lows and bounced higher. Look at the chart below.

Oil

Oil prices moved lower on lower demand fears and a stronger U.S. Dollar. This is an important story because if Oil moves above $84, there is a real threat of $90+ oil and quickly. Seeing Oil retrace back to $78 is good news for inflation and interest rates.

Fed Rate Hike Chances

Right now, the chance of a Fed rate hike in September is just 15%. But, the chance of a Fed rate hike in November is 40%. Whether the Fed hikes now or in November, the markets are looking forward and sensing the Fed is finished hiking and moving to a position of "how long" they can keep rates high until inflation falls back down to 2%. This uncertain story will remain with us for the foreseeable future but it is worth a reminder that mortgage rates are not controlled by Fed rate hikes as evidenced by the lists above.

Housing, A Tale Of Two Markets

The spike in home loan rates has put a damper on the housing market, but it is affecting existing and new home sales differently. The spike in rates clearly makes it a challenge for someone with a far lower mortgage rate to list their home for sale. This has created an inventory problem as well as keeping prices high.

But in a housing bright spot, builders are having their way as demand for housing remains robust, material costs have normalized, and builders can get creative with programs to get homebuyers into properties.

Bottom line: Home loan rates paused their rise and next week we may find out if the retreat in rates is sustainable. Housing remains in a long-term bull market and upon any meaningful decline in rates, we should expect housing to also step off the pause button, with activity quickly resuming.

Looking ahead

Next week might be the biggest economic news week of the year. With just a few weeks before the next Fed Meeting, we will see reports on inflation, the labor market and economic growth. If the reports show weakness, it may very well confirm the Fed is no longer hiking rates, the opposite is true.

Mortgage Market Guide Candlestick Chart

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, August 25, 2023)

Economic Calendar for the Week of August 28 - September 1

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into the Markets: July Fed Meeting Update

Fri, 25 Aug 2023 13:14:44 GMT

A Look Into The Markets

"Here I go again on my own. Going down the only road I've ever known" Here I Go Again by Whitesnake

"Uncertainty of the U.S. economic outlook remains elevated"... FOMC minutes from the July Fed Meeting.

"Most participants (Fed Members) saw continued significant upside inflation risks "

This line was like kryptonite to Superman as bond/interest rates hate inflation. The fact that we are still enduring significant upside risk was enough for bonds to sell off and push rates higher.

"Participants still saw below-trend growth, softer labor market as necessary to restoring economic balance."

The good news? After all this uncertainty and tough talk on inflation, the markets are currently pricing the probability of a Fed rate hike in

September at just 11%. However, more data will come in which could change things. But as of now, the Fed is not going to hike rates.

Bottom line: Rates have ticked higher on the heels of our recent debt downgrade and uncertainty around inflation and no recession. Maybe next week things change...read on.

Looking Ahead

Mortgage Market Guide Candlestick Chart

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, August 18, 2023)

Economic Calendar for the Week of August 21 - 25

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Inflation Hits 3.2%

Fri, 18 Aug 2023 12:55:16 GMT

A Look Into The Markets

This past week home loan rates remain elevated despite consumer inflation being reported slightly lower than expected. Let's discuss what happened and look at the week ahead.

"Oh, Minute by Minute by Minute by Minute - I keep holding on" Minute by Minute - The Doobie Brothers

Inflation Hits 3.2%

On Thursday, the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for July at 3.2% year-over-year which was slightly lower than the 3.3% expected. What was also positive is the back-to-back 0.2% increase on a month-to-month basis. This is the slowest pace of inflation in two years.

The upcoming CPI report is one of the five reports the Fed said to watch before the next Fed Meeting in September as they decide whether to hike rates again. So, seeing this inflation reading come in slightly light may add to the notion of a Fed pause in September, especially when coupled with the recent soft Jobs Report.

There is concern inflation is going to increase in the months ahead. Why? Oil was sharply higher with the bulk of the rise in late July, where those numbers were not reflected in the CPI reading. Additionally, higher oil prices seep into food prices, which would also be on the rise.

Currently, inflation is running at a low pace and while most expect prices to come down further, oil and energy prices could be a wild card as we move into the Fall.

Moody's Downgrades Some Banks

Rating agency Moody's downgraded the credit ratings of 10 banks last Monday, citing higher funding costs, slower loan growth and profit pressures. This is an important story to follow for mortgage and housing as it could lead to tighter credit standards for banks looking to be more conservative on lending and loan growth.

This story is yet another reason for the Fed to stop hiking rates. Tighter lending conditions are akin to Fed rate hikes and hiking rates further would only make the banking issues described above worse.

Rising Oil Prices

Oil prices are $84 and one month ago, they were just $68. This is inflationary and should the rise continue, it could be a problem. Last summer we found out how painful high energy prices are. Let's hope we do not go back to those levels.

Fed Rate Hikes Futures

After the past couple of weeks with a soft jobs report, soft inflation reading and the downgrade to US debt, the markets are now pricing the probability of a Fed rate hike at just 9.5%. Moreover, now the markets are also pricing in 5 rate cuts in 2024, with the Fed Funds rate coming back down to 4.00%. For this to happen, we will need inflation to come down further and we may have to experience a recession in early 2024. This story will change over time, and we will be tracking it.

Bottom line: It would be ideal to see the 10-year Note yield move nicely back beneath 4.00%, where it is right now. If that comes to pass, we should see a resumption in the decline in mortgage rates. The opposite is true.

Looking Ahead

Next week, the minutes from the July Fed meeting will be released. It will be interesting to hear the Fed's take on whether a pause is in the cards for September. This event, along with housing reports, could be the week's big market movers.

Mortgage Market Guide Candlestick Chart

On the right side of the chart, you can clearly see how prices have rebounded higher, providing some relief from the multi-month rate peaks. For rates to improve further we need to see Mortgage Bonds move above 101, which has limited any improvement in pricing/rate over the past few months.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, August 11, 2023)

Economic Calendar for the Week of August 14 - 18

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In This Issue: August 2023

Tue, 15 Aug 2023 15:51:32 GMT

In This Issue

"When you have a dream, you've got to grab it and never let go." - Carol Burnett

When purchasing a new home, you might prefer to live in the excitement of the city or the quiet solitude of the country. In this issue, we'll discuss how to decide where to buy, as well as the following:

What to Watch - The big question will be whether or not the Federal Reserve will continue to hike rates for the remainder of 2023 to fight inflation.

Urban, Suburban, or Rural Area: Where To Buy - Among urban, suburban, and rural properties, each have their own pros and cons to consider before purchasing a home.

DIY Tile Tips for Homeowners - You don't have to be a professional to install a stunning new tile floor in your bathroom with these simple tips.

Q&A: How Can You Add Value to a Home? - Knowing what improvements add the most value to a home can help you choose the projects you want to do.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What To Watch

The Fed and Inflation

Consumers have seen the closely watched inflation reading Consumer Price Index (CPI) fall from a 40+ year high of 9% in June 2022 to the recent read of 3% on a year-over-year basis.

Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year. It may be one of the most familiar words in economics.

That has been a big relief but could inflation reverse course and begin to head higher once again? Since the beginning of July energy prices have risen which is inflationary data. Oil prices rose to $82 at the end of July, up from $70 early in the month. We know inflation is the arch-enemy of bonds and borrowing costs.

Further inflation pressures are seen as the S&P Goldman Sachs Commodity Index has been on the rise signaling higher commodity prices. Cotton prices have risen while food prices remain high. Shelter costs continue to run high. It looks like future readings of inflation data could see an uptick and is something the markets as well as the mortgage market will have to closely watch.

The big question will be whether or not the Federal Reserve will continue to hike rates for the remainder of 2023 to fight inflation. Will the Fed allow the policy lag of 200+ basis points in hikes to the Fed Funds Rate to seep into the economy? These are the answers we'll be looking for inside of two CPI reports and a Core Personal Consumption Expenditure (PCE), the Favorite inflation gauge, before the September Fed meeting.

Bottom line: Whether or not the Fed hikes rates or inflation rises, Americans still need shelter. Families form daily and renters look to be homeowners so the need for housing will always be a constant.

Urban, Suburban, or Rural Area: Where To Buy

Housing News

When deciding where to buy, you have many options, from densely populated cities to wide-open country spaces. Learn the pros and cons of each option to decide what's best for you.

Urban. If you enjoy the hustle and bustle of the city, look for a home in an urban area. Many people move to cities for a greater variety of job opportunities. In a city, you have access to public transportation and key amenities, like road services and trash collection. The downsides of city living include pricier homes and higher crime rates.

Suburban. Life in the 'burbs offers a great compromise for people who enjoy city amenities but want lower living costs. You'll usually get more house for your money in a suburb. In addition, many families choose to move to the suburbs because of their reputation for quality schools. However, you might have a longer commute, and some suburban communities may have homeowners associations with rules about what you can do with your home.

Rural. Those who crave wide-open spaces will feel most at home in a rural area. In the country, you can find homes with plenty of land, where your nearest neighbors may be miles away. You will enjoy cleaner air and statistically lower crime rates than city residents. But rural areas may have fewer job opportunities, and some may not enjoy the slower lifestyle.

Whether you prefer the lights of the city or the quiet of the country, there's a place for you to feel at home. Do your research to decide the best space for you and your family to live.

Sources: Hansenteampensacola.com, Moneycrashers.com

DIY Tile Tips for Homeowners

Installing a new tile floor in the bathroom can instantly transform and update the space. Here are some tips if you want to try laying the new tile yourself.

Estimate the cost. Measure the floor to determine the square footage. Round up the measurement to the nearest foot and add 10% to make sure you purchase enough tile. Usually, you can find tile for $5 to $15 per square foot, though some options may be cheaper.

Prep the floor. In most cases, you can remove the existing floor before installing the new tile. If you have a concrete subfloor, you can lay the tile directly over it. Make sure the floor is free of adhesives or other residues, and patch areas as needed so it's smooth. For wood floors, use a backer board to prepare the floor for the tile.

Lay out tile before installing. To make sure you like the design, lay out the tile before installing. Plan where you need to make cuts. Use chalk lines on the floor to make a guide you can follow as you install the tile.

Grout the joints. Once you've laid the tile, grout the joints using a single-component grout that doesn't require mixing. Test the grout first by filling tile joints on a small piece of backboard. Press hard to get the grout into the joints and wipe away the excess.

With some preparation, you can install new tile yourself to save hundreds of dollars, if not more, on the cost of hiring a professional. Use these tips and follow all product instructions to lay a beautiful new tile floor in your bathroom.

Sources: Familyhandyman.com, Chieftain.com, Orlandosentinel.com

Q&A

How Can You Add Value to a Home?

QUESTION: Which types of home improvements can add the most value to a home?

ANSWER: There are many projects you can do in your home. While some add value, others may actually cost you money when you're ready to sell. Knowing what projects increase your home's value can help you decide whether they're worth doing.

In general, kitchen and bathroom improvements tend to increase the value of your home. Remodeling these rooms may involve updating light fixtures, installing new fixtures, and painting cabinets or vanities. These small changes can all add up to big resale value.

Here are some other projects that can add substantial value to your home:

Replace garage doors. Installing a new garage door can be a cost-effective way to boost your home's value. Choose garage doors made from steel, wood composites, or aluminum, since they're the most weather-resistant.

Add a deck. Building a deck for your home's exterior may be costlier than other projects, but it can have a high return on investment. A wood deck increases the living area of your home, making it a popular feature with buyers.

Update siding and windows. Your home's siding can make an instant impression on buyers, so make sure it's a good one. Replace old or damaged siding and update the trim. You can also upgrade your windows to enhance the look of your home. Choose energy-efficient windows for the greatest return on investment.

When deciding what projects to do in your home, consider the impact they may have on its resale value. Choosing projects that increase your home's value can have positive effects on a future sale.

Sources: Seattlecu.com, Bankrate.com, Moving.com

A Look Into The Markets: U.S. Debt Downgraded

Fri, 11 Aug 2023 13:05:50 GMT

A Look Into The Markets

This past week home loan rates ticked higher in a week filled with some negative surprises. Let's discuss what happened and look at the week ahead.

"Money, so they say – Is the root of all evil today"... Money by Pink Floyd

Another $1T Please

Earlier in the week, the Treasury Department surprised the financial markets when they stated they need $1T to fund the government from August to October. The problem? It was $275B more than what was expected just a few months ago when the Treasury last released their funding expectation needs.

How does the Treasury Department raise the $1T? By selling Treasury Bills, Notes and Bonds in auctions. The bond market hated the announcement and pushed rates higher in anticipation of even more bonds that must get sopped up at weekly Treasury auctions.

U.S. Debt Downgraded

The bond market was not the only thing that didn't like the Treasury Department's call for more money. Fitch Ratings downgraded US Debt one notch from AAA to AA+. They cited "fiscal deterioration" over the next three years as the driver behind the decision.

Our debt was downgraded back in August 2011, for many of the same reasons which were rising debt, political division, etc. But this time things are slightly different. Back in 2011, we had just $6T in government debt and today, we have over $32T in debt.

We do have some history on our side. Back in 2011, after the debt was downgraded, interest rates did improve in the months ahead. For the interest-rate sensitive housing sector, this would be a welcome development.

Japan Seeing Higher Rates

The Bank of Japan (BOJ) has started to loosen their Yield Curve Control (YCC) policy by allowing their 10-yr government bond to float from a cap of .50% to 1.00%. This is a big change from a government that had pinned rates at 0.0% for years. As the Japanese interest rates crept higher upon the announcement, it placed upward pressure on our rates as well.

4.09%

On Thursday, the 10-yr Note was right at an important level of 4.09%, which has been serving as yield resistance, preventing rates from moving higher since November. If the 10-yr moves above this level, we could easily see home loan rates move another leg higher still.

Bottom line: The financial markets were unnerved by the double whammy of surprises with the Treasury's request for more money and the subsequent debt downgrade. Time will tell whether rates can reverse from key levels like it had since November or will we see yet another leg higher in rates.

Looking ahead

Next week will deliver one of the 5 key reports the Federal Reserve said to watch prior to the next Fed Meeting in September...the Consumer Price Index or CPI. Last month, the June reading came in at 3.00%, which was well off the June 2022 reading of 9%. If the reading comes in higher than expected, rates could move higher. The opposite is true.

Mortgage Market Guide Candlestick Chart

On the right side of the chart, you can clearly see how prices are hovering right near 100. If the bond falls beneath this key level, we will see home loan rates climb higher once again. The opposite is true.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, August 4, 2023)

Economic Calendar for the Week of August 7 - 11

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Another Rate Hike

Fri, 04 Aug 2023 12:59:14 GMT

A Look Into The Markets

This past week home loan rates were unchanged, despite the Fed raising rates to the highest levels in 22 years. Let's discuss what happened and look at the week ahead.

"The Song Remains the Same" ... Led Zeppelin

Another Rate Hike

On Wednesday, the Federal Reserve raised the Fed Funds Rate to a range of 5.25 to 5.50% and this move was widely expected. Fed Chair Powell also shared that if the data comes in strong over the next two months, they will raise rates again in September. The opposite is true.

What data was the Fed talking about? Mr. Powell was specific and said there will be two jobs and CPI (inflation) reports, and one employment cost index which garners most of their attention before the Fed meets again in September when they decide what to do with interest rates.

One of the main reasons interest rates remain high and the Fed has continued to raise rates is the underlying resilience of the economy. Many economists, market watchers and central bankers were calling for a recession by the middle of this year. In fact, one reputable publication back in November said there was a 100% chance of a recession in 2023. Fortunately, or unfortunately, depending on how you're looking at it, the economy is currently growing near 2% and unemployment is at 3.6%, which are not conditions that lead to an economic recession.

Looking forward...watching the economic data will be important to determine whether the Fed increases rates further. At the very least we should be prepared for the Fed to hold the Fed Funds Rate at current levels for quite a bit longer.

