Market Update - July 10th, 2023
Rates Took a Beating Last Week
We are not going to sugar coat it. Last week was brutal for us in the mortgage world. Just a few a weeks ago, we were saying sayonara to the 7% interest rates. However, it’s been a snap back to reality (cue Eminem) with rates catapulting back to the low 7’s after a handful of economic reports that were stronger than expected. The main culprits for this week’s movement in rates were the ADP jobs report coming in higher at 497k jobs created compared to estimates of 225k, wages continuing to grow, and an unemployment rate near record lows of 3.6%.
Key Takeaway: Strong economic reports are bad for mortgage rates. The economy and the labor market continue to give the Federal Reserve the proverbial middle finger. If we continue to see positive economic news, expect rates to continue to increase. The Federal Reserve has openly stated they will continue to raise rates as long as the economy remains steadfast, and inflation remains at elevated levels.
Buckle Up for Another Eventful Week
Just when you think things couldn’t be any more eventful, we are hit with the motherload of economic news this week. Here is a breakdown of this week’s events:
A ridiculous number of 8 (!!!) Federal Reserve Board members are speaking throughout the week – The interest rate market tends to hang on every word of any Federal Reserve Board Member. Hoping they all stay the course and don’t spook the markets with any aggressive rate hike commentary.
CPI Inflation Report is released on Wednesday – This is the Federal Reserve’s favorite measure for inflation. If it shows a significant drop in inflation, expect mortgage rates to improve and move lower (as in high 6’s instead of 7’s). If the report shows that inflation has increased, expect rates to move even higher than where they are now :(
PPI Inflation Report is released on Thursday – The second most tracked inflation reporting measure. Again, we are looking for a lower inflation reading which will eventually lead to lower mortgage rates. Bad news if the inflation numbers come in higher.
Jobless Claims released on Thursday – This could be another major market mover. Despite the Federal Reserve’s unprecedented rate hikes to slow the economy, the US labor market has been incredibly resilient. We need to see to a high jobless claim number (more people filing for unemployment) to see rates drop. If less people are losing their jobs, the stronger the economy appears. The stronger the economy, the more anticipated rate hikes (to cool the economy), which will lead to higher mortgage rates.
Key Takeaway: Brace for impact and get ready for a turbulent / choppy week ahead.
Instagram Posts from Last Week
Don’t hesitate to reach out if you need anything at all. Have a wonderful week!