Mortgage Update - July 15th, 2024
Good morning, team! Before I jump into our weekly recap, I feel it’s necessary to address the events that occurred over the weekend. Regardless of which side we vote, I pray for former President Trump and the families of those impacted by the events in Pennsylvania.
As a fellow “girl dad”, my heart breaks for the family of a true hero, Corey Comperatore. His selfless acts as a volunteer firefighter and his protective spirit are extremely admirable. I hope his story is shared so his legacy can make an impact on everyone, especially fathers.
We should all strive to the be the light this country, and this world, needs in this moment. May God bless America!
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CPI 👍 / PPI 👎
Rates ended the week down due to CPI coming in lower than expected, signaling a higher likelihood of a Fed rate cut before the end of the year. Though the next Fed meeting is in late July, markets expect no cut at that time but are now pricing in an almost 90% chance of a cut at the September meeting.
In June, headline CPI inflation rose 3.0%, below expectations of 3.1%. Core inflation increased 3.3% annually, below expectations of 3.4%.
For the first time since May 2020, monthly headline CPI fell (-0.1%).
Under the covers, there are some interesting drivers (+ & -) of inflation over the last year:
Motor vehicle insurance +19.5%
Tobacco/smoking products +8.2%
Hospital services +6.9%
Vehicle maintenance & repairs +6.0%
Rent +5.4%
Gasoline -2.5%
Airline fare -5.1%
Used cars and trucks -10.1%
I found the following chart interesting. It details inflation since the year 2000. Yes, there are some items that have become cheaper over the past quarter century, BUT the high cost/important items in everyday life are significantly more expensive.
On Friday morning, however, markets got a heavy surprise with the Product Price Index (PPI) coming in WAY over expectations.
As a reminder, PPI measures inflation from the perspective of products, not consumers. The theory is that if producers have to pay more to manufacturer products, that cost will be passed to the consumer which would potentially drive up inflation.
June PPI rose 2.6% vs. expected 2.3%. Core PPI rose 3.0% vs. expected 2.5%.
Key Takeaway: PPI has risen 4 out of last 5 months while CPI has trended down. Corporations are going to see their margins pinched as the cost to manufacture is going up as consumers are spending less. They will need to find a way to pass these costs to their customers. Smaller companies will struggle. Remember, negative economic news typically results in lower interest rates as the Federal Reserve looks to keep the economy chugging along.
Ohio Still on FIRE 🔥🔥
Realtor.com released their June 2024 Hottest Housing Markets and Ohio cities continue to fill some of the spots in the top 20!
While Hartford, Connecticut takes the top spot for “most hotness”, Akron, OH is #7 tied with Canton-Massillon, OH. Columbus, OH lands at #15.
One interesting takeaway, however, is price growth is easing even in these hot markets.
Active listing were up 36.7% nationally, but in the hottest markets inventory was only up 17.3%.
Average annual growth was 13.6% in May, but down to 8.1% in June. There are still challenging housing conditions that are deteriorating buyer demand, somewhat rapidly. We will keep an eye out on this metric.
Key Takeaway: The midwest and east coast continue to see strong housing markets relative to other locales around the US like Texas, Florida and the west coast. It’s definitely a bifurcated landscape where certain areas are seeing continued strength whereas others are experiencing a massive slowdown in volume, driving prices down.
Wagers on Trump Victory Begin 🎲🎲
This newsletter will be released prior to the opening bell on the stock market, but early signs indicate that bets are being made on a solidified Trump re-election.
A Republican return to the White House would likely result in tax cuts, higher tariffs and a loosening of regulations. Higher tariffs is a scary proposition for the housing market and mortgage rates. We all know what happens when products become too expensive.
One major concern is the potential for added uncertainty into the markets. Political violence is serious and raises some concerns around US instability, which might push investors into safer assets vs. more risk. Uncertainty typically drives rates down like we saw in the wake of the COVID 19 pandemic.
There is still plenty of time for further surprises between now and the election.