How much longer? The Federal Reserve wants to see inflation come down to 2%. The Fed's favorite gauge of inflation is currently running at 4.6% so, there is a lot of wood to chop for inflation to get near the Fed's target. In fact, the Fed's forecast calls for core inflation to reach its goal in the year 2025. So, when we hear higher for longer, that's what we mean.

For reference: In the last rate hiking cycle back in 2018, the Fed cut rates 7 months after the last hike. Meanwhile, during that same time, home loan rates steadily improved.

Bottom line: The Federal Reserve may very well be done hiking rates. However, long-term rates may likely edge lower slowly. Why? The economy is slowing. Slowly, unemployment is rising, slowly, and inflation is rising slowly.

Looking ahead

Next week we will get one of the Fed's readings to watch...the Jobs Report for July will be released next Friday. Expectations are for 184,000 jobs to be created. This would be the lowest reading since December 2020. Within this report is hourly earnings, which the Fed watches closely because if people are receiving more pay, it could lead to higher prices and thus, more Fed rate hikes.

Mortgage Market Guide Candlestick Chart

On the right side of the chart, you can clearly see how prices moved lower after touching 101. For rates to improve from here, we need to see Mortgage Bond prices move above 101, which might accompany the 10-year Note yield moving beneath 3.70%.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, July 28, 2023)

Economic Calendar for the Week of July 31 - August 4

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: The Blackout Period

Fri, 28 Jul 2023 13:58:23 GMT

A Look Into The Markets

This past week interest rates were essentially unchanged from the previous week, and what was a relatively "quiet" week. Let's discuss what happened and look at the week ahead.

"Yeah, yeah, yeah...I really had a blackout, baby" - Blackout by the Scorpions.

The Blackout Period

As we approach the next Federal Reserve meeting, there is a blackout period, where no Federal Reserve members hold any speeches or make comments on monetary policy. The speeches by Federal Reserve members can often move the financial markets and interest rates, often in a volatile fashion. So, the absence of Fed speakers this past week was a welcome break from the added volatility.

The blackout period will end next Thursday, the day after the next Fed meeting. With a rate hike widely expected, there will be plenty to comment on once this quiet period ends.

Global Inflation Easing

Interest rates and financial markets are influenced by economic conditions around the globe. This past week several countries, including the UK, and the Eurozone reported a larger-than-expected decline in inflation. As inflation eases around the globe, it lowers expectations of further central bank rate hikes and lowers rates. The opposite is true, so seeing inflation recede, especially in Europe, was a welcome sign and it added to some of the relief in rates here at home.

To Hike or Not to Hike

Next Wednesday at 2:00 pm ET, the Federal Reserve will release its monetary policy statement and interest rate decision. The markets are now fully pricing in a .25% rate hike to the Fed Funds Rate. Remember, the Fed rate hike affects short-term loans like credit cards, automobiles, and home equity lines of credit.

Despite some of the softening inflation news here at home, the markets are getting a sense that this rate hike next Wednesday will be the last. It is too early to tell if that is the case. Next Friday's release of the Core Personal Consumption Expenditure (PCE), the Fed's favorite inflation gauge, may very well determine if this is the last rate hike. Should the reading come in lower than expected, the Fed may indeed take a break from hiking rates. Once again, the opposite is true.

3.70%

Over the past couple of weeks, interest rates have improved, with the 10-year yield moving from 4.09% down to 3.75%. For rates to improve further, the 10-year needs to move beneath 3.70%, a layer of yield support. Yield support prevents interest rates from improving. What will determine if the 10-year can move beneath 3.7%? Next week's huge dose of news which will be the Fed meeting, GDP and the inflation reading.

Bottom line: As stated above, next week is a big one for interest rates, and the financial markets overall. The Fed, which has already hiked interest rates 500 basis points over the last 18 months, may finally come to an end. The Fed meeting typically generates multiple market responses. The first of which happens upon the release of the actual statement at 2:00 pm ET on Wednesday. The next takes place at the press conference where Fed Chair Powell will answer questions that can lead to some off-script or contradictory remarks, and the final reaction will be next Thursday when markets get to sleep on what they all heard.

Looking Ahead

Key events next week will shape the economic landscape going forward given the Fed meeting and the closely watched inflation reading Core PCE.

Mortgage Market Guide Candlestick Chart

On the right side of the chart, you can clearly see how prices hit key resistance or a ceiling at 101 and were pushed lower. Home loan rate improvement from here will be limited in the absence of a break above this tough ceiling. Next week's news could certainly provide the spark for this to happen.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, July 21, 2023)

Economic Calendar for the Week of July 24 - 28

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Changes Ahead

Fri, 21 Jul 2023 12:47:57 GMT

A Look Into the Markets

This week interest rates improved significantly as the markets responded to the softest inflation reading in over two years. Let's discuss what happened and look at the week ahead.

"Ch-ch-ch-ch-changes, Turn and face the strange, Ch-ch-changes". Changes by David Bowie .

Consumer Prices Are Falling

The Consumer Price Index (CPI) for June was reported on Wednesday and showed that consumer prices are falling, which is wonderful for the interest rate sensitive housing sector. The headline CPI for June, which includes food and energy, came in at 3% year-over-year; the slowest rate since March 2021. It was just last year we were reporting CPI readings of over 9%, so this was a welcome sign for all Americans.

Note: This sizable decline is mainly because oil prices were $70 in June...almost half of what they were last June. It also highlights how important it is to keep oil prices low.

Adding to the good vibes within the report Core CPI, which excludes food and energy, also declined further than market expectations. All this good news on inflation sparked the party in the bond market. The 10-yr Note yield dropped from multi-month highs of 4.09% to 3.83% very quickly.

Fed Members Changing Their Tune

In response to the surprisingly low inflation reading, some Fed members are already suggesting that inflation is approaching "normal levels", while others say we are nearing the end of rate hikes. This is a very different tone that was being shared a couple of weeks ago when Fed members were pounding the table for more hikes and higher rates for longer.

After the dust settled from the report, the markets are pricing in just one more rate hike at the end of July. As we've seen before, this story can and will likely change in the future.

Not Out Of The Woods

This past week's low inflation number was terrific to see, but we are not out of the woods with inflation just yet. In fact, in the next couple of months, we are very likely to see CPI move higher. Why? Because last July and August we had very low monthly inflation readings, which will likely be replaced with higher inflation readings this year, causing inflation to possibly tick higher.

In future months, we will also have to watch the price of oil. If it starts to edge higher from the recent lows, it will elevate inflation much like it did last Summer. We do have production cuts from OPEC and Saudi Arabia next month which may influence prices.

4.09%

Yield resistance is a level which halts or prevents rates from moving higher. Since early November, that level has been 4.09%. If the 10-yr yield moves above 4.09%, it will likely place additional upward pressure on Treasuries and thus mortgage rates. The good news? This past week, the 10-yr yield hit 4.09% a couple of times before edging lower.

Bottom line: Inflation is trending in the right direction which is lower and as this continues, we should expect rates to continue to move lower as well.

Looking Ahead

Next week brings some important readings on housing and retail sales. With Fed speakers set to hit the podium, it will be interesting to see if we hear more dovish talk and a sense that rate hikes are drawing to a close.

Mortgage Market Guide Candlestick Chart

Mortgage-backed security (MBS) prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 5.5% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa. 

After a 5-day rally higher in prices, mortgage bonds are once again testing resistance at 100. If prices move above 100, rates can improve further. The opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, July 14, 2023)

Economic Calendar for the Week of July 17 - 21

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

July's Look Into The Markets: What To Watch

Wed, 19 Jul 2023 12:43:48 GMT

In This Issue

"Perfection is not attainable. But if we chase perfection we can catch excellence." - Vince Lombardi

When purchasing a home, you may have several options for getting a loan to pay for it. In this issue, we'll discuss these options, along with the following topics:

What to Watch - Will the Fed signal that due to persistent inflation, rates must continue to increase? Will the Fed hold rates higher for longer?

Choosing the best mortgage for your goals - Knowing the different types of mortgages available can ensure you get the right one for your budget and goals.

How to use wallpaper to upgrade your décor - Wallpaper can add visual interest to a room, whether it's on the wall or in a frame.

Q&A - Do you need a credit score for a mortgage? If you've never borrowed money before, learn how you can get a mortgage with no credit score.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What To Watch

Higher for Longer

Mortgage rates and what the Federal Reserve has in store for the markets are on the radar of mortgage consultants, realtors, and potential home buyers in the coming months.

Home borrowing costs continue to hover in the high 6% range for the 30-year fixed, up from the low 3% level in early 2022, and have added a heavy layer of costs associated with monthly mortgage payments. The jump in rates has caused refinance applications to cool given that 82% percent of homeowners have an interest rate below 5% while 92% of homeowners had an interest rate below 6%.

If the Federal Reserve continues in its quest to slow the economy, bad news is good news for bonds and rates. Borrowing costs could push lower if slow economic growth sets in. But if the higher rates don't bring inflation down, rates will stay elevated. At the June meeting, the Federal Reserve paused its rate hiking policy but has vowed to raise rates twice more in 2023 to fight high inflation. Next up is the Fed meeting on July 27th and is the one to watch. It is expected that the short-term Fed Funds Rate will rise by 25bp. The language in the statement will be key.

Will the Fed signal that due to persistent inflation, rates must continue to increase? Will the Fed hold rates higher for longer?

Bottom line: The "higher for longer" narrative from the Fed and some uncertainty is limiting the improvement in rates. At the same time, look at the homebuilder optimism as a sign that the worst is behind us as it relates to rates and inflation. There are many great opportunities to be had with more coming. Better days are ahead.

Choosing the Best Mortgage for Your Goals

Housing News

You've found the perfect home, and now you need to figure out how to pay for it. Consider these steps to choose the best mortgage for your goals:

Determine your budget. Do some budgeting to determine how much home you can afford. A good rule of thumb is to keep your mortgage payments under 30% of your take-home income. Use an online mortgage calculator so you get an idea of potential repayments.

Know the different types of mortgages. Various types of mortgages are available, so talk to your loan officer about which is best for you. You may qualify for a conventional mortgage if you have good credit and a 3% down payment or higher. Other types of mortgages include:

Consider terms. When choosing a mortgage, consider its terms. For example, a fixed-rate mortgage may have a higher initial interest rate, but it won't change over the course of the loan. Adjustable-rate mortgages (ARMs) have fixed rates for a specific period, and then they can fluctuate based on the market. An ARM with lower rates may be a good option if you plan to move before the fixed term ends whereas a higher fixed rate might work better if you plan to stay in your home longer.

Compare mortgage types. Like with any type of loan, finding the right mortgage is important. Get quotes from your loan officer for two or three mortgage types so you can compare them side-by-side. Comparing loan options that fit your budget and goals is key when choosing the right mortgage for you.

For most people, a new home is one of the biggest purchases they'll ever make. Do your homework and work with a qualified loan officer to choose a mortgage that works for you.

Sources: Investopedia.com, Nerdwallet.com, Bankrate.com

Home Improvement

How To Use Wallpaper To Upgrade Your Décor

Wallpaper can instantly add color, texture, and interest to any space. Whether you plan to transform an entire room or add a pop of pizzazz, here are some ideas to upgrade your décor with wallpaper:

Create a feature wall. A feature wall is one of the most popular choices for wallpaper. Choose a fun print and apply the paper in an area where you want to add some flair. This option works well on walls with natural focal points, like an entry table or a fireplace.

Wallpaper the ceiling. May seem different but using wallpaper on the ceiling creates a dramatic effect in a room, especially if you choose a bold print. Make sure you have a smooth ceiling, since bumps can be especially noticeable when wallpaper draws the eye upward.

Use wallpaper to accent furniture. If you're not ready to commit to a full wall or the ceiling, you can use wallpaper on furniture. For example, you can wallpaper the back of a bookshelf or use it to line dresser drawers. This subtle change will make you smile every time you see it.

Frame wallpaper for art. For an unexpected twist on traditional wallpaper, frame it and hang it as artwork. This can be a great way to use leftover wallpaper. You can also use wallpaper samples to create artwork if you don't want to pay for an entire roll.

Wallpaper can make a visual statement in your home. Use these suggestions to take a space from bland and boring to bright and beautiful.

Sources: Homesandgardens.com, Thespruce.com, Housedigest.com

Q&A

Do You Need a Credit Score for a Mortgage?

QUESTION: Can you get a mortgage with no credit score?

ANSWER: Yes, you can get a mortgage even if you don't have a credit score, though it may be more difficult. If you've never borrowed money before, you won't have a credit score. In this case, you can complete a manual underwriting process.

During a manual underwriting process, a lender uses multiple factors to determine your ability to repay a loan, such as your income, employment, and expenses. After reviewing your financial history, an underwriter makes a decision about your creditworthiness.

Here are some tips to secure a mortgage with no credit score:

Have documentation. An underwriter will ask for various forms of documentation. Make sure you can verify your income for the past one to two years. Also, have statements showing your payments for common expenses, like rent, utilities, and insurance.

Use a co-borrower. A co-borrower is someone who will be on your mortgage and take responsibility for repayments if you can't make them. If you have a family member or close friend with a credit history who's willing to be on your mortgage, it can increase your chances of being approved.

Make a substantial down payment. If you can make a large down payment, the lender takes on less risk in approving your loan. A good goal is to save 20% of the home price so you can show your financial responsibility.

It's not impossible to get a mortgage if you've never borrowed money before. Speak with your loan officer for more details about the options you have for getting a mortgage with no credit score.

Source: Ramseysolutions.com

A Look Into The Markets: Recession Fears Ease

Fri, 14 Jul 2023 12:37:06 GMT

A Look Into The Markets

"Man, we live it up, down, up, down. We live it up down here" by Morgan Wallen

This week, interest rates spiked on good economic news as fears of a recession fade. Let's discuss the big news of the week and gear up for important events in the week ahead.

The June Fed Meeting Minutes Out

"Some participants indicated they favored or could have supported raising the Target Rate by 25 basis points" FOMC Minutes June 2023 Meeting.

On Wednesday, the Minutes from the June Fed Meeting were released. Seeing that the Fed paused hiking at that Meeting, markets were looking to see what Fed officials felt about the pause. The quote above highlights the sentiment by some at the Fed that rate hikes must continue. Why? This quote below:

"Those favoring an increase noted very tight labor market, stronger-than-anticipated economic momentum, little evidence of inflation being on a path to return to 2% over time."

Recession Fears Ease

The last revision to 1st Quarter GDP showed a shocking upward revision to 2.00% from a previously reported 1.3%. The important takeaway is this has dramatically removed the fear of recession in the near-term at least for now. This has also elevated the chance of a Fed rate hike at the end of July to nearly 100%.

Going forward, the economic data will be important to track to see if the economy remains as strong as it was in the first Quarter. Part of the bump in consumer spending was in response to a 8.7% increase in social security benefits, which are adjusted for higher inflation.

ADP Highlights Tight Labor Market

The ADP Report, which shows private (non-government) job creation for June came in at a shockingly high 497,000; more than double the 220,000 expected. This report, on the heels of the GDP reading and Minutes, was enough to push interest rates to the highest levels of the year.

Bank of England Seeing Higher Rates

And if all the good news above was not enough to pressure rates higher, we also watch expectations for higher rates in England pressure our rates as well.

Markets are now pricing the Bank of England to raise rates from the current 5.00% to 6.50% early next year. As rates go higher abroad, rates here in the US edge higher as well.

Bottom line: The "higher for longer" narrative from the Fed is now being supported by some of the data this week which has led to a spike in rates. In the coming weeks, we shall see if long-term rates are comfortable being elevated, or if they will come back down from these levels much like they did back in November.

Looking Ahead

Next week expect the volatility to continue as the June Consumer Price Index and Producer Price Index are released. These inflation readings can have a big impact on rates. Expectations are for the Consumer Price Index to fall to 3.6%, well below the 9.00% seen last June.

