WEEKLY MARKET UPDATE, January 17th, 2024
It's surprising how well the bond market has behaved, largely shrugging off a stronger-than-expected BLS jobs figure AND the bump in headline CPI. Average 30-year fixed-rate mortgage rates increased last week, but not a lot. The debate is WHEN, not IF, the Fed starts cutting rates.
The next Fed rate decision will be on January 31. The Fed Funds futures market is currently pricing in a 97% probability that the Fed will do nothing (no hike, no cut). But for the subsequent meeting on March 20, the probability of a 25 bps cut (0.25% or one-quarter of 1%) is now 67%.
With the spring/summer selling season around the corner, there are many reasons to be optimistic. Mortgage rates have already dropped, the Fed will likely start cutting short-term rates in the next few months, and even home inventory is improving.
Christmas inventory gift.?Santa delivered more homes to needy buyers in December 2023. New listings rose 9% year-over-year, and active inventory (excluding homes under contract) rose 5% year-over-year. Full disclosure: new listings and active inventory fell?month-over-month?in December. That happens every year. This year, inventory fell?a lot less than usual. Is this a sign that 'locked-in' homeowners are getting 'unlocked' by lower mortgage rates? Let's hope so!
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The?MBS Highway Housing Index?for January 2024 improved for the second straight month (from 34 → 42), confirming the turnaround that commenced in December 2023. While the Buyer Activity sub-index continued to improve (27 → 33), it was the Price Direction sub-index (41 → 52) that led the way in January 2024, with five out of seven regions posting numbers at or above 50 (indicating net positive price direction). [MBS Highway]
Another record for home prices.?CoreLogic's Home Price Insights for November 2023 showed national home prices up 0.2% month-over-month (and 5.2% year-over-year), setting a new record. Home prices will likely increase 7% YoY for the full year 2023. [CoreLogic]
Have a fantastic week, and keep dreaming big.