Market Update - July 17th, 2023
Happy Monday! Have you been implementing the “value bombs” Kreg and I have been sharing week after week? Remember, our goal is to save you time and make you more money. This week is no different. Crush your next open house with the 8 steps we outline. Check it out!
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Inflation Now at 3.0%
Two weeks ago, the labor data showed signs of a flourishing US economy. This past week, the CPI and PCE numbers came in lower than expected, showing signs that the Fed may have inflation under control. Rates pulled back nicely, eliminating the increases from the week prior. It’s a good sign in the short-term, but will there be any chance we get to the Fed’s target 2.0% level of inflation?
Key Takeaway: From May to June 2023, annual CPI dropped from 4.0% to 3.0%. Why the sudden, dramatic drop? The June 2023 monthly data (0.2%) replaced the June 2022 monthly data from last year (1.2%) when inflation peaked resulting in the large decrease in the annual CPI numbers.
But where do we go from here? I believe the next leg down to 2.0%, the Fed’s target, is going to be a long, painful process. You can see the monthly CPI data in the chart below. Starting in July 2022, we started to see inflation slow dramatically from the early 2022 trend. That has continued for the past 12 months with much smaller inflation bumps month after month. Unfortunately, we don’t have any high inflation months left to offset any time soon. This is what the Fed means by “higher for longer”. They won’t pull back in the Funds Rate until they get back to their 2.0% target, which means mortgage rates may be in this 6-7% range for quite some time.
Due to the implied difficulty to get back to a 2.0% inflation rate, many are calling for the Fed to give in and target a new, higher inflation target like 2.5%. That would allow them to potentially adjust the Funds Rate sooner.
Quiet Week Ahead
We shouldn’t see any major swings up or down in rates this week as the globe prepares for next week’s decision from the Fed on hiking interest rates. Currently, the market has baked in a 90% chance of a 0.25% hike in rates.
Tuesday – June US Retail Sales - Are US consumers continuing to spend? If this continues higher, it should solidify the Fed’s rate hike next week and potentially prompt conversations of a second hike later this year.
Wednesday – Housing Starts – Groundbreaking on new homes is expected to slow a bit from June’s high of 1.631 million.
Thursday – Initial Jobless (Unemployment) Claims – We are monitoring this metric weekly to see a break in either direction.
8 Steps to Crushing Your Next Open House
Open houses are back and it’s important to maximize these opportunities. The goal is to showcase not only the property, but also your brand and personality. Being knowledgeable and friendly is so important because most of the potential buyers won’t like the particular property. However, they might like you and that’s most important!
Check out the attachment and let us know if you have any more to add to the list.
Instagram Posts from Last Week
Don’t hesitate to reach out if you need anything at all. Have a wonderful week!