Mortgage Market Guide Candlestick Chart

Mortgage-backed security (MBS) prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

You can see on the right side of the chart how prices opened beneath 100.20, which has kept rates from moving higher. If the Bond is unable to get back above the 100.20 and edge higher, rates will remain elevated. The incoming news can change this story for the better or worse and quickly.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, July 7, 2023)

Economic Calendar for the Week of July 10 - 14

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Inflation Fight Continues

Fri, 07 Jul 2023 12:12:06 GMT

A Look Into The Markets

Independence Day, also called the 4th of July, is the United States celebration of nationhood. It commemorates the passage of the Declaration of Independence on July 4, 1776. In 1870, the U.S. Congress made July 4th a federal holiday. In 1941, the provision was expanded to grant a paid holiday to all federal employees. The day is celebrated by fireworks, barbecues and spending time with family and friends.

"My country,' tis of thee, Sweet land of liberty, of thee I sing" by Henry Carey .

Inflation Fight Continues

Interest rates continued their sideways trend as we close the first half of 2023. Let's discuss what happened this week and look into the future.

The European Central Bank forum was the main event this week. Central bankers from across the globe, including our Fed Chair, Jerome Powell spoke about the state of their countries economy as well as monetary policy. A common theme was the need to continue to fight inflation, which is still persistently high and above central bank targets.

Here at home, the Federal Reserve's favored gauge of inflation, the Core Personal Consumption Expenditure Index (PCE), is still running in the mid 4.00% range, more than double the Fed's target of 2%. The Federal Reserve recently stated they see inflation coming down to their goal of 2% in 2025. This means we should expect short-term rates to stay higher for longer and a high possibility of no rate cuts this year.

A Breakout is Coming

If you look at the chart section below, you will see Mortgage Bonds have been unable to break above 100. Until this happens, home loan rates simply can't get better. While in the Treasury market, the 10-year Note has a breakout coming. The 10-year yield, currently at 3.80%, sits at the top of a very tight range between 3.68% and 3.83%. Whichever way the yield breaks will likely determine the next directional move for home loan rates. So, this is a story worth following. 

Bottom line: Long-term interest rates peaked back in October and have gradually inched lower, making a series of lower highs and lower lows overtime. Looking at the second half of the year, with inflation continuing to moderate and unemployment continuing to rise, we should expect a continued gradual decline in long-term interest rates. Coupled with robust housing demand which has set us up for a much better housing market in the back half of 2023.

Looking Ahead

Next week is a short week as we celebrate Independence Day. However, there could be plenty of fireworks come next Wednesday and Friday as the Fed Meeting Minutes and June Jobs Report are delivered.

Mortgage Market Guide Candlestick Chart

You can clearly see how prices have moved sideways beneath resistance at 100 for over one month. Home loan rate improvement from here will be limited in the absence of a break above this tough ceiling.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, June 30, 2023)

Economic Calendar for the Week of July 3 - 7

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Homebuilders Feeling Good

Fri, 30 Jun 2023 13:55:18 GMT

A Look Into The Markets

This week, interest rates held near the best levels in a month as Fed Chair Powell testified on Capitol Hill. Let's discuss the big news of the week and gear up for important events in the week ahead.

"Don't stop thinking about tomorrow Don't stop, it'll soon be here It'll be better than before, Yesterday's gone, yesterday's gone" - Don't Stop by Fleetwood Mac

Powell on the Hill

"Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace." Fed Chair Powell on Capitol Hill, 6.21.23

On Wednesday, Federal Reserve Chair Jerome Powell gave his semi-annual testimony to Congress regarding the state of the economy and interest rates. His prepared speech was very similar to the statement the FOMC released last week when they "paused" the string of 10 rate hikes. The quote above, from the question-and-answer portion was one of the highlights as it reminds the markets that Fed rate hikes are nearing an end.

The next Fed Meeting is at the end of July. If the incoming data continues to show inflation coming down and unemployment going higher, the Fed may very well not hike again next month. Currently, the markets are pricing in a 75% probability of a .25% rate hike next month. This will likely change as news comes in.

Homebuilders Feeling Good

As a sign of long-term confidence in the housing market, homebuilders put shovels in the ground at a rapid pace in May. Construction of single-family homes jumped 21.7% from April as builders try to meet soaring housing demand. Housing starts rose to a 1.63M annual pace in May, up sharply from 1.34M in April. There are many reasons for builders to be optimistic about the future. Below are just three:

Housing demand is high, and supply is low.
Labor market is tight; jobs buy homes.
The Fed is nearing the end of rate hikes.

Bank of England Raises Rates

In response to a higher-than-expected inflation report in the UK earlier this week, the Bank of England raised their rates by more than the expected .50%. The Bank also said more rate hikes are coming to help lower inflation. This is important to follow because their inflation is over 8% and next month our Consumer Price Index will be in the 3.00% range. So that central bank is behind the US on monetary policy and inflation and must catch up with more rate hikes. This could add to the uncertainty and volatility in the months ahead.

It's important to note that UK long-term interest rates improved on the rate hike as markets feel the Bank of England regained credibility in its fight versus inflation. This is another example where rate hikes help long-term rates.

Bottom line: The "higher for longer" narrative from the Fed and clear technical factors are limiting the improvement in rates. At the same time, we can look at home builder optimism as a sign that the worst is behind us as it relates to rates and inflation. There are many great opportunities to be had and more coming. Better days are ahead.

Looking Ahead

Next week we will see the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure Index (PCE). The reading is expected to fall to 4.5% May from 4.7% in April. Note: When the Fed says they want inflation to run at 2.00%, they are talking about this index. So, when the Fed says they need to see more progress, they are correct. The Fed is forecasting Core PCE to come down near 2.00% in 2025...so short-term rates will remain higher for the foreseeable future.

Mortgage Market Guide Candlestick Chart

You can see on the right side of the chart how prices are unable to move above 100. If MBS can move above 100, rates will improve and the opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, June 23, 2023)

Economic Calendar for the Week of June 26 - 30

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: The Fed Outlook

Fri, 23 Jun 2023 12:07:14 GMT

A Look Into The Markets

This week the Federal Reserve decided to pause their string of rate hikes for the first time in 15 months, yet long term rates moved higher.

Let's discuss what happened and look at the events to watch for next week.

"Going to keep on trying, 'Til I reach my highest ground" - Higher Ground by Stevie Wonder

Higher For Longer Still

On Wednesday, the Federal Reserve made a decision to not hike the Fed Funds Rate, breaking a string of 10 consecutive hikes, leaving the rate in a range of 5 to 5 1/4.

This move was widely expected by the financial markets. However, the markets were delivered a surprise when The Fed announced its members believe there will be two more rate hikes this year. Heading into the meeting, it was speculated that the Fed may raise rates one more time in July. This additional hike caused a lot of volatility with a spike in short term and near term rates here and abroad.

The Fed Outlook

Every three months, the Federal Reserve releases a Summary of Economic Projections which gives the markets a sense of what Fed members are seeing regarding economic growth, inflation, unemployment, and where interest rates are headed. The forecast shows economic growth coming in slightly stronger than previously expected, but still at a historically slow 1%. Core inflation, which strips out food and energy, is expected to be higher than previously forecasted. Unemployment is forecasted to come in lower than originally expected. Lastly, many Fed members believe interest rates will need to go higher to cool off the labor market to reach the Fed's inflation target of 2.00%

The Press Conference

After the Fed statement was delivered, Fed Chair Jerome Powell held a press conference, where he took questions and tried to give more color as to what Fed members have been thinking. Within the press conference the Fed Chair did say they have not talked about the July rate hike, and the next meeting will be a "live meeting" where they will respond to the economic data in advance of that report. This means, if inflation continues to come down as it has and the unemployment rate edges up like it did last month, the Fed may very well pause rate hikes again at the July Fed meeting. As of this moment, the chance of a Fed hike in July stands at 75% probability.

What It All Means

After all the smoke cleared from the Fed Meeting, we are left with more of the same...uncertainty and volatility around how far the Fed will go with interest rates and where the economy is headed.

Rate Hikes Around the Globe

Last week other Central Banks increased their rates, including the Bank of Canada's surprise rate hike. And this past Thursday on the heels of our Fed rate hike, the European Central Bank (ECB) raised their rates to the highest level in two decades. As rates around the globe go higher, it puts upward pressure on our rates. The opposite is true.

Bottom line: It may be tough to see long-term interest rates improve much in the near term as the markets digest the notion that the Fed will potentially raise rates two more times, with no rate cuts this year. Be sure to watch the data and work with your experienced loan officer who follows this closely.

Looking Ahead

Next week doesn't have a packed economic calendar, but there will be plenty of headline risk as Fed officials start speaking and presenting. There are several Fed members who are calling for at least two more rate hikes and as they speak and defend their position, the market could move quickly.

Mortgage Market Guide Candlestick Chart

You can see on the right side of the chart how prices bounced off support at 99 and edged higher. Staying above 99 will confirm the rate peak for this year is in place.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, June 16, 2023)

Economic Calendar for the Week of June 19 - 23

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Treasury Refunding

Fri, 16 Jun 2023 12:17:49 GMT

A Look Into The Markets

This past week interest rates ticked higher in response to a surprise rate hike from above our Northern border. Let's discuss what happened and talk about the big week ahead.

"Well Surprise, Surprise, Come on Open your Eyes" - Surprise, Surprise by Bruce Springsteen

Oh Canada

As the saying goes, "Where there's smoke there's fire". A big news story this past week was the Canadian wildfires raging and sending smoke, affecting nearly 100,000,000 American citizens. But that was not the only big news coming out of Canada.

On Wednesday, in a surprise move, the Bank of Canada raised interest rates by .25%. This lifted their benchmark rate to the highest level in 20 years. In response, interest rates around the globe crept higher. The main concern? This surprise rate hike came after two consecutive meetings where the bank of Canada did not raise rates. There was immediate market fear that our Federal Reserve might do the same.

In recent weeks, the Fed has signaled they are going to pause and not raise rates next week. The Fed has also said there could be a "skip", where they do not raise rates in June, but they come back and raise rates in July, if needed. The markets have ignored the idea of a skip, until Wednesday, when the Bank of Canada raised their rates.

As of this moment, there is a slim chance the Fed lifts rates next week. But come July there is a 66% chance the Fed raises rates once again. There will be a lot of important data that will be reported and can affect whether the Fed raises rates or not.

Treasury Refunding

With the debt ceiling now officially lifted, the Treasury Department needs to refund the Treasury General Account, which was depleted during the past several months. The Treasury Department does this by selling bonds to raise money. It has been said that the Treasury needs to sell as much as $1 trillion worth of bonds, bills and notes over the next six months to keep the money moving. There are negative headlines in the media suggesting this will be a big problem and will cause rates to move higher. Keep in mind that in the past, the treasury department sold much more than this, and in a shorter time frame, so history is repeating itself.

Bottom line: Interest rates remain elevated and near important technical levels as we enter a week full of market moving news.

Looking Ahead

Next week is a very important week for the economy and interest rates. On Tuesday, the Consumer Price Index (CPI) for May will be released. CPI is currently running at 4.9% year over year. There should be some good news over the next couple of months as last May and June high inflation readings will be replaced with the lower ones this year. This means we should see the current 4.9 inflation rate fall to the low 4% range or lower by mid-July when June's number is reported. This news will hit in advance of the late July Fed Meeting.

Speaking of the Fed, on Wednesday the Fed will release their monetary policy statement and interest rate decision. As we shared above, the markets do not expect a rate hike. Word of caution, the markets didn't expect Canada to raise rates either this past week.

Mortgage Market Guide Candlestick Chart

Recently, you can see on the right side of the chart how prices bounced off support at 99. If prices remain above 99, it will represent a near-term peak in rates. The opposite is true.

Next week's high impact events may very well determine whether rates remain above 99 or not.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, June 9, 2023)

Economic Calendar for the Week of June 12 - 16

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

June's Look Into The Markets

Thu, 15 Jun 2023 14:30:27 GMT

June's Look Into The Markets

"Do not stop thinking of life as an adventure. You have no security unless you can live bravely, excitingly, imaginatively; unless you can choose a challenge instead of competence." - Eleanor Roosevelt

What to Watch - Could the mortgage sector of the U.S. economy have seen a pivotal moment when an agreement was recently reached and signed into law regarding the debt ceiling?

Shopping for Homes in a Busy Market: Top 4 Tips - Use these tips to help you secure your dream home.

3 Easy Landscaping Projects You Can DIY - Avoid spending thousands of dollars on landscaping projects by completing these three simple DIY projects yourself.

Q&A: What Should You Do Once You Close on Your New Home? Create a post-closing checklist of these tasks and take care of them after you're handed the keys.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

What To Watch

Pivot Point

A pivot, in the financial markets, is a significant price level known in advance which traders view as important and may make trading decisions around that level.

Could the mortgage sector of the U.S. economy have seen a pivotal moment when an agreement was recently reached and signed into law regarding the debt ceiling? It could be, at least in the short term. Once all the I's are dotted and the T's are crossed there will be some negative sentiment lifted off the bond markets. But now the bond markets will have to deal with how to pay for the new bill and the funding will have to come from the Treasury markets.

If a deal wasn't reached, it would have sent global holders of U.S. government debt into a sell first, ask questions later mode which would have pushed borrowing costs higher. The debt deal has put a line of support for the markets, but it will be a moving target and sentiment can always reverse course in a New York Minute.

So, what does this mean for the mortgage market?

After the lows seen in mid-April, Freddie Mac recently reported that the 30-year fixed rate mortgage had risen and could have increased a bit further if a debt deal wasn't reached. Now that a deal has been reached, costs could inch lower which may push potential home buyers off the fence and into the American dream of homeownership.

Bottom line: Hurdles continue in the home-buying market given that many homeowners still have interest rates well below current levels and may not be eager to sell. This has caused a low inventory environment for buyers that are seeking existing homes, however...the new home market has an abundance of inventories and builders could be offering some sweet incentives to lure in buyers.

Shopping for Homes in a Busy Market: Top 4 Tips

Housing News

Spring is the most popular time in real estate, with buyers awakening from their winter slumber and looking to maximize their tax returns by purchasing new homes. If you're one such buyer, pay attention to these four tips when shopping in the busy spring market.

Get pre-approved. In many markets, inventory is low because so many current homeowners don't want to get rid of the ultra-low mortgage rate they received several years ago. Getting pre-approved shows sellers that a lender verified your credit and can give you an advantage over another potential buyer who lacks pre-approval.

Look for a fixer-upper. Don't ignore a fixer-upper because you might receive a better price on a piece of property that needs a little extra TLC. Add up the approximate costs needed to remodel, and if the numbers look right, don't be afraid to make an offer.

Try to reduce your mortgage payment. Financing a home is a huge responsibility, so taking steps to reduce your monthly costs can save you hundreds or thousands of dollars. Consider making a larger down payment or ask for a seller's credit or concession as part of the deal.

Partner with a trusted real estate professional. A real estate professional can offer insight into the housing market and know how to negotiate with sellers and other agents. Since these agents might also be busy during this time, start expressing your interest early so they can prioritize your needs appropriately.

Spring is a busy time of year to try to secure a home, so if you're looking to purchase a residence, it's important to do your homework.

Following these four tips can help you increase your chances of landing your dream home. For additional assistance, make sure you reach out to your loan officer who can help guide you in the right direction.

Sources: CNN.com, Fortunebuilders.com, Guidanceresidential.com

Home Improvement

3 Easy Landscaping Projects You Can DIY

When it comes to creating a masterful landscape, you don't need to spend thousands of dollars or even hire someone else to do the work for you. These three easy landscaping projects are simple enough that you can tackle them yourself.

