Will there be another rate cut this week? ??

12/9-12/13 Headline: Rates Head Higher But A 3rd Rate Cut Is Coming

Easy come, easy go. Rates shot back up last week after government spending came to light and hotter than expected inflation reporting didn't roll our way. Luckily, none of this was disappointing enough to deter the market from believing we'll get another rate cut this week.

The average rate on a 30-year fixed rate conventional loan rose to 6.706% (up from 6.56% last week)! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers!?

Federal Budget Deficit Continues to Balloon

The U.S. government posted a $367B budget deficit for November, up 17% from a year earlier and more than the $353B expected.

Budget deficits are BAD for mortgage rates. The higher the budget deficit gets, the greater the interest rate that the U.S. needs to pay investors, which pushes the 10-year treasury higher and simultaneously pushes mortgage rates higher. We saw that play out this week!

It would be REALLY nice if we had a government that understood how to balance a budget (and stick to it). There's some hope that new Department of Government Efficiency (DOGE) is going to fix all of our government spending problems, but I'm less optimistic. Considering the Trump administration has a goal of reducing the federal deficit by $876B annually, Musk might have an easier time landing someone on Mars than getting the US government spending under control. ??

Inflation Reporting Gets a Mixed Reaction

The Consumer Price Index (CPI) and Producer Price Index (PPI) reported last week - 2 HUGE inflation measures.?

CPI came in as expected, an increase of 2.7% annually and 0.3% month-over-month. Unfortunately, as expected, still gives many investors cause for concern. Here's why...

September CPI reported a 2.4% increase and October CPI reported a 2.6% increase, meaning inflation is heating up, and even though it's not heating up by much -it's still concerning. Some policymakers are getting frustrated with inflation's resilience and that puts the pace of rate cuts in jeopardy. Slower future rate cuts will translate to higher mortgage rates today.

This inflation report did give us some great news from the shelter costs reading. A measure within the shelter component that asks homeowners what they could get in rent for their properties increased 0.2%, as did the actual rent index. They are the smallest monthly respective increases since April and July 2021.

More troubling, PPI came 2x expectation (increase of 0.4% instead of 0.2%). The producer price index measures what producers get for their products at the final-demand stage. PPI can be an early warning sign for CPI. If producers are paying more, producers will naturally try to pass that cost on to customers. The silver lining on PPI is excluding food and energy, core PPI increased 0.2%, meeting the forecast.

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Rate Cut #3 is Here!

Current forecasts show a 96% chance of a rate cut, so while there are no guarantees in life, this is about as close as we can get.?

For homebuyers, the rate cut is just a piece of the puzzle. More important than the rate cut is going to be the changes in the Fed's dot plot (showing the expected future Fed Funds Rates) and Powell's commentary at 2:30ET on Wednesday,

Next week is an action packed week with housing data, retail sales data, inflation data and of course the Fed meeting, Follow us on Instagram?for immediate reactions to all the news this week.

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Key reporting dates this week:?

Mon, 12/16: Empire State manufacturing survey

Tues, 12/17: U.S. retail sales, Home builder confidence index

Wed, 12/18: Housing starts, Building permits, FOMC interest-rate decision, Fed Chair Powell press conference

Thurs, 12/19: Initial jobless claims, GDP (second revision), Existing home sales, U.S. leading economic indicators

Fri, 12/20: PCE index

If you're actively shopping for a home right now, don't forget bout our Rate Rebound program, so you can buy today and enjoy a low cost refinance whenever rates fall.?

Have y'all seen the news about all the mysterious? drone activity??? Drones are now appearing in 6 states across the country with little known about where they are coming from!? it's a story that's captivating people all across the country.

If you have any questions or just want to learn more, feel free to email or call/text me at 512-701-1819.?

Talk soon!

Eric