Mortgage Market Update - "Stubborn Chicken" - Rates vs Economy (recap Dec 16-22)

A slightly different format to my Mortgage Market Update, no bullet point headlines and more of a story this week as?it is a quite week for the markets.?I share some insights on the #mortgage #rate and market movements following #theFed's .25% #ratecut.? And, while there are no bullet points, I assure you that you don't want to miss this week's personal note...I assure you that you will be on my wife's side and enjoy a good? laugh at my expense.

The #Fed cut #rates by .25% were well-forecasted and expected.? The surprise was the dissension amongst the ranks with one member voting against the cut.? The published meeting notes will provide valuable insights when published next month.?

Jerome Powell's comments more than implied this will be the last #ratecut for a while.? Saying that we can only expect as much as two #rate cuts next year, most importantly, that would be fewer than the three cuts markets were projecting. Markets raced to react to the new projections (of one fewer reduction) and rates generally increased following the Fed's meeting, despite the rate cut.?The Fed meeting, dot plot, and press conference were all bad for mortgage rates and pushed them higher, and signal that we will see rates continue to creep higher again from here.

PCE inflation data came in better than expected, showing that inflation has cooled to the slowest pace since May.? But, most economists are still warning that inflationary policy proposals could still present reasons for pause as the Fed agrees with a more wait and see data reactive approach. ?

The week closed with a marginal dip, but we often see money parked in bonds during as stock markets slow the pace of trading during the holidays (good for rates...until the money moves again).?Most traders take the rest of the year off, making it unlikely to see any big moves until 2025.

I've spent the week playing a dangerous game of chicken.? Over the last 15ish years I will shave some ridiculous facial hair and by the time I turn around my wife will say, "gorse go shave that off!" I laugh and shave it.? This week, she didn't say anything...so, a day went by and then that turned into three...and now I am stuck with this disgusting mustache.? Turns out she saw a text echange with my oldest saying that I was going to se how long it took mom to notice...and so the game of chicken continued.?Finally, this morning she said that she can't even look at me anymore and I need to shave the mustache.? But, trust me when I say that I still lost this game of chicken...I had to meet the parent's on Ryan's new soccer team, attend a few local holiday events, and go to my son's final weekend shows looking like this (visit @financewithfactor on Instagram to see the evidence)!

Some people can pull off the mustache...I am not one of them!

The Fed and the economy have been playing a similar game of chicken for the past few years.? I continue to remind people that the Fed does not set mortgage rates. So, while the Fed will bring down short-term rates, mortgage rates will follow the bond, 10y treasury, and the mortgage backed security markets determine mortgage rates--aka the data.??The Fed basically warned as much in this week's comments, where following their .25% rate reduction they reiterated concerns that while inflation is trending in the right direction, it can reverse quickly.? Markets seem to think similarly and much will come down to where the data trends in 2025.??

Over the past few years, the only real losers in this game of economic chicken have been those who acted as if they "knew" rates were going to come down (as widely predicted...but didn't) and those left on the sidelines as rates continued to price them further out of the market. I acted as if I knew my wife would tell me to shave...but she didn't. ?It is with similar perspective that I encourage you to create a backup plan. If you are an aspiring homebuyer or a homeowner looking to refinance in 2025, don't get stuck with the results of this game of chicken.? I encourage you to build a team of people who can help you navigate what promises to be a volatile market. Work with a trusted mortgage lender who can help you build a plan and keep an eye out for your ideal outcomes...so that when the right rate or home comes available you can act quickly.

As someone who is relieved to shave his mustache, I assure you that having a plan (and a back-up plan) to react quickly is better than the stubborn game of chicken that leaves you suffering the results.?

Happy Holidays and I hope you enjoy some time off this week with friends, family, and your loved ones.? Best wishes for a happy, healthy, and prosperous 2025!

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