Make a flagstone wall. These types of walls are about 1 foot tall, and you can complete this project in one weekend. Dig a trench a few inches deep and wide to accommodate the flagstone, and fill the trench with pea gravel to level the trench. Lay out the flagstone, and backfill with more gravel.

Create a tree surround. Installing masonry around a tree not only looks great but also means you have less grass to mow. This project should take less than one day to complete. Dig a circular trench, add some sand, and install either brick or stone. Select whatever material you think would look best.

Design a fire pit. Adding a fire pit to your backyard or patio is an excellent way to add a focal point to your landscaping. It's another project you can complete in a day. Use large rocks from your property or fire bricks from your local home improvement store. Stack your materials in a circle or square, and place chairs around the finished project.

Improve your home's curb appeal by completing one of these three simple landscaping projects. In just one weekend, you can have a new focal point to your home that you created yourself.

Sources: Thespruce.com, Houselogic.com, Bobvila.com

Q & A

What Should You Do Once You Close on Your New Home?

QUESTION: What steps should you take after you close on your new home?

ANSWER: After you close on your home, you might think all the hard stuff is done and you can move right in. Before you load up the moving truck and settle into your new home, you need to take care of a few additional steps.

Safely store the closing documents. Remember signing your name on dozens of pieces of paper? Those important documents need to be in a secure place.

Change the locks. Those keys you received at the closing are the same ones the previous homeowners used. You don't know if they gave copies of the keys to friends or relatives. To err on the side of caution, change the locks as soon as you can.

Update your address. Contact the U.S. Postal Service to have any piece of mail forwarded to your new residence. It might take up to two weeks for your forwarding request to take effect. Don't forget to update your insurance company, bank, employer, medical provider, and anyone you have an account with.

Create a maintenance to-do list. During your inspection, you likely became aware of repairs that your new residence needed. If you didn't have all of them taken care of before the closing, add the task to a list and get started.

Whether you're a first-time homeowner or have gone through this process several times, you should take care of these tasks once you close on your new home. After you check them off your list, you can begin to fully enjoy your home.

Sources: Fbmortgageloans.com, Geico.com, Familyhandyman.com

A Look Into The Markets: Debt Ceiling Fix Incoming

Fri, 09 Jun 2023 13:15:46 GMT

A Look Into The Markets

This past week interest rates moved lower on optimism the debt ceiling will be lifted and on surprisingly low inflation out of Europe. Let’s discuss what happened and investigate the week ahead.

"Get back, get back / Get back to where you once belonged" by The Beatles

Debt Ceiling Fix Coming 

The House of Representatives and Senate have passed a bill to suspend the U.S. debt limit through the 2024 election. Included in the bill are non-defense spending caps, expansion of work requirements for some food stamp recipients as well as a clawing back of unused COVID-19 relief funds.

This bill now goes to President Biden’s desk for signing before the June 5th deadline, where it is believed the U.S. would no longer have funds to pay its debt.

In response to the optimism, short-term treasury yields like one-month bills moved sharply lower as the fear of default is removed. This decline in yields spread across the entire bond market, with the 10-year note yield moving from 3.80% to 3.60% in the matter of days.

Fed Pause in June

A couple of key Federal Reserve officials spoke this week and suggested the central bank should not raise rates at the next Federal Open Market Committee on June 14th. Why? They are citing the policy lag effect and its uncertain impact. Essentially, the Fed has already raised interest rates from 0.0% to 5.00% in a little over a year, most of which has yet to seep into the economy. With inflation declining, the economy slowing and the banking crisis lingering, it is probably a good time for the Fed to pause.

On Thursday, the inflation reading unit labor costs, within Q1 Productivity, came in well below expectations. This means it is costing less for businesses to produce, which is disinflationary and another reason for the Fed to take a break from rate hikes.

Low Inflation Surprises in Europe

This past week, Germany, Spain, and other countries reported inflation was well below market expectations. As a result, yields in Europe declined, and that helped U.S. yields to move lower as well. If the trend of lower inflation continues here in the states, and in Europe, we should expect rates to continue to decline.

Surprising Job Gains in May

On Friday it was reported that 339k jobs were created in the month of May, well above economists expectations. The unemployment rate ticked up to 3.7%, which still represents a tight labor market. It will be interesting to see what Fed officials say before their quiet period begins next week.

Bottom line: With some of the uncertainty surrounding the debt limit deal lifted and with inflation data cooling, the mortgage market could see a continued ease in borrowing costs.

Looking Ahead

The upcoming week sees just a few economic reports and with the Fed meeting on June 14th there will be a blackout on any Fed speakers leading up to the release of the monetary policy decision.

Mortgage Market Guide Candlestick Chart

You can see from the bottom right side of the chart that prices recently bounced off the 2023 figures. This appears to be a classic reversal higher on the heels of the debt ceiling decision, but a lot still must go right before the market gets overly bullish.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, June 2, 2023)

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Debt Ceiling Debate

Fri, 02 Jun 2023 13:23:48 GMT

A Look Into the Markets

A Day of Remembrance

Originally called Decoration Day, Memorial Day was first observed after the Civil War and is in remembrance of those men and women who have died in military service to our country. Memorial Day was declared a federal holiday in 1971 and commemorated on the last Monday in May.

Enjoy the unofficial kick-off of Summer and remember those who perished serving our country.

Debt Ceiling Debate

Failure to reach a deal..."Would be a negative signal of the broader governance and willingness of the U.S. to honor its obligations in a timely fashion and would be unlikely to be consistent with a "AAA" rating" – Fitch rating agency.

As of this press time, there has been no resolution to the debt ceiling negotiations. This event has caused major disruptions in the financial markets, including a spike in interest rates over the last few weeks.

Adding to the uncertainty, the bond rating firm Fitch has put our debt on a negative rating watch. This is a direct threat that if we do not resolve the debt ceiling, a credit downgrade would result.

History Might Be On Our Side

Back in April 2011, our debt was put on negative watch by credit agencies and on August 5th, 2011, our debt was downgraded. What happened at that time? Rates improved.

After a week plus of rates edging higher, maybe this event will start the process of stabilization. If you look at the chart section below, you can see MBS prices were able to remain above support, which means rates stopped increasing.

The lack of resolution on the debt ceiling may be a reason why the Fed may very well pause on hiking rates in June.

Bottom line: As the debt ceiling debate continues unresolved, we should not expect much if any improvement in interest rates.

Looking Ahead

Until resolved, the debt ceiling remains the biggest issue for our economy. But next week will have additional headline risk with Fed speakers and the Jobs Report next Friday.

Mortgage Market Guide Candlestick Chart

You can see on the right side of the chart how prices bounced off support at 99, despite a negative ratings watch. If prices remain above 99, we may have seen the near-term peak in rates. The opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, May 26, 2023)

Economic Calendar for the Week of May 28 - June 2

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Mixed Messages & Debt Ceiling Fallout

Fri, 26 May 2023 13:24:21 GMT

A Look Into The Markets

This past week interest rates ticked higher in response to the still unresolved debt ceiling debate. Let's look at what happened this week and discuss events to watch for in the week ahead.

"So, we put our hands up like the ceiling can't hold us"- Can't Hold Us by Macklemore and Ryan Lewis

Debt Ceiling Fallout

As of this writing, there has been no resolution to the debt ceiling debate, where Congress and the White House agree on a plan to lift our spending limit. In the absence of lifting our debt ceiling, there is a risk of debt default and/or a credit downgrade. Any of those scenarios would be very disruptive to the financial markets and our overall economy.

We are already seeing upward pressure on rates due to the lack of a resolution. The one-month Treasury bill spiked to 5.60%, up from 4% just a few weeks ago. This dramatic spike has also placed upward pressure on the 10-year yield and mortgage rates. The former hit two-month highs on Thursday.

There is optimism a deal will get done, but until that happens, we should expect continued upward pressure on rates along with a lot of volatility.

Regional Banks Faring Better

Some good news in the banking sector. A couple of banks, which were feared to have problems, reported larger than expected deposits over the first quarter. This gave a sense that the worst of the banking crisis may be behind us. It may still be too early to tell, but stocks blasted off on Wednesday from this optimism.

If we do indeed see the banking sector stabilize, it would likely embolden the Federal Reserve to continue talking about holding rates higher for longer.

Fed Speak Continues

Federal Reserve officials were out offering their thoughts on rates and inflation and generally spoke tough about the need to keep rates higher for longer. Some, like Fed Governor Phillip Jefferson, offered hope for a June pause on hikes saying this, "History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect of higher interest rates."

33% For .25%

Despite high uncertainty around the debt ceiling debate and banking sector, the chance of a .25% rate hike in June is now at 33%. Remember, Fed rate hikes have no direct impact on home loan rates, but this will affect credit cards, auto loans and home equity lines of credit.

Mixed Messages

Home Depot reported poor earnings, casting a dark shadow on the markets. But then the very next day, Wal-Mart reported fantastic earnings, which was highlighted by broad purchases from their consumers. These conflicting signals on the health of the consumer have added to the uncertainty in the financial markets and thus what the Fed should do next.

Retail Sales for April came in less than expectations when factoring in inflation. Meaning, because of higher prices, consumers purchased less. Reports like this elevate fears of more rate hikes ahead.

Bottom line: As the debt ceiling debate continues unresolved, we should not expect much, if any, improvement in interest rates.

Looking Ahead

The debt ceiling debate remains the most important event to follow. And if that were not enough, the Fed's favored gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, will be released on Friday. If this number comes in soft and the debt ceiling is resolved we could see rates improve dramatically. The opposite is true.

Mortgage Market Guide Candlestick Chart

The Purple line is the 200-day Moving Average. There is a saying in the markets, "nothing good happens beneath the 200-day Moving Average." This means rates can't improve much until prices break above this ceiling. Right now, the lack of resolution on the debt ceiling is preventing this from happening.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, May 19, 2023)

Economic Calendar for the Week of May 22 - 26

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 19 May 2023 13:08:41 GMT

A Look Into The Markets

This past week mortgage rates held near the best levels of the last several months in response to the lowest inflation reading in two years. Let's discuss what happened and have a look at next week.

"Lighten up while you still can. Don't even try to understand". Take it Easy by The Eagles

Inflation Moving Lower

The Consumer Price Index (CPI) for April, a closely watched reading on consumer inflation, was reported at 4.9% year over year. This was lower than what was expected and the lowest reading since April 2021.

Last year the CPI was running above 9%, so seeing annual readings under 5% is a welcome sign.

There is a reason to be optimistic about lower inflation ahead. Shelter, which includes rent, makes up a sizable portion of CPI. That figure, which is lagging as declines in rent take time to hit the CPI report, are finally appearing in the report. We should expect the shelter component to continue lowering inflation later this year and into 2024. This will help keep long-term rates (like mortgage rates) all beneath current levels.

1.5%

The softening inflation reading is adding to the idea that the Fed should pause on rate hikes in June. As of right now, the financial markets are pricing in just a 1.5% probability that the Fed will hike rates at their next meeting in June.

After the fastest rate hiking cycle in 40 years, this would be welcome news. Despite Fed officials saying otherwise, the financial markets are also pricing in a high probability of multiple Fed rate cuts in the second half of this year. If inflation cools further and unemployment starts to rise, this may come to pass.

Debt Ceiling Debacle

Add one more uncertain event to our economy, and it is the debt ceiling debate taking place in Congress. Essentially, we will reach the limit to what our government could spend as early as next month. This means Congress has to agree to raise the limit regarding what we could spend, or we risk a potential debt default and credit downgrade like we watched in 2011.

Most everyone believes that aside from the political grandstanding and bickering back and forth, a deal will get done to ensure the U.S. doesn't default on its debt. However, in the near term it could cause increased volatility, and potentially an uptick in rates, including mortgage rates, as the threat of a downgrade rises.

Sell In May

After a rough 2022, stocks have enjoyed a couple of strong quarters of gains. Now we enter the summer months and the old adage "sell in May and go away" is gathering steam. Essentially, the idea is to sell stocks in May and re-enter the market later in the year. Why is this important? If stocks move lower amidst uncertainty, bonds and interest rates will likely be the beneficiary.

Bottom line: This is an important moment for rates. As you will see below in the chart section, there is a pending breakout that could cause yet another fast improvement in rates. Follow this closely and be prepared to strike at any opportunity!

Looking Ahead

We are continuing to watch the debt ceiling debate and uncertainty within the banking sector. The economic calendar will have readings on Retail Sales, Housing, and regional manufacturing data.

Mortgage Market Guide Candlestick Chart

The purple line is the 200-day Moving Average (MA), which we mentioned earlier. Until MBS break above this ceiling at the 200-day MA, mortgage rates can't improve further but, once it does, we could see bonds blast off and help rates move lower to another level and quickly.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, May 12, 2023)

Economic Calendar for the Week of May 15 - 19

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

May's Look Into The Markets

Mon, 15 May 2023 20:49:37 GMT

A Look Into The Markets

"The more one does and sees and feels, the more one can do, and the more genuine may be one's appreciation of fundamental things like home, and love, and understanding companionship." â€” Amelia Earhart

What to Watch - Positive signs emerging within the spring buying season.

Unconventional Ways to Find Home Listings - Doing a quick online search for homes is easy, but you should consider these four untraditional options to find your dream home.

How to Choose an Interior Paint Type - Know what type of paint finish to use to help you completely transform your space.

Q&A: What Are the Pros and Cons of Using Owner Financing? Learn more about if owner financing is a smart decision for your situation.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

Spring Buying Season

As the nation comes out of its winter hibernation, potential home buyers will now zero in on the spring buying season, now almost in full bloom and there are some positive signs.

The National Association of REALTORSÂ® (NAR) recently reported that properties typically remained on the market for 34 days in February, up from 33 days in January and 18 days in February 2022. And though still in the winter months, after 12 months of declines, February Existing Home Sales jumped from January. Also, the total housing inventory at the end of February was up solidly, though small, from a month and a year ago. However, low inventories continue to plague the sector.

And speaking of inventories, after five straight months of declines, total Housing Starts surged in February from January.

Home borrowing costs have come down from the multi-year highs seen last November though still double what they were in January of 2022. NAR Chief Economist Lawrence Yun said, "Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines. Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs."

The Mortgage Bankers Association said applications for new home purchases in February were also up monthly and from a year ago. The NAR went on to say that median home prices for existing homes fell ever so slightly year-over-year in February, ending a streak of 131 consecutive months of year-over-year increases, the longest on record.

Bottom line: Yes, there are some positive signs but aside from that, buying a home also gives you a feeling of gratification and is your sacred space. And historically, purchasing a home is a good investment for the long run.

Source: Mortgage Market Guide

Unconventional Ways to Find Home Listings

If you find yourself searching for your dream home, you might automatically assume you can only find them on traditional real estate websites.

However, there are other ways to find homes, but it might take a little more creativity and sleuthing to try to find them.

Ask around. If you're walking or driving around a neighborhood you're interested in, don't be afraid to ask homeowners who are outside if they know of any homes that might be on the market soon. You might be able to work out a deal directly with the seller.

Advertise your interest. Similarly to walking through neighborhoods, you could try a mass mailing to those people living in your desired neighborhood.

Go online. Use non-MLS websites such as ones that list properties that are for sale by owner or classifieds from local newspapers and look for homes for sale. Again, you might be able to work out a deal directly with the seller with this option.

Contact homeowner's associations (HOAs). Contact these associations to see if any residents are getting ready to sell their homes. These neighborhoods might use a social media platform, so see if you can join to learn about soon-to-be-listed homes.

When you begin your unconventional home listing search, make sure you're ready to carry through with your inquiries. Speak with a mortgage professional to understand your financing options so you're prepared to purchase your new home.

