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Jason Obradovich - Chief Investment Officer

Housing Market News & Updates

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

Some Turbulence Before Landing

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

Yesterday was another big economic data release.  The Consumer Price Index came down from November to December.  The annualized rate now stands at 6.5% vs 7.1% from the month prior.  Excluding the volatile food and energy prices, the index is at 5.7% vs 6.0% prior.

Even though inflation is coming down and calming the market to a decent degree, it will take several more months until it’s close to the Fed’s target rate.  Most expect the Fed’s target won’t be hit until July at the earliest. 

If you recall CPI hit a 40-year high at over 9% at the end of June which eventually pushed the 10-year Treasury to over 4.2% in October.  The 10-year is now hovering around 3.5% as the market and the Fed try to figure out if the inflation fight is well under control or not.

The big question right now is what the FOMC will do with the benchmark rate in 2023.  The Fed is telling us they have no plans whatsoever to lower the Fed Funds Rate in 2023 and expect to raise it 25-50bps on Feb 1st and another 25bps in March with a slight chance of another 25bps in May.  In fact, most FOMC members expect the Fed Funds Rate to exceed 5% in order to completely extinguish all inflationary risk.

They got some good news last week with the jobs report when the unemployment rate actually went down from 3.7% in November to 3.5% in December.  That lends more credence to the notion that the Fed is going to achieve a soft landing with their interest rate policy and may not need to pivot on rates in 2023.

On the flip side, the market still sees a lot of economic risk around the possibility of a recession, and they are pricing in a Fed Funds Rate under 5.0% in 2023 with the Fed likely to lower rates in July or September.  

We will need to continue to watch inflation and economic data over the next couple of weeks but the big question coming is what the Fed will do in February; will the raise rates 25 or 50bps.

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

Previous Market Update

The Interest Rate Rollercoaster

Hello, everyone. Welcome back to the mortgage rundown. Today we're talking about what's happening with interest rates.

Rates go up and rates go down. We are witnessing one of the most volatile interest rate markets in history. Treasury rates hit their lowest point ever just two years ago and in the last 45 days they saw some of the highest rates in 15 years.

As we've talked about before, very high inflation is forcing the Federal Reserve to push up interest rates in an effort to slow down the economy. And what is keeping rates from running higher, out of control, is recessionary fears and the likelihood that higher rates will slow the economy down too much. The volatility is coming from inflationary fears one week and recessionary fears the next week.

The big question out there is what is the Fed's future path of rates? Will they continue to raise rates through May of next year only to drop them immediately to stop a recession? Or will they keep rates at an elevated level through most, if not all, of 2023 to ensure inflation is beat? And how high will they raise the overnight rate, which is currently 3.75 to 4%? Will that move as high as 5% or even higher?

Those are all the important questions being debated by economists and the market. Even the economists don't agree on the Fed's future path of rates. Half say the economy has a very strong job market, so that gives the Fed the ability to leave rates higher longer, and half think the Fed will try to prevent a recession and back off. The Fed is actually telling us they will leave rates higher for an extended period of time. But as I mentioned, half the market doesn't believe it.

During the FOMC meeting next week, they will release their updated dot plot and we will get a clear picture on what they see the future path of rates will be for 2023 and beyond. In the interim, I would expect more continued rate volatility, along with some very big moves next Wednesday after the Fed announcement. That's it everyone from the Capital Markets Desk this week. Thank you all for watching and have a great day.

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