Market Update - June 5th, 2023
Good morning team! We made it to June. For those of you in central Ohio, the weather was beautiful for the Memorial golf tournament, which far exceed my expectations. Severe storms usually plagued the weekend of the Memorial. Similarly, the jobs report on Friday far exceeded my expectations coming in HOT! We dive into the details on how the market pivoted on all the news from last week.
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Rate See-Saw Continued Last Week
Interest rates moved lower through the week due to the advancement of the debt limit deal and chatter the Fed may pause rate hikes.
Key Takeaway: The debt ceiling agreement was passed through Congress and signed by President Biden on Saturday morning. This deal eliminated a lot of uncertainty in the markets around the potential of a US default. Additionally, last week we heard from several Federal Reserve officials who are considering a brief rate hike pause during the June meeting. Rate hikes would potentially resume later in the summer once more economic data points are collected. As we mention from time to time, the market moves on expectations. Influential Fed officials discussing their strong opinions on a pause to rate hikes is an important detail and it helped rates as markets absorbed that news.
…aaaaaand then rates worsened on Friday.
Headline Job Number Smashed Expectations
On Friday, the jobs report for May was released showing the US added 339,000 new jobs vs. expectations close to 200,000. The report was “mixed” as the unemployment rate moved from 3.4% to 3.7%. Additionally, wage growth is starting to slow down. These are signs the labor market may be walking on thin ice.
Key Takeaway: The headline number crushing expectations was a shock and rates worsened. The labor market needs to break. We continue to monitor job growth, the unemployment rate and wage growth along with initial and continued unemployment claims to find stress in the system. It feels like the US is still in “recovery mode” from Covid, essentially catching up to the pre-pandemic employment levels. We are almost there and when it breaks, we should see the Fed start to lower rates.
FHA Proposes New Home Retention Option to Help Struggling Homeowners
Today, many FHA loan holders have historically low interest rates but are still missing/shorting payments due to inflation pressures. Historically, there have been relief options for them which won’t work in today’s high interest rate environment. On Wednesday, HUD announced a proposal to provide temporary assistance to affected borrowers reducing their monthly mortgage payment up to five years.
Key Takeaway: The program is very similar to the Covid program from a few years ago. Effectively you can think of it as a zero interest second mortgage that is due to be paid back by the borrower when they close their loan. Mortgage servicers are protected because the borrower + HUD continue to make the necessary monthly payments. This is important because we need happy servicers to stabilize the industry. It is widely accepted by trade groups and other industry experts that this proposal is wise.
Realtor Value Add - Stop the Scroll
We’ve attached a really good resource to help you stop your potential clients from scrolling past your social media posts. Kreg and I have been deploying these strategies and thought you might find them useful 😊
Instagram Posts from Last Week