Morning Market Update - 4.20.22

Good Morning Everyone and Happy Wednesday!?I missed you all yesterday, stayed and worked from home trying to kick a nasty head cold.?Slept in a little this morning to try to keep up the beat down on this pesky head clogger, and feeling a lot better today.?I did want to reach out to you, even though a little later than usual to give you an update on the markets.?Many have lamented the recent run up in mortgage rates (and bond yields).?Even the first 2 days of this week saw another leg up over the 2.90% mark for the 10 year Note yield for the first time since 2018.?Jesse Bullard, Fed Pres for St Louis, was quoted in an interview on Monday that he could reasonably see a 75 bp move in the next FOMC meeting that is scheduled for May 3-4.?That sent bond yields up again.?Haven’t we already baked in to the bond market and mortgage rates all of the possible Fed interest rate hikes for the next year and ???Sheesh.

However, this morning we’re comin’ back down on the bond yields based on economic data from the National Assoc of Realtors who reported that U.S. Existing Home Sales fell by 2.7% in March to a seasonally adjusted rate of 5.77M.?This number is actually worse than the headline as February’s number was revised lower to 5.93M from the 6.02M originally reported.?So March’s number is really 4.15% below the original February number.?And take into account the fact that these existing home sales are based on March closings – which would represent January and February contracts (pending sales).?We were still at 3.99% for mortgage rates at the end of February.?The Freddie Mac National Average for 30 year fixed Conventional mortgages hit 5.35% this morning.?It will certainly be interesting to see how the real estate sales numbers pencil out here in the next couple months.

The bright spot in the NAR report this morning is the median price for an existing home was 15% higher in March of 2022 over March of 2021.?That number is down just a bit from year over year numbers posted in months’ previous, but the median price of $375,300 is a new record high.?This is a nation wide number of course, but it is the highest reading since records were kept starting back in 1968!?Prices keep going up because a limited inventory (supply) and still enough buyers (demanders) who are willing to keep moving with home purchases (and home loans? Or are they cash buyers?) despite higher mortgage rates.?If you talk to someone over 30 years old, they have enough experience to know that if you just cut the last 2 years out of the 40 year mortgage rate chart – we’re in a pretty normal interest rate environment.?

Also, many of us that do have 20+ years of experience in the real estate / mortgage business know that 18 to 20% year over year home price appreciation is not healthy – and certainly not sustainable.?If the real estate market is to be reasonably healthy again, we need to get that year over year appreciation number down to 5-7% -- that’s sustainable.?And this year’s run up in mortgage rates seems to be accomplishing that.?Can we get a “soft landing?”?That is the question for the FOMC.?They need to project a hard line right now to convince the markets that they are serious about getting inflation under control . . . but they are cautious not to drive this robust economy into recession and as such create a negative appreciation for the housing market.?Sorry for the long email . . . you got 2 days crammed into 1 ???

And, earnings season is in full swing right now with multiple major companies reporting all throughout the day.?As such, the Dow is up 296 points as of this writing, the NASDAQ is lower by 140 points on Netflix’s dismal earnings report.?The S&P 500 is up 8.?Gold prices are lower by $6 an ounce (down $40 an ounce on the week!) and Oil prices are down $1.65 to $100.91 a barrel for WTI.?The yield on the 10 year Note is lower by just over 5 bps to 2.863% -- still about 3.5 bps higher than where we left of last week.?I’m in the office all day today.?Please reach out to me by phone or email if I can help you out in any way.?Have a wonderful Wednesday!