Monday is here and we got updates for you! So I want to start sharing market insights from those like my lending partner Michael McDermott at Bay Equity and his deep dive into what's going on around us in the mortgage and real estate industry. If you want jump straight to the snap shot of the current mortgage interest rates scroll to the bottom. If you want to read the market overview see below.
What's currently going on from my perspective is I am getting buyers and sellers to call in again since the election. Activity has picked up the last week and people seem more optimistic and interested in making a move. This is good news for homeowners looking to cash in and sell their home. My last listing received multiple offers and a bidding war was started raising the purchase price. I hoping this is going to be the case for many other sellers out there so they can get the additional money in there pockets to buy down interest rates when they purchase their next home. The Buyer conversations that I have over the last few months the biggest concern is interest rates. These rates have been fluctuating up to over 8% to down to low 5s back up to the 7s, mostly hovering at the mid 6s over the last year. One of positive things I have seen recently for my buyers are offerings from sellers and builders of credits and concessions to buy down the interest rate to make their monthly payments more affordable. We are seeing a lot more homes on the market giving buyers more options when choosing their next home.
Well enough of what I have to say, lets hear from Mike:
"Good morning, everyone!
All things considered, rates weathered economic news rather well last week despite inflation coming in hotter than expected, and Retail Sales beating expectations. Let’s get into it!
Consumer Inflation Moves Higher
Wholesale Inflation Moves Higher
October Retail Sales Hotter Than Expected
Weekly Rate Recap – What to Expect This Week
Consumer Inflation Moves Higher
Up until a few years ago, this was the Feds preferred gauge on inflation so while it might not be their preferred today, it can still move the bond market (mortgage rates). The latest Core Consumer Price Index (CPI), which doesn’t include food and energy prices, increased 0.3% from September while the annual reading remained at 3.3%. This reading peaked at 6.6% in 2022 and has obviously improved but in the prior 12-month timeframe, the reading has largely stalled, only improving from 3.9% to 3.3% over that timeframe. Four out of the last five readings have now come in at 3.3% which is one of the reasons we’ve seen mortgage rates remain elevated around the 7% mark.
After this CPI reading last week, Fed Chair Jerome Powell noted that “the economy is not sending any signals that we need to be in a hurry to lower rates.” So long as inflation remains stubborn, or stuck, around these levels, we can expect the Fed to lean towards leaving the Fed Funds Rate alone. While they must be concerned with a weakening job market, they also can’t cut rates too quickly with inflation not showing signs of improvement. In fact, if we average the last 6 months of CPI readings, inflation would be on track for 2.5% annually. However, when we look at the most recent 3 months, that annualizes to 3.5% which would be a rise in inflation. In short, recent readings indicate that inflation is not just stubborn, but poised to rise which won’t help long term rates such as mortgage rates. We’ve been saying this for a little while now – expect inflation data to worsen in the coming 3-4 months.
Wholesale Inflation Moves Higher
We don’t talk too often about Wholesale level inflation but it’s worth noting on occasion since it can be a leading indicator to Consumer inflation later. The Producer Price Index (PPI) rose 0.2% in October with the annual reading jumping from 1.9% to 2.4% which was hotter than the 2.3% that the markets estimated/expected. Any time these inflation readings come in higher than expected, it doesn’t bode well for mortgage rates. Core PPI, which again strips out food and energy prices, rose 0.3% for the month and moved the year-over-year reading higher to 3.1%. It’s this annual reading moving higher that bond traders/investors don’t like to see. This is just one monthly reading, but this move higher now puts more attention on the upcoming months to see if this is going to become a trend higher, which correlates to higher Consumer inflation later down the road.
These two inflation reports combined, CPI and PPI, last week is largely what caused mortgage rates to deteriorate a little bit from the week prior.
October Retail Sales Hotter Than Expected
Investors were expecting a rise of 0.3% in October for Retail Sales, but this reading came in a bit hotter, at 0.4%. While this might not sound like much, anything hotter than expected with Retail Sales leads the market to believe that the Fed might have to sit tight on a rate cut at the next meeting. What we have today is just a snapshot in time but if the Fed were meeting today, they likely would not be able to cut rates given inflation is still very much a thorn in our side and yet, consumers continue to spend. Now, the argument very well could be made that the consumer is spending more but they are not buying more product; that’s the ugly side effect of inflation. It just costs more now to buy the same amount of product. Nonetheless, what we want to see in terms of lower mortgage rates and improved housing affordability is the opposite of what we got last week – we need weaker Retail Sales and lower inflation data.
Weekly Rate Recap – What to Expect This Week
It’s a relatively quiet week as things start to wind down for the Thanksgiving Holiday next week. We will get housing reports later today and homebuilder confidence readings though. We’ll also get a peek at Existing Home Sales and Jobless Claims later this week but neither of those typically move the mortgage rate market too much. Fed Members will be speaking at various conferences this week though and that can sometimes spook the market depending on what is said. For right now, expect rates to stay right around where they are today with a little drift higher as the market just isn’t too sure of what to expect for economic data this holiday season.
It’s worth pointing out that the daily survey of mortgage rates has been updated a little bit. These daily readings are a collection of dozens of lenders, and it provides the rate they are offering a top tier buyer, not an average, which is defined as a buyer with 25% down, a 780-credit score, on a primary residence purchase. Obviously, it’s still very possible to put less than that down and there are still loan programs available for buyers with a credit score as low as 500 but the rates associated to those scenarios would be higher than what is published here.
Here’s how rates ended the week, and year-to-date:
Lastly, with the tweaks to the daily published rates on MND, I’ve updated the estimated monthly payments for various loan programs here. This includes principal, interest, average property taxes, average property insurance, and average mortgage insurance (if applicable):
Mike's Monday Mortgage Minute - Week of November 11, 2024 in Review"