Sources: Dashhomeloans.com, Investopedia.com, Isoldmyhouse.com

How to Choose an Interior Paint Type

One of the easiest ways to spruce up your interior is to apply a fresh coat of paint. Color isn't the only way to add character to the room, you'll also need to consider the paint's finish. The six most common types of finishes include the following:

Eggshell. This popular finish gives off a slight sheen and is a medium that sits between matte and glossy. It's typically used in high-traffic areas such as bathrooms, hallways, and children's bedrooms.

Flat. Use this finish if you want to hide any bumps or scratches on the wall's surface. Flat paint soaks up the light, but it's also the hardest to clean. It's best for low-traffic rooms.

Glossy. Glossy paint reflects light and creates a bold impact. Use this finish if you want to elevate the space since it creates a vibe that you're entering a special place.

Matte. This option absorbs light and causes a velvety effect. Use a matte finish if you want other pieces of decor to play a part in the space's design.

Satin. A satin finish is ideal if you want a durable paint finish. It hides imperfections and is easy to clean. It's best suited for humid areas that don't receive a lot of sunlight such as a basement.

Semi-gloss. A sleek and elegant finish, semi-gloss is known for its radiance. However, it has a heightened sheen so it shows off imperfections easily. Use it in high-traffic areas or on crown moldings to accentuate them. .

Regardless of whatever interior paint finish you select, it can completely transform a room. You might need to sample a few types to get the look you desire.

Sources: Mydomaine.com, Housebeautiful.com, Washgingtonpost.com

What Are the Pros and Cons of Using Owner Financing?

QUESTION: Is owner financing a good idea?

ANSWER: While a traditional mortgage is the most common way to secure financing for a home, not everyone qualifies. Owner financing can be another option if you're struggling to find a lender who can provide a mortgage for you. Owner financing eliminates the need for a lender, appraisal, and inspection. Keep in mind, no matter what financing you choose, it's always a good idea to have a trusted real estate professional to guide you through the process.

Also known as seller financing, owner financing is an alternative that allows you to keep the dream of homeownership alive. With this option, the seller finances the purchase, often at an interest rate higher than a traditional mortgage, and can include a balloon payment due after at least five years.

Similarly to a conventional mortgage, owner financing involves the buyer making a down payment on the piece of property and making payments over the years. However, it's often a more expensive option and could require refinancing in as few as five years.

Once the buyer and seller agree to use owner financing, the two parties determine a payback schedule. Depending on the type of agreement, the buyer might face a rather large lump-sum payment at the end of the term. Also, unlike a conventional mortgage, owner financing usually doesn't include taxes and insurance payments so the buyer is also responsible for making those payments separately

Buyers benefit from this option because it allows them to finance a home that might not qualify otherwise and it can expedite the home-buying process. However, it often involves higher interest rates than traditional mortgages and might require them to pay off the entire mortgage before selling the home.

Knowing what to expect with owner financing can help you decide if this option works best for you. If you have any further questions about what to expect, don't be afraid to reach out to a trusted real estate professional.

Sources: Forbes.com, Investopedia.com, Lifehacker.com

A Look Into The Markets: Another Federal Reserve Hike

Fri, 12 May 2023 13:15:08 GMT

A Look Into The Markets

This past week the Federal Reserve raised rates for the 10th time in a little over a year. Let's discuss what happened as we await yet another Fed rate hike next Wednesday.

"Was it something I said or something I did? Did the words not come out right?" Every Rose Has Its Thorn by Poison .

The Last Hike?

As we expected, the Federal Reserve raised the Fed Funds Rate to a range of 5.00% - 5.25%. Remember, this interest rate affects short-term loans like credit cards, autos, and home equity lines of credit.

The big question is whether this will be the last hike. When the Fed statement was released, the markets believed the Fed was signaling a pause by omitting the following line from the previous statement: "The Committee anticipates that some additional policy firming may be appropriate."

However, shortly after the statement was released, Fed Chair Powell hosted a press conference and right at the top said the Fed Members have not discussed a "pause" in rates. Bottom line? Expect more uncertainty and volatility as it relates to rates.

Sound And Resilient

This is the term Fed Chair Powell used to describe the banking sector. Unfortunately, we are seeing more banks have issues. This week it was First Republic taken over by JP Morgan Chase and as of this writing PacWest was said to be "exploring strategic options." The fear of banking contagion has elevated uncertainty in the financial markets. It's not clear if and how many more banks will continue to have issues. Bottom line? The fear of this story has created a "safe haven" to trade into bonds where prices move higher, and rates move lower.

European Central Bank Hikes By Less

The European Central Bank (ECB) hiked their benchmark rate by .25%, the smallest since the start of their hiking cycle. Like our Fed, they too signaled they would be "data-dependent" going forward, leading markets to speculate a pause on future rate hikes.

Bottom line:

The Federal Reserve is sending mixed messages on the future direction of rates. Meanwhile, long-term rates, which the Fed doesn't control, are near their best levels in months and sense all the uncertainty in our economy will prompt the Fed to pause and potentially cut rates later this year. The incoming data and issues in the banking system will determine what happens next.

Looking Ahead

Expect market volatility to continue next week. The Consumer Price Index (inflation) will be reported. If this number comes in higher than expected, rates could rise. The opposite is true. Despite this being a backward-looking number, we will have Fed officials continue to speak and comment on the release and how they feel it impacts future Fed policy and interest rate decisions.

Mortgage Market Guide Candlestick Chart

The purple line is the 200-day Moving Average, we mentioned earlier. Until MBS break above this ceiling at the 200-day MA, mortgage rates can't improve further but once it does, we could see bonds blast off and help rates move lower to another level quickly.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, May 5, 2023)

Economic Calendar for the Week of May 8 - 12

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 05 May 2023 13:25:08 GMT

A Look Into the Markets

Home loan rates continue to stabilize ahead of next week's Fed Meeting. Let's discuss what happened this week as we await yet another Fed rate hike next Wednesday.

"Little Pink Houses for You and Me"... Little Pink Houses by John Mellencamp .

New Home Sales Soared In March

Housing continues to show some positive signs lately, thanks to the decline in mortgage rates. This week, New Home Sales for March grew by 9.6%, when the markets expected a 1.6% decline. The sales pace remains 3.4% lower than in March of 2022 but the improvement we are seeing since the beginning of the year highlights the strong demand for housing coupled with interest rate sensitivity.

The Northeast saw the largest pickup in sales. Warm weather could have helped fuel the buying activity. Builders also used incentives and buydowns to close deals.

Home Prices Rise - First Time In Eight Months

The S&P CoreLogic Case-Shiller National Home Price Index rose month over month in February, breaking a string of seven consecutive months of declines.

The Federal Housing Finance Agency also reported a price rise for February. What is sparking the increase in prices in what overall remains a slower housing market? Low housing inventory and a nice decline in home loan rates since the peak in October.

The home price gains continue to decelerate and this is good for restoring market balance as well as helping lower future inflation readings.

First Republic - The Next Bank Problem?

Weeks after the SVB collapse, First Republic Bank, despite multiple bailouts, is said to be on the brink of failure. There is some speculation that measures might need to be taken over the weekend to help the Bank survive.

This story reignites uncertainty around financial stability as we approach next week's Fed Meeting. Higher short-term rates, controlled by the Fed, only make problems worse for the banks. The Fed's comments on the banks next week will be market-moving.

Technical Barriers To Further Rate Improvement

Mortgage and housing professionals monitor both macroeconomic conditions, as well as technical factors (chart signals), to help determine rates trends and changes to them.

Currently, the 200-day Moving Average is limiting further rate improvement in the 2-year Note yield and the 10-year and mortgage-backed securities (where home loan rates are derived).

Next week's Fed Meeting, where it is widely believed the Fed will end this rate hiking cycle, could be the trigger to push bond prices above this ceiling.

One thing for sure? Rates can't improve further until prices break through this barrier. And if they do, we could very well see another leg lower in rates.

Bottom line: Home loan rates have peaked, inflation has peaked and next week the Fed rate hikes are likely finished. Couple this with the bright future in housing and it's a reason to go shopping today.

Looking Ahead

Next week is a big week for the mortgage and housing world. On Wednesday, the Fed is going to raise rates by .25%, lifting the Fed Funds Rates to a range of 5 to 5.25%. This event will garner multiple market reactions. And if that were not enough headline risk, we have the April Jobs Report out next Friday. The current tight labor market is wonderful for housing and is a reason why the economy can't endure a deep recession.

Mortgage Market Guide Candlestick Chart

The Purple line is the 200-day Moving Average, as we mentioned earlier. Until MBS break above this ceiling at the 200-day MA, mortgage rates can't improve further but once it does, we could see bonds blast off and help rates move lower to another level and move quickly.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, April 28, 2023)

Economic Calendar for the Week of May 1 -5

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Home Loan Rates

Fri, 28 Apr 2023 13:15:02 GMT

A Look Into the Markets

Home loan rates have ticked higher week to week but some bad economic news halted the rise. Let's discuss what happened and look ahead into next week.

"Baby come back; you can blame it all on me" Baby Come Back by Player

Positive Bank Earnings Impact

The rise in home loan rates over the last couple of weeks has mainly been in response to good news from the banking sector. Corporate earnings from the likes of JPMorgan Chase, Bank of America, Charles Schwab, and others have lifted fears of a contagion from the recent bank failures. With those fears lifting, it has now brought focus back to the Federal Reserve, and the threat of more rate hikes.

Fed Rate Hike Coming

With bank failure fears easing, Fed officials have been speaking loudly about the need for more rate hikes. Some OK economic reports over the last week have also given the Fed cover to raise rates once again. Currently, there is an 85% chance the Fed will raise rates by 0.25% on May 3rd.

Now the question is will this be the last rate hike? Will 5.00% to 5.25% be the terminal rate? If you try to listen to Fed officials, you will hear a lot of mixed messages. Fed President Bullard was speaking out this week saying he wants to see the Fed Funds Rate at 5.75%, which is an additional .75% higher than current levels. Fed President Bostick had a more cautious tone, saying the Fed should raise rates one time and pause to see how the economy responds to all the previous hikes.

As you can imagine, the wildly different opinions from Fed members move the markets all over the place.

Inflation With Your Scones

The bond market is global. So, when interest rates move higher in other parts of the world, it puts upward pressure on our yields as well. Midweek, the UK reported consumer inflation of over 10%, when markets were looking for a reading below 10%. If that were not enough, food inflation ran at the highest clip since 1977. Inflation in England is now moving twice as fast as it is here in the United States, with our

CPI at 5%. The stubbornly high inflation in the UK caused their interest rates to move higher, which lifted our interest rates to the highest levels in weeks.

3.60% Yield Resistance Holds

The 10-year Note yield, which ebbs and flows with home loan rates, is remaining beneath important yield resistance at 3.60%. This is a key technical level, which has been limiting the rise in rates over the past month. With the banking crisis looking less uncertain for now, there is a threat that rates will drift higher still. Staying beneath 3.60% would be an excellent sign for longer-term interest rates.

Bad News is Good News

On Thursday, Weekly Initial Jobless Claims, a leading indicator of labor market health, came in worse than expected. It showed that more people signed up for first-time unemployment benefits. The bad news is good news for the Fed, which has been looking for an uptick in unemployment. On top of this, the Philadelphia Fed Index showed that manufacturing in that region slowed dramatically. Slower growth means less need for rate hikes.

Bottom line: Home loan rates have stabilized. Spring is in the air and the demand for housing remains high. Opportunities exist for nimble would-be buyers.

Looking Ahead

With one week before the next Fed Meeting on May 3rd, the Fed will enter the "quiet period" where they do not have speeches or make comments. This will make things a bit silent in the financial markets up until next Friday when the Fed's favored gauge of inflation, the Core PCE, is released. If this number comes in light, bonds may improve further. The opposite is true.

Mortgage Market Guide Candlestick Chart

MBS prices improved late in the week, as evidenced by the Green Candles on the right side of the chart. Next week's Core PCE may determine whether prices continue to improve or not.

Economic Calendar for the Week of April 24 - 28

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 21 Apr 2023 13:00:02 GMT

A Look Into The Markets

This week home loan rates remained steady and near their best levels in six months. Let's discuss what happened and the technical factors that are limiting further rate improvement.

"Break on through to the other side" ... Break on Through by The Doors

Consumer Prices are Coming Down

Consumer Prices fell in March, supporting the notion that inflation remains in a downward trend. The headline Consumer Price Index (CPI), which includes food and energy, came in at 5% year over year, a full 1% decline from the 6% reported in February. This is the slowest rate since May 2021 and that is a good thing.

When taking out food and energy, the more closely watched Core CPI declined less and is stuck at a still high 5.6%. Why? Shelter. The housing component of CPI makes up nearly 60% of the CPI reading. The good news? Housing is a lagging indicator within the inflation reading. Rents have declined for each of the last six months, and they will be reflected in future inflation readings. This is why rates remained steady after this report was released with a 10-year note yield hovering around 3.40%.

Fed Minutes Released

The Minutes from the March Fed meeting were released on Wednesday. There were no shocking details that moved the markets. In a further sign that the Fed is close to ending their rate hikes, all Fed members agreed that financial conditions would tighten due to the bank crisis which equates to further rate hikes.

Speaking of rate hikes, the chance of a .25% Fed rate hike in May is now 63%. Oddly enough, the financial markets are also pricing in as much as four rate cuts in the back half of 2023. If we see rate cuts by the summer, it would be a historically short amount of time between the last rate hike and first rate cut.

Watching the Charts

The bond market reacts to news, and they also react to price history and technical signals. Right now, Mortgage-Backed Securities (MBS) are battling a tough ceiling of resistance, which is holding prices down and keeping rates from further improving. Take a look at the chart section below.

As prices go up rates go down and vice versa. For home loan rates to improve further, MBS must break through and remain above its 200-day moving average.

3.38%

The 10-year Note yield is currently at 3.38%, which is also near its lowest levels in 6 months. For it to move lower still, it needs to fall convincingly beneath 3.30%.

Bottom line: Home loan rates are near the best levels of the year. Spring is in the air and demand for housing is high and despite the lack of housing supply, opportunities exist.

Looking Ahead

Next week's economic calendar is a bit on the light side with moderate to low impact reports due to be released. We will see some housing readings by way of the Housing Market Index, Building Permits, Housing Starts and Existing Home Sales. It will be interesting to see if the recent downtick in rates has further helped the outlook for housing.

Mortgage Market Guide Candlestick Chart

MBS prices continue to battle its 200-day Moving Average (Purple line). For rates to improve further, MBS must "break on through, to the other side."

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, April 14, 2023)

Economic Calendar for the Week of April 17 - 21

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

April 2023: The Latest Market Trends

Tue, 18 Apr 2023 12:22:27 GMT

April 2023: The Latest Market Trends

What to Watch - Positive signs emerging within the spring buying season.

Unconventional Ways to Find Home Listings - Doing a quick online search for homes is easy, but you should consider these four untraditional options to find your dream home.

How to Choose an Interior Paint Type - Know what type of paint finish to use to help you completely transform your space.

Q&A: What Are the Pros and Cons of Using Owner Financing? Learn more about if owner financing is a smart decision for your situation.

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

And speaking of inventories, after five straight months of declines, total Housing Starts surged in February from January.

Source: Mortgage Market Guide

Unconventional Ways to Find Home Listings

If you find yourself searching for your dream home, you might automatically assume you can only find them on traditional real estate websites.

However, there are other ways to find homes, but it might take a little more creativity and sleuthing to try to find them.

Advertise your interest. Similarly to walking through neighborhoods, you could try a mass mailing to those people living in your desired neighborhood.

Sources: Dashhomeloans.com, Investopedia.com, Isoldmyhouse.com

How to Choose an Interior Paint Type

Flat. Use this finish if you want to hide any bumps or scratches on the wall's surface. Flat paint soaks up the light, but it's also the hardest to clean. It's best for low-traffic rooms.

Glossy. Glossy paint reflects light and creates a bold impact. Use this finish if you want to elevate the space since it creates a vibe that you're entering a special place.

