Feels Like Fed Easing

by Jim the Realtor | Nov 30, 2022 | Interest Rates/Loan Limits

This isn’t exactly new news – most prognosticators figured the Fed would only raise their rate by 0.5% in December, instead of the 3/4% hikes recently – but the stock market liked it (up 628) and the 10-year yield dropped a tenth.  All we need is mortgage rates to be in the 5s for selling season!

Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting. Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.

https://www.cnbc.com/2022/11/30/fed-chair-jerome-powell-says-smaller-rate-hikes-could-come-in-december.html

He never had a clue about the real estate market, and was just winging it – and nobody has helped him with it since. “…..hopefully come out in a better place between supply and demand”???  The guy who has our economy in his hands is living on hope?

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Rates Are Steady

by Jim the Realtor | Nov 28, 2022 | Interest Rates/Loan Limits

Will the 30-yr jumbo rate stay in the 5s? Here’s what MND says:

Excitement, volatility, non-stop action… concepts that have absolutely nothing to do with mortgage rate movement over the course of the past two weeks.  In fact, since rates plummeted in response to the November 10th CPI data, they’ve been as flat as we’ve seen in 2022.

This is the goal for financial markets and mortgage rates as they traverse a time frame like the Thanksgiving holiday, but it’s also a byproduct of relevant events.  Specifically, inflation data dominates the landscape.  It was no surprised to see a big reaction to the CPI data 2.5 weeks ago, and markets may largely be waiting for the next installment before the next substantial shift in rates.

This doesn’t mean rates will remain as flat as they have been–only that they may resist moving too far in either direction until they have more guidance from economic data and the Fed.  This week will bring some of that economic data, but the next CPI report arrives on December 13th followed a day later by the next Fed announcement.

Fed speakers were making the rounds today reminding markets that there are more rate hikes to come.  The Fed sees the strength of the jobs market as providing a cushion to be aggressive in its fight against inflation.

While the Fed will almost certainly continue to hike rates on the 14th (probably by 0.50%), financial markets have long since baked that assumption into current trading levels.  That means today’s mortgage rates already account for the current Fed Funds Rate forecasts.

Even then, the Fed Funds Rate doesn’t dictate mortgage rates and is an imperfect indicator for rate momentum. Longer term rates like mortgages and 10yr Treasury yields typically begin falling sooner and by larger amounts in any given rate cycle. The past few weeks could be the first phase of that typical pattern (10yr Treasuries have dropped 0.30% versus 2yr Treasuries since then), but again, the continuation of that pattern depends on confirmation from upcoming inflation data.

https://www.mortgagenewsdaily.com/markets/mortgage-rates-11282022