Market Update - June 19th, 2023
Good morning team! Was last week as crazy as we all expected? Keep reading to find out.
Additionally, we have a new “value-bomb” for all our subscribers to help you generate new leads in this tougher environment! Remember, our goal is to help make you money AND save time 💪
We are posting regular content to Instagram (Nick | Kreg) and Facebook (Nick | Kreg) to help you and your buyers. Be sure to follow us
Declining CPI + Fed Pause = Rates Flat?
As Kreg discussed last week, everybody was laser-focused on Wednesday when the May CPI (inflation data) was released, followed by the June Fed announcement in the afternoon. CPI came in below slightly expectations at 4.0% vs. 4.1% (see chart below for annual CPI month by month). Jerome Powell went on to announce a “pause” to the rate hikes later in the day. In theory, one would imagine mortgage rates improving off this news, but it turned into a non-event with rates staying flat for the day. Why? The beat in the CPI wasn’t meaningful and the markets were already convinced Powell was going to pause hikes in June.
CPI Year-Over-Year Data Points by Month
Key Takeaway: The Fed releases additional details during their meeting that offer guidance on both short- and long-term rates. Mortgage rates, for example, are heavily influenced in the forward-looking trajectory implied by the Fed. To get a gauge on the Fed’s projections, they release something called the Summary of Economic Projections. As part of that report, there is a “dot plot” that polls each member of the Fed on where they expect rates to be in the future. Since March of 2023, the committee has INCREASED its expectations on where they see the Fed’s rate by the end of the year (chart below). Currently, the Fed rate is 5.25% but a majority of the members now see rates peaking at 5.625%. That implies two more rate hikes this year with the first as early as July’s Fed meeting. This dot plot offset the CPI beat and the pause announcement while adding some additional headwinds to potential improvements in mortgage rates.
March 2023 vs. June 2023 Dot Plot from FOMC Committee Members
The biggest head-scratcher is why so many committee members believe we need another two hikes. Leading up to the Fed meeting, there is a “blackout” period where members cannot speak to the press. That period is now over, so we expect to hear from a few this week on their rationale.
Mortgage Hack – Income Limits Higher for Home Possible/Home Ready
Home Possible/Home Ready Conventional loans have always been super strong options for borrowers and last week they casted a wider net capturing an even larger group of consumers. In most parts of the country, the income limits bumped up between 5-10%. In central Ohio, the income limit moved up to $80,720. What’s odd is that many news outlets and other lenders haven’t posted anything about this even though it’s SUPER beneficial for borrowers who now qualify for the programs. Make sure you’re working with us, so your borrowers have the strongest financing options available to them. 😊
As a reminder, Home Possible/Home Ready do not have any pesky loan-level price adjustments, so the interest rates are super strong. Additionally, the mortgage insurance is cheaper.
Value Bomb – 23 Ways to Generate Leads in This Market
I’ve never been a very good therapist, but let me remind everybody that we are all struggling right now. Times are tough and it may continue for a little while longer. Kreg and I are confident better days are around the corner. To help you think of ways to generate more business, we’ve compiled a list of 23 ideas that will help set your business up for success. There is no magic bullet, but those of us thinking outside of the box and working a little harder will come out on the other side in a significantly better place once the market shifts.
**Send us a quick e-mail to request the PDF**
Instagram Posts from Last Week