Matte. This option absorbs light and causes a velvety effect. Use a matte finish if you want other pieces of decor to play a part in the space's design.

Regardless of whatever interior paint finish you select, it can completely transform a room. You might need to sample a few types to get the look you desire.

Sources: Mydomaine.com, Housebeautiful.com, Washgingtonpost.com

What Are the Pros and Cons of Using Owner Financing?

QUESTION: Is owner financing a good idea?

Sources: Forbes.com, Investopedia.com, Lifehacker.com

A Look Into The Markets

Fri, 14 Apr 2023 12:43:03 GMT

A Look Into the Markets

Home loan rates reached their best levels in two months on the heels of not-so-good news. Let's get into what happened and look into the week ahead.

"I see hurricanes and lightning" Bad Moon Rising by Creedence Clearwater Revival

Bad News is Good News for Rates

The JOLTS (Job Openings and Labor Turnover Survey) report, a leading indicator on the health of the labor market, showed signs of cooling. It revealed 9.8 million jobs available, 700k less than expected and the first reading under 10 million in three years.

If you consider how the labor market works for example, first firms stop hiring, then they cut hours and then if conditions persist, they lay people off. So, this could be a sign to the Fed that the labor market is finally showing some signs of slowing down, which is what they want to help lower inflation.

The good news? While the number of jobs available came in well below expectations, we are still seeing 1.6 jobs available for every person unemployed, which is indicative of a tight labor market.

Dimon Jawboning

Earlier this week, JPMorgan Chase CEO Jamie Dimon, shared his annual thoughts with shareholders. He stated that the problems in the banking sector are far from over and the chance of recession is elevated. Over the last several months, Mr. Dimon did suggest the economy was headed into an economic hurricane and then backed off that gloomy stance and suggested we might not see a recession. Now he is firmly back in the recession camp and upon his headlines, rates improved and stocks didn't.

Manufacturing is Not Manufacturing

The ISM Manufacturing index, which is a reading of our national manufacturing production, came in at 47. Readings beneath 50 suggest contraction or shrinking of production. This is not a good number and because bonds and rates like numbers that are not good, they rallied.

3.26%

During the week, the 10-year Note yield hit 3.26%, the lowest since September. Most importantly, as of press time, the 10-year yield fell well below its 200-day Moving Average. History has shown that when the 10-year moves convincingly beneath its 200-day Moving Average, it leads to better rates in the weeks and months ahead.

Bottom line: With signs of a recession looming in the months ahead and if inflation continues to decline, it could push home borrowing costs lower and buoy the spring buying season.

Looking Ahead

The upcoming week will feature the closely watched inflation reading Consumer Price Index for further signs of a cooldown. The index hit 9% in June of 2022 and has fallen to 6% though still historically high. Also, wholesale inflation from the Producer price Index will be released along with a key gauge on consumer spending with the Retail Sales report.

Mortgage Market Guide Candlestick Chart

Mortgage-backed security (MBS) prices determine home loanrates. The chart below is a one-year view of the Fannie Mae 30-year 5.5% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

If you take a look at the right side of the chart, you can see MBS breaking above its 200-day Moving Average. If this trend continues into next week, we could expect lower rates ahead. The opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, April 7, 2023)

Economic Calendar for the Week of April 10 - 14

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 07 Apr 2023 13:02:38 GMT

A Look Into The Markets

This past week, home loan rates ticked higher from the previous week in response to no dire news in the banking sector. Let's walk through the Fed Meeting and the other big events impacting the markets.

"Going up, down, up, down, up, down"- Up Down by Morgan Wallen

Contagion Fears Subside

No news was good news for stocks and bad news for bonds and interest rates. After two weeks of multiple bank collapses and central bank intervention, fears of contagion leading to other banks has eased a bit.

This removal of fear pushed home loan rates higher after they touched the best levels in over a month. And stocks which like less risk, enjoyed solid gains throughout the week.

Pending Home Sales Bodes Well for Housing

The February Pending Home Sales Index, a leading indicator for the housing sector, grew for a third straight month. It appears that housing sales may have bottomed as demand remains strong. With the Fed nearing the end of its rate hiking cycle, long-term rates having already peaked and the labor market still resilient, it all adds up to a bright outlook for housing.

Economic Growth Slowed into 2023

The final revision for 4th Quarter 2022 GDP came in at 2.6%, which was a slowdown from the 3rd Quarter 3.2% rate. The final GDP rate for 2022 was 2.1%...a sharp slowdown from the 5.9% rate in 2021.

The evidence of slowing growth may be music to the Fed's ears as they hope their previous rate hikes will slow the economy enough to lower inflation, while achieving a "soft landing" and where we could avoid a deep recession.

Home Price Gains Slowing is Good News

The Case-Shiller Home Price Index showed the broad-based 20-City Composite posted a 2.5% year-over-year gain in January, down from 4.6% in the previous month.

"2023 began as 2022 had ended, with U.S. home prices falling for the seventh consecutive month," says Craig J. Lazzara, Managing Director at S&P DJI.

This is yet another data point the Federal Reserve is happy to see. The Fed wanted to slow down housing and cool price gains, which make up a large portion of overall inflation. This backward and lagging indicator should help lower inflation in the months ahead.

50/50

As of press time, the easing bank fears have slightly elevated the chance of a .25% rate hike in May to 50%. The Fed had forecasted at the last meeting they will get the Terminal Rate, a fancy way to say peak in Fed Funds Rate to 5.1%. One more .25% rate hike will achieve this. With so many important economic reports and uncertainty in the banking sector, this story can change quickly.

Bottom line: With mortgage rates now near the levels seen in early February, when home sales jumped, there are signs the Spring housing market may be better than expected than just a couple of weeks ago.

Looking Ahead

Next week it will be about jobs. We will get the ADP Report and the official Jobs Report for March, next Friday. Last month we saw the unemployment rate tick up to 3.6% from 3.4% in the previous month. A further uptick in unemployment would lower expectations for more rate hikes.

Mortgage Market Guide Candlestick Chart

MBS prices have backed away from their 200-day Moving Average. For rates to improve much further, we need to see prices break above this technical barrier.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 31, 2023)

Economic Calendar for the Week of April 3 - 7

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: Credit Tightening

Fri, 31 Mar 2023 13:14:45 GMT

A Look Into the Markets

This past week, home loan rates hovered near the lowest levels in over a month as the Federal Reserve raised rates once again. Let's walk through the Fed Meeting and the other big events impacting the markets.

"Well give me all you got, don't hold back (Yeah) Well I should probably warn you I'll be just fine (Yeah)" Happy by Pharrell Williams.

Fed Funds Rate Hike

"Some additional policy firming may be appropriate" – FOMC Monetary Policy Statement on 3/22/2023."

This past Wednesday, the Federal Reserve raised the Fed Funds Rate by .25%, the 9th rate hike in just over one year. This lifted The Fed Funds Rate to a range of 4.75% to 5.00%. There was some speculation the Fed may pause hiking rates at this meeting amidst the fallout of the SVB and Signature Bank failures.

The good news was the quote above along with the Fed's updated Economic Projections are suggesting one more rate hike in May, so rate hikes could be nearing the end.

Credit Tightening

"Likely to see tighter credit conditions that weigh on economic activity." FOMC Statement.

This may be the main reason rate hikes are nearing their end. The SVB failure, uncertainty around potential bank runs and overall liquidity concerns will likely lead to banks making it tougher for small business and commercial loans. As Fed Chair Powell said in his press conference on Wednesday, "Credit tightening post-bank failure is akin to rate hikes."

Lower Rates Equal Housing Relief

A backward-looking housing report may reveal better times ahead for housing. Existing-Home Sales for February rose 14.5% from January, ending a 12-month streak of declining sales.

This good reading came on the heels of improved mortgage rates in January and February. With home loan rates now within a whisker of those levels and spring in the air, better days for housing lie ahead.

Bottom line: The end of Fed rate hikes is near and long-term rates, like mortgages, may have likely already seen their peak. With mortgage rates now near the levels seen in early February, when home sales jumped, it will be no surprise to see this trend continue through spring.

Looking Ahead

Next week will be chock full of headline risk as Fed officials are back speaking and we monitor the banking sector for more potential issues. And from the economic front, the Fed's favored gauge of inflation, the Core PCE, will also be reported. If this report comes in showing hot inflation, rates could suffer. The opposite is true.

Mortgage Market Guide Candlestick Chart

MBS prices have moved sharply higher over the last several days, providing a nice improvement in rates. For rates to improve further, we need to see MBS push above $101, where they started at the beginning of February. A move above this ceiling would lead to another move lower in rates.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 24, 2023)

Economic Calendar for the Week of March 27 - 31

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets: SVB

Fri, 24 Mar 2023 13:19:03 GMT

A Look Into The Markets

This past week, home loan rates improved to their lowest levels in a month in response to the closures of Silicon Valley Bank (SVB) and Signature Bank. Let's walk through what happened as we approach the Fed Meeting next week.

"Bringin' on the heartache, Can't you see?, Can't you see?" Bringin' on the Heartbreak? Def Leppard .

SVB Failure and Rates

It's important to remember that bonds enjoy bad news, so when word broke earlier this week that SVB was shuttered by the FDIC, home loan rates improved to their best level in six weeks. At the same time, the 2-year Note yield, which tracks Fed rate hike activity, plummeted from over 5.00% to under 4.00% in just a couple of days. This was an epic decline in rates not seen even after 9/11 or the Great Recession.

The good news (in the case of SVB and even Signature) is that bad management, failure to manage interest rate risk and a widespread desire for depositors to gain access to their funds (bank run) is what caused these banks to shutter.

In response, the Federal Reserve immediately created a line of credit and an implicit backstop to protect any depositors from any losses. This was good news and will hopefully limit any further fallout in the banking sector.

So, what does the Fed do with rates now that we have high uncertainty and contagion risk in the banking sector?

Stability > Inflation

Seeing that one reason SVB failed was in response to a rapid rise in interest rates, there is increased pressure for the Fed to limit rate hikes going forward and regain stability in the financial sector.

Just last week there was a high probability the Fed would raise rates by .50. Now just days later, there is a 75% chance of a .25% and a 25% chance the Fed doesn't hike rates at all.

Next week's Fed Meeting and press conference will hopefully have the markets feeling that the Fed is going to take every measure possible to ensure stability while they closely watch the pace of inflation decline.

Housing Numbers OK

It wasn't all bad news this week. Housing numbers for February highlighted the little rate relief we saw in January and brought some optimism into February. Both Housing Starts (which is putting the shovel in the ground), and Permits (a leading indicator of future building), came in better than expectations.

This bodes well for housing in the months ahead, especially combined with the rate relief we are experiencing.

Bottom line: This week's news in banking has changed everything as it relates to the Fed and rate hikes. The markets are suggesting the Fed will be cutting rates in the second half of the year which is a big change from the rate outlook just days ago.

Looking Ahead

Next week brings the Fed Meeting and monetary policy decision. As we shared, it appears the Fed is only going to raise rates by .25%, rather than .50% to foster stability in the financial markets and avoid contagion in the banking sector. What the Fed says will be important in bringing calm to the markets during this uncertain moment.

Mortgage Market Guide Candlestick Chart

Mortgage Market Guide Candlestick Chart Mortgage-backed security (MBS) prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 5.5% coupon, where currently closed loans are being packaged. As prices move higher, rates move lower and vice versa.

MBS prices have moved sharply high over the last several days, providing a nice improvement in rates. For rates to improve further, we need to see MBS push above $101, where they started at the beginning of February. A move above this ceiling would lead to another pop higher in rates.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 17, 2023)

Economic Calendar for the Week of March 20 - 24

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

The Peak of The Markets: What's to Come Next?

Fri, 17 Mar 2023 12:36:47 GMT

A Look Into the Markets

This past week, Fed Chair Powell testified on Capitol Hill and his words sent rates higher. Let's walk through what happened and take a peek at what to watch next week.

"No more words and no more promises." No More Words by Berlin .

"Rates Need to Go Higher, Faster"

On Tuesday and Wednesday, Fed Chair Jerome Powell testified before both the House and Senate on the state regarding the economy and monetary policy.

is prepared speech set off fireworks in the financial markets on Tuesday as stocks moved sharply lower, and rates spiked once again. He started by suggesting that rates need to go higher and faster. This was a surprise as the Fed Chair recently said, "The disinflation process had begun." He had the markets sensing there would be possibly three more .25% rate hikes.

As of this writing, things have changed a lot. Now, there is a 69% change of a .50% hike at the March Fed Meeting in two weeks. Before the Fed Chair spoke, the chance of a .50% was just 25%. The threat of even more rate hikes elevated short-term rates (which move closely with Fed rate hikes) to the highest levels in 16 years.

2-Year & 10-Year Yield Curve Inversion Widens

With the 2-year Note yield spiking to 5.00% and the 10-year yield remaining beneath 4.00%, we witnessed the largest yield curve inversion since 1981. Why is this important? Yield curve inversions are typically accurate in predicting recessions. So, seeing the widest yield curve inversion in decades suggests the bond market is screaming that a recession is likely to happen within the next 12 to 18 months.

"We do not think we need to see a sharp increase in unemployment to get inflation under control." Powell

Here, the Fed Chair is trying to soothe the markets on the notion they can hike rates more to help lower inflation and avoid a large uptick in unemployment. Currently the labor market remains very tight. There are still nearly 11 million jobs available and nearly half that amount of people unemployed, so there is a 5 million gap between jobs available and people to fill those positions.

Let's hope the Fed Chair is correct and inflation will continue to come down and we do not experience significant unemployment...as jobs buy homes.

Bottom line: The uncertainty, confusion and volatility in the financial markets has elevated pessimism in the economy and housing. History has shown when pessimism or optimism elevates, it's generally a contrarian indicator and a change in sentiment is forthcoming. The other good news? Despite all the noise, both inflation and home loan rates have likely peaked.

Looking Ahead

Next week the financial markets will get some relief from Fed speak as Fed speeches will be limited during the "quiet period", one week before the next Fed Meeting on March 22nd. Meantime, there will be important inflation readings which could move rates.

Mortgage Market Guide Candlestick Chart

MBS prices fell to the lowest level since November 10th. If prices fall beneath the lows of November 10th, we will likely see home loan rates move another leg higher.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 10, 2023)

Economic Calendar for the Week of March 13 - 17

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

March 2023 Markets

Wed, 15 Mar 2023 15:57:11 GMT

In This Issue

"We delight in the beauty of the butterfly, but rarely admit the changes it has gone through to achieve that beauty." - Maya Angelou

What to Watch - Could the recent uptick in inflation and a robust labor market push the Federal Reserve to be more aggressive in raising the short-term Fed Funds Rate?

4 Tips for Maximizing Your New Home Budget - Know what steps you can take to get the home of your dreams without breaking the bank.

Entryway Renovation Ideas - Update your entryway by implementing some easy decorating ideas.

Q&A: How Long Does It Take to Get Keys to Your New Home? You might be surprised to learn how quickly you can.

What To Watch

Lingering Inflation

Inflation, the Fed, rising borrowing costs, and lower inventories are just a few areas to watch in the coming months.

Recent data from consumer inflation or the Consumer Price Index saw costs were on the rise again after the previous decline and are being watched by the markets as well as the mortgage industry. Inflation at the wholesale level or the Producer Price Index has also increased.

Could the recent uptick in inflation and a robust labor market push the Federal Reserve to be more aggressive in raising the short-term Fed Funds Rate? Time will tell as the market still sees increases in the rate for the foreseeable future.

After a big drop in home borrowing costs from June of 2022 to the first week in February, rates have been inching higher and has put a crimp into mortgage application volumes. Mortgage applications to purchase new homes fell in January but surged year over year. With the spring buying season just around the corner, buyers should start to appear as business picks up in the coming months.

