Week of Dec 11 - 15: What happened in the market this week?
Happy Friday!
I hope you had a week filled with new challenges and opportunities that helped push you past your comfort level.
It was a pretty light week in the mortgage world. Nothing too major to report... ;)
Alright, that joke probably fell flat. But you know what else fell this week... RATES!
We saw a massive drop in the average 30 year mortgage rate from last week. We're at 6.60% on average, which is down a whopping 50 basis points from last week, and the lowest they've been since May.
So what caused all of this market activity this week? Keep reading...
Favorable Fed Forecasts
The big news this week centered around the highly anticipated Wednesday Fed meeting. Even though the result was expected (no increase in rate), it was the statement released after the meeting that had everyone talking.
The key information was the "dot plot" forecasts from officials. While investors have been pricing in 3 or 4 rate cuts next year, officials projected just 1 in their last set of forecasts three months ago, and recent comments have been mixed on the subject.
Well, well well... this week, officials did in fact shift significantly closer to the outlook of investors, as they now anticipate three 25 basis point rate cuts in 2024. Yes, you read that correctly... cutting rates!
In addition, Chair Powell supported the latest outlook during his press conference, which is why MBS prices increased, the US 10Y bond yield dropped, and mortgage rates declined sharply on the prospect of looser monetary policy.
Deflation?
We've been talking so much about inflation over the past couple of years, but are we continuing to head the opposite way? I have no idea if this is a technical term, but how about we start talking about Deflation! Another key economic indicator - Consumer Price Index or CPI, was announced on Tuesday with a favorable result.
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Mostly due to lower energy prices, CPI in November slowed to 3.1%, the lowest reading in 5 months, from 3.2% in October and in line with market forecasts. Progress in the battle against inflation has been slow due to persistently high prices in certain areas, but this month, most of those individual components of the CPI report revealed favorable news. Shelter (housing) costs remained elevated and again were responsible for the largest portion of the increase, although they are easing.
We're still spending money!
Despite numerous headwinds, such as higher prices and credit card rates, retail sales (consumer spending) has continued to outperform the forecasts of economists. Retail sales in the US unexpectedly increased 0.3% month-over-month in November 2023, rebounding from a 0.2% fall in October, and beating market forecasts of a 0.1% decline. Gains were seen across a wide range of categories, particularly in restaurants/bars, hobby stores, and sporting goods. Retail sales, which are not adjusted for inflation, were 4.1% higher than a year ago, exceeding the increase in prices over that period. Maybe it's all that holiday spending?
A Look Ahead
Not much of a surprise here, but investor will continue to watch for Fed officials to elaborate on their plans for future monetary policy.
As far as economic reports go:
And here's some food for thought as we head into a new year: It's easier to optimize a modest start than to begin with a perfect start. Starting is the hard part, so start small and get in the mix. You'll learn a lot and you'll realize you don't need to have it all figured out to begin.
Have a fantastic weekend!
Cheers
Mortgage Leader | Unapologetically Authentic | True Believer of Good Karma | NMLS 1683722
1 年And I forgot to mention, if you want to be added to my email list so you get this directly, shoot me a message! You don't need to be a mortgage broker to get value out of this.