Market Update - May 8th, 2023
Good morning, team! We are in the middle of two pretty important weeks with plenty of new data points that might help us identify where rates will go in the future. Absorb the content below so you can be prepared.
Additionally, be sure to follow us on Instagram and Facebook. We are posting regular content to those platforms to help you and your buyers.
The Fed Raised Rates 0.25%
Key Takeaway: In Wednesday’s meeting, the Fed hiked the Fed Funds Rates by 25 basis points bringing it to 5.25%. As we have discussed, this is not the same thing as mortgage rates. The Fed Funds Rate affects the interest rates for overnight borrowing for banks. We hope this is the final hike as the economy is already showing signs of falling inflation. Many countries, including the US, are on rocky ground with a host of economist predicting a recession. Additionally, the banking sector is in trouble. Folks are pulling their money from banks and moving into higher yields from money market accounts or short-term treasuries. These bank runs have caused very large banks to fail (Silicon Valley Bank, etc.).
Jerome Powell, head of the Fed, didn’t specifically mention a pause to future rate hikes. However, there was a meaningful change in the language of the announcement. The next meeting is in June where we expect further guidance on the path forward. Fingers-crossed a pause is mentioned 😊
Jobs Report Shows Huge Gains
Key Takeaway: Even though the Fed is trying to break the economy, jobs remain super strong. On Friday, the April jobs report was released and it showed 253,000 new jobs were added in April, blowing the doors off estimates. Unemployment dropped from 3.5% to 3.4%. Hourly earnings were also up. It’s truly a remarkable feat that the economy is still adding this many jobs when all we hear is impending doom and gloom of a recession around the corner. Mortgage rates didn’t like the stronger job news. Rates rose Friday and have continued as of Monday morning.
May 10th CPI Report
Key Takeaway: Wednesday morning we will get the April CPI (Inflation) updates. The consensus estimate is 5.0% (overall US CPI). When calculating the year-over-year CPI numbers, you add up the rolling 12 months of data points. On Wednesday, we will drop the April 2022 data and add the April 2023 data. This is particularly important when you look at what months were are replacing in the calculation. Inflation REALLY accelerated starting in May of 2022. We predict that when we start to drop the May, June, July 2022 data points, we will start to see a nice drawdown of the year-over-year CPI numbers. Mortgage rates will follow that pullback in inflation.
Mortgage Hack of the Week – Take Control of Your Credit
When I was in my late teens and early twenties, I was a sucker and took out every credit card offer I received. Horrible move…don’t do what I did. Learn from my mistake. Today, I have an everyday card, a backup/emergency card and one store/niche card. Keeping it simple allows you to manage your credit, never miss a payment and build up a flawless credit history setting you up for success.
Instagram Posts from Last Week