The market still must deal with low inventories of existing homes on the market for sale. The National Association of REALTORS© reports that there is just 2.9 months' worth of supply, well below 6 months that is seen as normal. Housingwire reports that for the week of February 13, the weekly housing inventory fell again by 6,858. In its latest report, the National Association of Home Builders showed optimism in February saying that the housing market is showing signs of stabilizing off a cyclical low.

Bottom line: The spring housing market should give a boost to the markets especially now that the pandemic is well behind us and visitations should be on the rise. Always remember, jobs buy homes and in this tight labor market, buyers should be more open toward homeownership.

4 Tips for Maximizing Your New Home Budget

Housing Tips

If you have aspirations of owning a big house with a large yard, you're not alone. Many people want a lavish home with premium amenities and plenty of space to host friends and family.

However, a house that fits this description may cost more than your budget allows. So how do you maximize your budget to make your new home dreams come true? You can start by following these four tips.

Keep an eye on the market. When there's a buyers' market, home prices tend to drop so you have a better chance to negotiate prices. This increases your odds of purchasing a big home on a low budget.

Look into new construction. While this option means you forgo the convenience of a home that's ready for you to move in, you have more control over the budget. You can customize the home and seek affordable building materials.

Get help with closing costs. Closing costs can take up to 5% of your budget, so consider asking your lender or seller to pay for them. Keep in mind, though, that you might pay a higher purchase price or have a higher interest rate in return.

Think about compromising. Be flexible when looking for a home. While it's harder to add a bedroom or bathroom to a home, updating a kitchen or bathroom down the road might be an easier project to tackle.

A spacious home might be your goal, and you can fulfill them by making the most of your new home budget. For additional assistance to make your dreams a reality, don't hesitate to reach out to a trusted real estate professional.

Sources: Themortgagereports.com, Obererhomes.com

H ome Improvement

Entryway Renovation Ideas

While curb appeal refers to the first part of your home people notice, the entryway is the first space guests notice when they enter your home. If you're looking for a way to spruce up the interior, these ideas might provide you with some inspiration.

Provide seating. Place a small bench or sleek seating option near the entryway, as long as you have the space. Some people have difficulty putting their shoes on, so including a seating option can be helpful, especially if they feel uncomfortable asking for a chair.

Add some artwork. If you have an empty wall in the entryway, why not add a colorful piece of artwork? Consider an oversize painting to provide some vocal interest.

Splurge on an area rug. Placing an area rug is an excellent way to separate the entryway from the rest of the house. Get one that's easy to clean since guests will likely have shoes on when they walk on the rug.

Hang a mirror. For smaller entryways, adding a mirror to the entryway can make the space look bigger. Plus, guests can take a look at themselves whenever they enter or exit your home.

Select a unique light fixture. You likely need an entryway light, but that doesn't mean it needs to be boring or dated. Choose a chandelier if you have the height or a catchy fixture that sits closer to the ceiling.

Your entryway serves as more than just a way for people to enter or exit your home. Most of these ideas are simple enough to complete by heading to your local home improvement or décor store.

Sources: Makeitright.ca, Renoquotes.com, Lizzydesignsblog.com

Q&A

How Long Does It Take to Get Keys to Your New Home?

QUESTION: When does the buyer receive their keys after purchasing a home?

ANSWER: The short answer is that most homebuyers receive the keys immediately after closing, but others won't have them for a few days. In certain states, a buyer takes possession of the home once the local government has the new title on file.

Closing day is when homeownership transfers from the seller to the buyer. When the buyer gets the keys depends on where they live. This could take several days once both parties sign all the papers.

On the day of the closing, both the buyer and seller do a walk-through. Once both parties are happy with the walk-through, they fill out the final paperwork.

Afterward, the money is distributed and the deed to the property is recorded. Once these steps are completed, then the buyer receives the keys, with a few exceptions. If the closing occurs later in the day, usually after 3 p.m., the funding might not occur during regular business hours, so the seller might not receive the money until the following day. As a result, the buyer might not receive the keys until the following day.

The seller and the buyer might also negotiate a different date to exchange keys. For instance, the seller might want to rent back the home for a few days or the buyer might take possession of the home early in exchange for waiving some earnest money.

Knowing when you take possession of a home is an important step in your planning. If you are unsure when you secure the keys, make sure you reach out to a real estate professional for assistance.

Sources: Nclegalcounsel.com, Realtor.com, Hunker.com

A Look Into The Markets

Fri, 10 Mar 2023 14:19:56 GMT

A Look Into The Markets

This past week, home loan rates touched their highest levels since November. Let's walk through what happened and mention the big events in the week ahead.

"And you and your sweet desire (don't you do it, don't you do it) You took me, oh (higher and higher, baby)" Livin' Thing by Electric Light Orchestra

Global Inflation Remains High

Back in early February Fed Chair Jerome Powell stated that the disinflation process has begun and that's a good thing. Since that moment, the U.S. has endured several higher-than-expected inflation readings causing interest rates to spike to the highest levels since November.

This included the recent Q4 2022 Unit Labor Cost Numbers, which came in double expectations.

And if that were not enough, inflation across the pond rose to record levels causing global yields to rise. France, Spain, Germany and Italy all reported record inflation prompting markets to start pricing in more rate hikes ahead for the European Union.

The European Central Bank is now expected to raise their benchmark interest rate to 4%. It was not long ago where that interest rate was negative and as interest rates rise around the globe, it places upward pressure on our yields.

On Wednesday, the ISM Manufacturing Index was reported. And while the headline number was disappointing and shows the manufacturing sector contracting, the prices paid component or inflation reading was elevated. After several higher-than-expected inflation readings over the last few weeks, this report was enough to push rates higher, with the 10-year yield breaking a psychological barrier at 4%. With this break above 4%, market watchers' sense that the November highs of 4.20% will be tested.

Fed Tough Talk Is Back

On the heels of the hotter than expected inflation numbers, Federal Reserve officials were out in full force, reminding markets that interest rates will go higher for longer. Fed President Kashkari said, "If we declare victory too soon, there will be a flood of exuberance and we will need to do even more work (rate hikes)."

The financial markets are now pricing .25 basis point rate hikes in March, May, and June, lifting the Fed Funds Rate to over 5% for the first time since 2007.

The good news? The Fed's efforts to fight inflation, slow demand create some unemployment and lower asset prices is good for long-term bonds like the 10-year Note and Mortgage-Backed Securities (MBS). We will now watch carefully to see if MBS prices can remain above the November price lows and if the 10-year yield can remain beneath the closing peak of 4.20% last seen in November.

Bottom line: In the absence of market-moving economic data we should not expect any meaningful improvement in rates. The good news is the cure for higher rates is higher rates. Rates are near peaks seen in the Fall. The economy is slowing and all of the Fed rate hikes from last year have yet to hit the economy.

Looking Ahead

Next week brings big news which could reverse the negative sentiment in the bond market. On Tuesday and Wednesday, Fed Chair Jerome Powell will be delivering the Fed's Semi-annual testimony in front of Congress. This event includes speeches in front of the Senate and House, along with a long question and answer session. And if that were not enough, on Friday we get the February Jobs Report which comes on the heels of January's surprisingly strong report.

Mortgage Market Guide Candlestick Chart

MBS prices fell to the lowest level since November 10th. Next week's big news may determine whether rates can improve from this recent spike and if we see some relief.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 3, 2023)

Economic Calendar for the Week of March 6 - 10

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 03 Mar 2023 13:30:31 GMT

This week, rates touched the highest levels since Fall. Let's walk through three things that happened and what to watch in the week ahead.

"Don't speak, I know just what you're sayin', so please stop explainin', Don't tell me 'cause it hurts." - Don't Speak by No Doubts

1.) Fed Meeting Minutes Released

On Wednesday, the Minutes from the February 1st Fed Meeting were released. At that meeting, the Fed raised rates by .25% and in the following press conference, Fed Chair Powell said, "The disinflation process has started and that's a good thing." The smaller rate hike and disinflation reference were bond friendly at that time and led to the lowest rates since September.

Fast forward to today, the markets were on edge heading into the Minutes as we have since seen a surprisingly strong Jobs Report for January and a higher-than-expected inflation number, both of which lifted Fed rate hike expectations and mortgage rates.

The Fed Minutes ended up not mentioning disinflation whatsoever, but acknowledged prices have declined, but they need to see more progress (lower prices). Moreover, some Fed Members said there is an elevated threat of a recession in 2023. After the dust settled, rates remained elevated but stable.

2.) Inflation Rising Abroad

In Europe, Core inflation (ex food and energy) for January was revised higher to 5.3%. This now puts pressure on the European Central Bank to raise rates more aggressively like our Federal Reserve did last year with its string of .75% rate hikes. There is speculation the ECB will raise rates from the current 2.5% to 3.75% by September.

Why is this important to us? The bond market is global. If rates rise in other big bond markets like Europe, they increase here. The opposite is true. The markets will start watching to see if these economies slow materially because of the rate hikes. This would benefit long-term rates like mortgages. Currently, short-term rates are higher than long-term rates, which is generally a sign that economies are slowing, and the Fed must be careful not to hike rates too much and for too long.

3.) FHA Makes MIP Cut

The Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), announced a 30-basis point reduction to the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage. The premium will be reduced from 0.85% to 0.55% for most homebuyers seeking an FHA-insured mortgage, which could mean an estimated savings of $678 million for American families in aggregate by the end of 2023 alone. The reduction will benefit an estimated 850,000 borrowers over the coming year, saving these families an average of $800 annually.

Takeaway? This effort by the government to help with housing affordability should be applauded. This measure will help would-be homeowners.

Bottom line: We are revisiting the theme of 2022 where there was uncertainty and volatility about where inflation is headed, what the labor market will look like and what the Fed will do about it. Long-term rates still looked to have peaked, which is a good thing.

Looking Ahead

Next week brings the Case/Shiller Home Price Index, Consumer Confidence and Durable Orders. Durable Orders are items that last over three years, like a dryer or refrigerator. There will also be plenty of Fed speak and news from abroad which could move the markets.

Mortgage Market Guide Candlestick Chart

MBS prices fell beneath a key support level at $100. For rates to improve, we need to see rates climb above this important ceiling. The news and outlook for the economy will determine if and when this will happen.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 24, 2023)

Economic Calendar for the Week of February 27 - March 3

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 24 Feb 2023 14:13:04 GMT

A Look Into the Markets

This week multiple inflation readings came in higher than expected and home loan rates ticked higher. Let's walk through what happened and what to watch in the week ahead.

"Do you have to let it Linger?" Linger by the Cranberries

"More upside inflation surprises could make Fed Policy more aggressive." Ohio Fed President Loretta Mester.

What happened? We thought inflation was on the decline. Even Fed Chair Powell just days ago said, "For the first time, we can say the disinflation process has started".

Inflation readings at the consumer and producer level did decline, they just simply didn't decline as much as expected. The shelter component, which includes rent, insurance, lodging (away from home and owners' equivalent rent of residences), makes up a sizable portion of consumer inflation which continues to run higher than 7% year over year.

One major way to knock down housing inflation is to build more homes. It is estimated we are several million homes short of what is needed to meet demand.

Homebuilder Outlook Improving, But...

The National Association of Home Builders announced an uptick in Homebuilder Sentiment to 42, a level last seen in September and right before home loan rates peaked in October and November. The downtick in rates in January fueled some of the optimism.

But, Building Permits and Housing Starts for January, both came in lower than expected. The Permits is forward looking as it shows authorization to build and ultimately leads to Starts, where the shovel goes in the ground.

We think of the Fed fighting inflation as part of their dual mandate of maintaining price stability. However, this problem will not be fixed by rate hikes alone, if at all. The lack of supply that can be filled by affordable home building could be addressed with fiscal policy at the County, State and National level.

Consumers Spent in January

Retail Sales, which measures consumer spending activity, came in much higher than expected. The markets initially hated the good news because it fuels the notion of more rate hikes. However, after a closer look, the markets saw one-time anomalies affecting the number, including an annual benchmark revision and consumers racing to spend holiday gift cards at vendors offering big discounts.

Going Higher

After all the news, the chances of more rate hikes went higher. The futures markets are now fully pricing in a .25% hike in March and May. There is also a 50% chance of another .25% hike in June, which would lift the Fed Fund Rates to 5.25-5.50%.

It is worth reminding everyone that Fed rate hikes have no direct correlation in mortgage or long-term rates. For example, the 10-yr Note yield, which has ticked up in recent weeks, along with mortgage rates, remains at 1.00% beneath the 3-Month Treasury Bill. The only way long-term rates go higher, is if the economy can absorb those rate hikes. The bond market continues to say it can't, so it likely won't.

Bottom line: Rates and inflation have peaked, but as we have seen the past couple of weeks, further improvement won't be a straight line. Expect further inflation and rate improvement in the weeks and months ahead as the Fed is committed to lowering inflation.

Looking Ahead

Next week, the Fed's favored gauge of inflation, the Core Personal Expenditure (PCE) Index will be released. If this report wildly misses expectations, we can see rates move sharply. After the recent decline in prices and spike in rates, this report could add to the recent selling pressure or help it ease. The Fed Minutes from the February 1 meeting will be released on Wednesday and could be a potential market mover.

Mortgage Market Guide Candlestick Chart

MBS prices have drifted lower over the past couple of weeks causing the recent spike in rates. Should prices bounce off support at $100 on the chart, rates have an opportunity to improve. The opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 17, 2023)

Economic Calendar for the Week of February 20 - 24

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 17 Feb 2023 13:11:34 GMT

A Look Into The Markets

After last week's surprisingly strong Jobs Report, Fed Chair Jerome Powell spoke about the economy and direction of rates. Let's walk through what happened and what to watch in the week ahead.

"Cause I'm Back, Yes, I'm Back" - Back in Black by AC/DC.

"The strong Jobs Report shows you why we think this will be a process that takes a significant period of time." Fed Chair Powell 2/7/23.

The Federal Reserve has a dual mandate, which is to maintain price stability (inflation) and promote maximum employment. On the inflation front, it appears inflation has indeed peaked and is on the decline. The Fed Chair reiterated the "disinflationary process" has begun. This is a positive development for the economy, housing, and long-term rates.

On the labor market front of the Fed's mandate, the Fed in its desire to slow demand and thus inflation, wants to see some unemployment. The good news/bad news? Last week, the Bureau of Labor Statistics (BLS) reported the unemployment rate at 3.4%, the lowest in 53 years...that is good news. The bad news is it means the Fed will look to raise rates by .25% in March and another .25% in May, thereby lifting the Fed Funds Rate above 5.00%.

This renewed outlook for a higher Fed Funds Rate has elevated uncertainty and volatility in long-term rates, which move up and down based on economic conditions and inflation, both of which are easing and a reason why long-term rates are lower than short-term rates.

"Likely to see some softening in labor market conditions" - Powell

This is a reasonable assumption considering the number of planned layoffs announced this year, while we sit at multi-decade low unemployment, it seems like up is the only direction for unemployment.

Soft Landing Back in Play

Due to the current strength of the labor market, there is a growing chance the Fed can raise rates and lower inflation towards its 2.00% target without triggering a deep recession.

History has shown that recessions do not take place with unemployment at 4% or below without some sort of surprise shock to the economy.

Let's hope the Fed is not too successful in "creating" unemployment because if it quickly rises, the idea of a soft economic landing could go away quickly too.

3.70%

As we mentioned, long-term rates have responded negatively to last week's strong jobs report, because good news is bad news for bonds and rates. The 10-yr Note touched 3.33% last Thursday and touched 3.70% just a few days later. However, rates remain beneath where the 10-yr yield opened 2023 at 3.85%.

"We are going to react to the data" – Powell

Here the Fed Chair reminds the markets that last Friday's Jobs report was strong, but backward looking and lagging while other economic indicators show signs of s slowdown. The Fed does not want to over hike rates into a slowing economy and be the reason for the recession. So, while the market is currently pricing in two more rate hikes and a rate cut in December, this story could quickly change once again.

