Question of the week: What do you think about interest rates, real estate prices, and the economy?
Answer: This week I am saving you some time, at least those who routinely slog through the answers to the questions of the week.
I would like to know what you think about what is happening in the economy, inflation, interest rates, real estate.
Please click this link to a quick survey I put together (14 questions all multiple choice but one): https://s.surveyplanet.com/0xbb1zby
Every week the WR&MU goes out to over 500 readers, almost half open up the email and read some, or all, of the update every week. My hope is that everyone who opens this week’s updates click on the link and take a few minutes to click through the survey.
Depending on the amount of data, I intend to have for you next Friday the results of this not very scientific poll.
Thank you for taking the time to complete the survey!
Have a question? Ask me!
A lot of public figures talk about “transparency,” Federal Reserve Chair Jerome Powell appears to be one who means it. Pulling no punches, Powell without actually saying it, said that the Fed is okay if the economy falls into a recession as a result of the Fed’s moves to pull down inflation.
As well, the Fed is expecting unemployment to increase, forecasting the unemployment rate to be 4.4% in 2023, an increase from the current 3.7% rate.
Powell’s comments came at a press conference following the Fed had hiked its benchmark rate by 0.75%, the third straight increase of that amount, as expected, increasing the rate from 2.25-2.50% to 3.00-3.25%. Looking ahead, the Fed raised its “terminal rate,” (where it expects to end up after more rate increases) to 4.6% in 2023. Easy math shows us that two more large rate increases hits that mark. While it will get close to 5%, no Fed officials who vote on the rate changes predict it will exceed that level. Forecasts from the eighteen officials were evenly split with six each predicting the benchmark rate will level off at 4.25-4.5%, 4.5-4.75%, or 4.75-5.00%. The climb to the “terminal rate” will not be gradual, as the Fed has embraced a shock-and-awe approach, as seen by the 2.25% increase in rates over its last three meetings. Looking forward, based on the past few months, it is not unreasonable to expect the terminal rate to be reached by February. How firm the terminal rate expectation is remains to be seen given Powell’s very hawkish view of inflation and his stated intention to use all tools to pull it down from near 9% to near 2%.
In regards to housing, Powell said the deceleration (not the same as decrease) in housing prices is “a good thing,” as housing prices will be more in line with residential rental rates and other prices. Having supply and demand become more aligned is needed to increase home affordability.
Somewhat good news for mortgage rates came when Powell answered, “No,” when asked if the Fed is getting close to selling the $2.7 trillion of Mortgage Backed Securities it holds. As mentioned in last week’s WR&MU, the Fed selling its holdings of mortgages and Treasuries puts upward pressure on rates, but withholding sales of MBS in the short-term, the Fed will alleviate any additional pressure.
Rates for Friday September 23, 2022: No news or comments this week moved investors to want to enter the fixed-rate markets. When they feel a recession is closer than more inflation and rate hikes we will see rates flatten and decline. In the meantime the conforming rate is up from last week, but less than I would have expected given the activity earlier in the week.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:
30-year conforming 6.125% Up 0.125%
30-year high-balance conforming 6.625% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
Thank you to all who reached out after last week’s WR&MU. I was worried about getting too technical, and was more long-winded than normal, so the positive feedback was very well received.
Regular readers know that I am a big baseball fan. While never a fan of the Yankees, Aaron Judge’s season where he has already tied the immortal Babe Ruth for home runs in a season, and could possibly win the Triple Crown (first in the American League in homers, RBI, and batting average), has me rooting for him.
That said, I am rooting even harder for St. Louis Cardinal Albert Pujols to reach the magic number of 700 career homeruns, he currently is at 698 career dingers with eleven games left in the regular season and how ever far they go in the playoffs. Pujols is one of the all-time good guys to play the game and is well known for his work in the communities where he has played.
Making it easier for me to root for both of these great players is that neither is scheduled to play my beloved Phillies, unless they meet in the playoffs.
Have a great week,
Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog