Market Update - June 12th, 2023
Hello all! We have an enormous week ahead for the mortgage world, one that will undoubtedly have an impact on all of us!! Let’s preview what’s in store during this action-packed week!
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Big Inflation Reports Released on Tuesday and Wednesday
Key Takeaway: All eyes are going to be on the May CPI Inflation data released on Tuesday and the PPI Inflation report on Wednesday. It is widely known that inflation is the main driving force pushing mortgage rates higher, along with the surge in prices across everything else in our daily lives. We are all feeling the inflation pinch whether you are buying a house or simply grabbing a quick to-go dinner at Chipotle (I just spent $60 for my little family of 5!). The most recent inflation report released last month showed that inflation had plateaued and was starting to level off, which isn’t necessarily a bad thing. However, after a year and a half of the Fed hiking rates, we are at the point where we desperately need signs of a significant decline in inflation. Otherwise, we could potentially face a prolonged period of higher rates.
Fed Interest Rate Decision on Wednesday!
Key Takeaway: On top of the inflation reports this week, we also have the all-important Fed Rate Hike Announcement on Wednesday at 2:00 PM. Unless we see the Inflation data on Tuesday and Wednesday coming in a lot higher than expected, it is safe to assume that the Fed will likely pause rate hikes. This would be the first time since March 2022 that they have not increased rates. I wouldn’t consider this a pivot, but a clear indication that the Fed believes their past rate hikes are working and inflation is headed in the right direction (down). Many economists now believe the Fed will continue to hold rates steady for the remainder of 2023. We agree, assuming we don’t see any crazy spikes in the inflation data moving forward, which would cause the Fed to restart that rate-hiking machine ☹
Don’t Underestimate Residential Real Estate!
Key Takeaway: During a time where we have seen the biggest mortgage rate shock since 1981, the home values in Columbus, Ohio continue to be incredibly resilient. The main objective of the Federal Reserve increasing interest rates was to quell demand and reduce inflation. However, the Fed didn’t take into consideration that when they quickly increase rates after a long period of time with low rates, you’ll have distorted impacts in markets such as Ohio. We all know sellers are limited as you have 90% of mortgage holders sitting on mortgage rates below 5%. With fewer sellers, inventory is low causing prices to appreciate. Looking at the monthly appreciation chart below, you can clearly see there are no signs of the market cooling even with rates being at the highest levels we have seen in decades. It’s becoming more imperative for buyers to act now, before affordability slips away beyond their reach.
Instagram Posts from Last Week