Bottom line: Rates and inflation have peaked. Housing activity has jumped in the past weeks as a result. The incoming data will determine how much better rates can get in the next few weeks leading to the next Fed Meeting.

Looking Ahead

Next week's CPI is a very important number. If it meets or comes in lower than expectations, we could see home loan rates revisit the levels seen last week right before the Jobs Report last Friday. We will also see the latest readings on housing and the strength of the consumer, by way of Retail Sales. As fast as the story changed when the strong jobs data hit, things can change quickly upon these reports

Mortgage Market Guide Candlestick Chart

MBS prices backed away from the best levels of the year and are now in the middle of a wide trading range. It will likely take some bond friendly news for MBS to push above the recent highs and see the lowest rates of 2023.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 10, 2023)

Economic Calendar for the Week of February 13 - 17

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

MMG Monthly Edition - February 2023

Wed, 15 Feb 2023 14:43:41 GMT

In This Issue

"For me, my home is a peaceful place where I can rest, and it gives me back energy." - Fabiola Gianotti

What to Watch - The housing market could be making a rebound in 2023 as home borrowing costs have improved since the multi-decade highs seen last November.

Can You Sell Your House and Buy Another One at the Same Time? - Learn more about your financial options when buying and selling homes concurrently.

4 Top ROI Home Updates - Learn what projects give you the highest return on investment.

Q&A: What Questions Should You Ask Before Hiring a Home Improvement Contractor? Knowing the right questions to ask a contractor can save you money and frustration.

What To Watch

Housing Market Rebound?

Don't look now but after a downfall in 2022, the housing market could be making a rebound in 2023 as home borrowing costs have improved since the multi-decade highs seen last November.

The trough for housing in 2022 came in November and coincided with the 30-year fixed rate mortgage hitting 7.08% having doubled during the year. That quick and sudden jump in rates sent buyers into a retreat as costs soared. In December, sales of existing homes fell for 11 straight months but let's see what the new year brings as November and December are not historically big months for purchases given the holiday season.

Redfin reports that customers requesting first tours of houses have improved by 17 percentage points from the November low point, and the number of people starting the home-buying process has improved by 13 points. Compared with a year ago, home tours and requests for service are down 23% and 27% respectively, but that's an improvement from November when both were down 40%.

The drop in the 30-year fixed from the 7%+ level to near 6% has spurred some optimism among potential buyers. And with a possible soft landing being orchestrated by the Federal Reserve, a still strong labor market, and inflation cooling a bit â€¦ all of a sudden we could see a turn in the sector as we near the spring buying season.

This is from a Redfin agent in California, â€œMortgage rates aren't stopping people as much as they were at the end of 2022 now that they're down from their peak and sellers are more willing to negotiate. Some buyers are having luck winning a home for under asking price, especially if it has been on the market for several weeks, but those days may be numbered.â€

Bottom line: We here at the Mortgage Market Guide agree that mortgage rates don't impede or help people from purchasing homes. As we have always said, jobs buy homes .

Can You Sell Your House and Buy Another One at the Same Time?

Housing News

If you're in the market for a new home but already own one, you might feel completely overwhelmed. In an ideal situation, you won't have to carry two mortgages and can close on your old home and seamlessly move into your new residence without needing to find a temporary place to stay.

With the right planning, financing, and strategic negotiating, you can perfectly time the sale of your old home and the purchase of your new one. The best way to gear up for this task is to prepare to buy and sell as ahead of time as possible. The more you plan, the better prepared you'll be for any issues.

When selling your home, you will likely use the proceeds to pay off the old mortgage and apply the remainder to the new home. However, until that sale closes, you'll need to come up with money for the down payment and financing. Some options you can choose from include the following:

Knowing what to expect when buying and selling homes concurrently can help you be more financially prepared. For additional assistance, don't hesitate to reach out to a trusted mortgage professional.

Sources: Nerdwallet.com, Opendoor.com, Bankrate.com

Home Improvement

3 Top ROI Home Updates

Whether you want to put your home on the market shortly or are just looking to enjoy a few upgrades to your residence, you can take advantage of ways to boost your home's return on investment. Savvy homeowners know that receiving a decent ROI is more important than the traditional question of whether or not the improvement will add value.

These three best ROI home updates can help you get the most return for your project.

When you're looking to update your home, the cost might not pay for itself when it comes time to sell. Take advantage of these three top ROI home upgrades and improve your home's value.

Sources: Homeandgardens.com, Forbes.com, Fortunebuilders.com

Q&A

What Questions Should You Ask Before Hiring a Home Improvement Contractor?

QUESTION: What questions do I need to ask a home improvement contractor before hiring?

ANSWER: Renovating your home can have a huge financial impact, so it's essential to vet anyone who's working on your home. Knowing the right questions to ask a potential home improvement contractor can make a significant impact on your project. A few important questions to ask include the following:

Does the contractor have a license and insurance? This question is perhaps the most important ask because if the contractor lacks the proper license and insurance, you're putting yourself at a huge financial risk. You're also liable for accidents that occur on your site, so the contractor should at least have worker's compensation insurance to protect you.

Does the contractor have a list of referrals? Sometimes the best way to determine if a contractor works for your needs and budget is to see some of his or her work. You can also dig around on social media to see what customers or previous employers say.

Is the project's bid an estimate or a fixed price? Certain contractors use the bid as an estimate, which means that the project's overall cost could be higher in the end. If the contractor cannot offer a fixed price due to unknowns regarding the project, try to eliminate the uncertainty. Also, if additional work is necessary, ask for a change order.

To make sure you're getting the best work from a contractor, you need to ask some important questions. Finding the best fit can reduce the amount of emotional and financial stress you'll have to deal with during the renovation process.

Sources: Goasher.com, Pods.com, Houselogic.com

A Look Into The Markets

Fri, 10 Feb 2023 13:40:43 GMT

A Look Into the Markets

This week the Fed hiked rates by .25% and home loan rates improved to their best levels since September. Let's walk through what happened with the Fed and talk about what to watch in the week ahead.

"It Feels Good, yeah" - Feels Good by Tony! Toni! Tone!

"We can now say for the first time that the disinflationary process has started. This is a good thing." Fed Chair Powell 2/1/23.

As expected, the Federal Reserve raised the overnight Fed Funds Rate by .25% to a range of 4.50 to 4.75%. The Fed Statement and subsequent press conference also contained "dovish" tones where the Fed offered hope that inflation is headed lower and future hikes would be dependent on the incoming data.

"We haven't made a decision on exactly where rates need to end up." Jerome Powell.

Here, the Fed Chair was non-committal on where he sees the Fed Funds Rate reaching the terminal rate or peak. In his press conference, he reminded everyone the Fed will release their updated quarterly economic projections and forecast for rates. Meantime, the financial markets have their own idea of where rates are headed and are pricing in multiple rate CUTs later this year.

This means in the months ahead we should expect uncertainty and volatility as economic reports are released and Fed officials speak.

3.33%

Last October, the 10-year Note yield, which moves up and down with home loan rates, was 4.30%. Four months later, the yield has declined sharply to 3.33%. It is important to note the 10-year yield does have an important technical barrier right at current levels which may limit how much better rates can get in the near term. The trend for longer-term rates remains lower which is a good thing.

Labor Market Resilient

"By many, many indicators, the jobs market remains strong." - Powell.

The JOLTS report showed 11.1M jobs available and with 5.7M people unemployed, we have a nearly 4.5M person shortfall to fill open positions. The latest first-time unemployment claims are also at multi-decade lows, which further highlights the continued strength of the labor market.

This is great news for housing and the notion the economy can land softly and avoid a recession.

Bottom line: Rates have continued to improve since the start of the year. Couple this with continued strength in the labor market and you have multiple reasons to see housing sales improve going forward.

Looking Ahead

Next week is short on economic data with just a few reports being released. A few questions remain. Will volatility continue? Will the bond markets continue to believe that inflation is moving lower? Will mortgage rates decline further? These are questions that will be on the minds of the markets, the Federal Reserve, Wall Street and Main Street.

Mortgage Market Guide Candlestick Chart

MBS prices are right at a ceiling of resistance, which is limiting further improvement in rates. For home loan rates to improve further, prices will have to move above this ceiling. This move would likely need to accompany the 10-year Note yield moving beneath its 200-day Moving Average which is currently at 3.33%.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, February 3, 2023)

Economic Calendar for the Week of February 6 - February 10

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 03 Feb 2023 13:39:48 GMT

A Look Into the Markets

Interest rates hover near the best levels since September, despite several good economic readings reported. Let's discuss what happened and see what is coming next week.

"Hey, alright now And don't it feel good" - Walking on Sunshine by Katrina and the Waves

Economy Grew To Finish 2022

Gross Domestic Product, a measure of economic growth, for the Fourth Quarter 2022 showed the economy expanded at a 2.9% annual rate, down slightly from the 3.2% rate in the Third Quarter 2022. Seeing the economy grow in the back half of 2022 after negative growth in the first half of 2022 is good news.

This positive reading elevates the chance of a "soft landing" by the Fed, where they hike rates to slow inflation but do not slip us into a recession.

Unemployment Line is Historically Short

Initial Jobless Claims for December came in at 186,000...the lowest reading in 9 months. This is also good news as it tells us the length of the unemployment line. If the amount of people signing up for first time unemployment benefits remains near historical lows, it further lowers the chance of a recession. Moreover, it highlights the continued strength in the labor market, and this is paramount as jobs buy homes. Yes, we want interest rates to move lower but if someone doesn't have a job or is in fear of losing their job, they can't commit to a home purchase. Let's hope the labor market remains strong as the Fed continues to hike rates to slow demand and lower inflation.

New Home Construction Costs Coming Down

The National Association of Homebuilders reported that building materials costs, less energy, are up 8.3% which is a big increase annually. However, the price growth is down a staggering 60% as input costs increased over 16% in 2021.

We should expect input cost growth to slow further in response to slower demand and further reopening of supply chains. This is another positive theme as we move through 2023.

Smaller Fed Rate Hike Still Priced In

One of the headwinds to the economy is the threat of higher short-term rates by the Federal Reserve. The good news there? After four consecutive .75% rate hikes, followed by a .50% hike in December, the financial markets are fully pricing in a smaller .25% hike at next week's Fed Meeting.

The markets also believe the Fed will raise rates by another .25% in March and then pause to allow all the hikes that date back to last summer to seep into the economy.

This means the Terminal Rate, or the fancy way of saying the peak in the Fed Funds Rate, is going to be in a range of 4.75- 5.00%. From there we will have to continue to watch the standoff between the Fed who says they want to keep rates higher for longer. Additionally, with no rate cuts this year versus the financial markets, which are starting to "price in" as many as two rate cuts later this year.

Bottom line: The economy is showing mixed signals, but the labor market remains strong, and we are nearing the end of Fed rate hikes. So, the plan to land the U.S. economy softly and avoid a deep recession remains very much in play. That is good news for housing and the economy.

Looking Ahead

Next week is Fed week. As of this moment, the markets fully expect the Fed to raise rates by .25%. Anything other than that would be a surprise and generate a lot of market volatility. The Fed generally looks to avoid sending the market mixed signals but the markets will be on edge.

Mortgage Market Guide Candlestick Chart

Economic Calendar for the Week of January 30 - February 3

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

A Look Into The Markets

Fri, 27 Jan 2023 14:42:31 GMT

A Look Into the Markets

Bad economic news helped home loan rates touch the lowest levels in months. Let's discuss what happened and see what is coming next week.

"When you believe in things That you don't understand,
Then you suffer, " Superstition by Stevie Wonder .

Producer Prices Are Falling

The Producer Price Index, which is an inflation reading on what producers/wholesalers pay for goods and services, showed a larger than expected decline. It was also the lowest reading since March 2021.

This is good news, because if producer prices fall, it leads to consumer prices falling, which leads to lower rates and less Fed rate hikes.

It appears that both inflation and long-term rates have peaked.

Weak Economic Data Elevates Recession Fears

A bunch of weaker than expected economic reports cast a dark cloud over stocks, with bonds and rates the beneficiary.

Manufacturing reports in New York and Philadelphia highlight an economic slowdown and a very weak Retail Sales number for December, showing the consumer cutting back on spending.

In the recent past, stocks had moved higher in response to weak news on the notion the end of Fed rate hikes is near. But this week, stocks slid lower on the bad news because the bad news may also mean a recession and not just the end of Fed rate hikes.

On Thursday, the 10-yr Note yield touched 3.32% for the first time since mid-September which suggests the bond market sees a slowdown and the need for the Fed to stop hiking rates.

The Standoff Continues

The Federal Reserve and the bond market disagree on the Fed's position on rates. The Fed says it wants to keep rates higher for longer, yet the sharp decline in long-term rates and wide yield curve inversions is the bond market saying the Fed is wrong.

The good news? The markets are now pricing in a .25% Fed rate hike on February 1st. We could very well see just one more .25% rate hike in March but that will be based on the incoming data.

Bottom line: Home loan rates continue to drift lower; sellers are eager to make deals and the labor market is strong. Now is a great time to highlight the current "buyers' market" while it exists.

Looking Ahead

Next week is the "quiet period" for the Fed, where they do not speak or comment on monetary policy one week prior to the next Fed Meeting. But the week still carries a bunch of headline risk events, including the Fed's favored gauge of consumer inflation, The Personal Consumption Expenditure (PCE) Index.

Mortgage Market Guide Candlestick Chart

MBS prices are right at a ceiling of resistance, which is limiting further improvement in rates. If MBS can move just slightly higher and above this nearby ceiling, rates will likely improve a bit more. The opposite is true.

Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, January 20, 2023)

Economic Calendar for the Week of January 22 - 26

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

MMG Monthly Edition - January 2023

Wed, 25 Jan 2023 17:51:10 GMT

In This Issue

"The home should be the treasure chest of living." - Le Corbusier

What to Watch - How will the market hold up after borrowing costs and housing soared in 2022?

3 Tips for Getting to Know Your Local Market - Use these tips to forecast what the real estate market might look like in your community in the next few years.

5 Winter Landscaping Tasks to Maintain Your Curb Appeal - Tackle these crucial landscaping tasks during the winter so your yard will be ready come spring.

Q&A: When Is the Best Time to Begin a Major Home Renovation Project? - If you're looking to start a major home renovation, consider tackling it during this time of year to save money.

Housing and Mortgage Forecasts for 2023

On the radar in 2023 for most of those in the housing and mortgage business is how the market will hold up after borrowing costs and housing prices soared by mid-2022.

A recent forecast from Fannie Mae showed home sales in 2023 are forecasted to total 4.57 million units from the previous read of 4.42 million. Sales in 2022 are expected at 5.27 million units. Fannie sees a rebound in 2024 to follow thereafter, with total sales rising 14.7% to 5.24 million units from 5.25 million. Additionally, they expect economic growth to return and mortgage rates to stabilize. The outlook for overall mortgage originations for the three-year period from 2022 through 2024 is essentially unchanged from a recent forecast at $2.35 trillion, $1.70 trillion, and $2.11 trillion, respectively.

Fannie Mae's Senior Vice President and Chief Economist, Doug Duncan said, "We expect housing to continue to slow, even though mortgage rates have come down recently. Home purchases remain unaffordable for many due to the rapid rise in rates over the last year and the fact that house prices, though certainly slowing and in some places declining, remain elevated compared to pre-pandemic levels. Of course, refinancing is still not practical for the vast majority of current mortgage holders, which we expect will also continue to constrain mortgage origination activity."

Industry expert Rob Chrisman recently wrote," Keep in mind that people need a place to live, and usually financing to accomplish that, and someone has to give them those loans!" So true, households form every day and there will always be a need for shelter either in renting or owning.