Housing Market News & Updates

Hello everyone.  Welcome back to the Mortgage Rundown.  Today we are going to talk about what’s happening with the Capital Markets

Here we stand, one year into the Fed’s campaign to slow the economy down and bring inflation under control.  The FOMC has now raised their overnight rate by 4.5% and all indications today point to a terminal rate that will touch over 5.5% sometime later this year.

The market was expecting a terminal rate around 4.75% for quite some time, but due to the most recent jobs report and inflation appearing to be stickier than expected, that is no longer the case.  If you look at the chart on your screen, it shows the September Fed Funds Futures contract, which now implies the key overnight rate hitting 5.6%. 

Since the release of the January jobs report, there has been a material shift in both the Fed as well as the market’s opinion on how difficult bringing inflation down to 2% will be. 

A couple of key things to keep an eye on.  We have the February jobs data coming out tomorrow as well as inflation data becoming available next week.  If the jobs data continues to be strong and inflation isn’t coming down as quickly as the market is expecting then we will likely see higher rates for the balance of 2023.

On the flip side if the jobs data comes in much lower than expected and inflation does drop materially then we could see a total market shift in sentiment and rates could drop later this year.

That’s it everyone from the capital markets desk this week.  Thank you all for watching and have a great day.

Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with the Capital Markets.

Well, 2023 is off to a fast start and last week was quite an eventful one to say the least.

Wednesday was the long awaited FOMC meeting where the Federal Reserve raised overnight rates again by 25bps to the range of 4.50 to 4.75%. Normally you would see mortgage rates rise with such an event. But as we have seen with Chair Powell, after the announcement and during the Q&A we once again saw mortgage rates drop by a substantial amount.

Jerome Powell leaves the market feeling very dovish; that the campaign to raise rates in order to defeat inflation will be quickly followed by a reduction in rates later this year. At least that’s what the market continues to read from him.

However, that thought was pushed aside very quickly after Friday’s jobs report was released showing the economy added 517k jobs, which was well above the estimate of 189k, and the unemployment rate actually fell to 3.4%, the lowest rate since 1969.

This was a huge shock to the entire market as the belief was that inflation was being contained in all sectors, including the jobs market. But after Friday’s report it’s very clear that the work is not done on inflation and that the path to 2% inflation is going to take longer than the market expected.

And lastly, yesterday Powell during the Q&A at the Economic Club of Washington DC noted that disinflation has begun but is going to take time. He stressed that if we continue to see a strong labor market or higher inflation reports, then the FOMC will have to do more and raise rates at a higher level than what the market prices in.

So, looking ahead I would stress that the market will be very data dependent going forward with the likelihood of high volatility around inflation and jobs data. Keep an eye on inflation data next week with the latest CPI data coming out on Valentine's Day. There will be some major market disruptions if the annualized rate is below 6% or above 6.5%.

That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.