Motto Mortgage Pacific

THE QUIET BEFORE THE STORM
April 29, 2024
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This past week interest rates held steady as the markets brace for the Fed meeting this coming Wednesday. Let's discuss what happened and look at the big news events ahead.

The Quiet Period
A lot of the big market moves and volatility in the financial markets have been sparked by Federal Reserve members speaking about monetary policy. The good news this week? It was the blackout or quiet period for the Federal Reserve, where Fed members have no speeches or make no comments on monetary policy for 10 days leading into The Fed meeting.

Bottom line...Fed members did not speak, and markets didn't have to react, and that was good news.

Global Rate Cuts Coming
Economies around the globe are seeing slower economic growth and lower inflation. For this reason, other countries have either cut rates or will begin cutting rates as soon as June. This is going "against the grain" with what the U.S. is doing as we do not expect to be cutting rates until later this year because our inflation remains a bit higher and more persistent.

New Home Sales Jump
In March, New home sales jumped to the highest levels in six months. This leading indicator highlights the pent-up demand for housing as new home sales are counted at the signing of a contract.

Since this report, mortgage rates hit the highest levels of 2024, so it remains to be seen if the strong buying demand will continue.

Demand for U.S. Short-Term Debt
Last Tuesday, the Treasury Department sold a record $69 billion worth of two-year notes. The good news? The buying demand was solid and the yield on the 2-year Note remained beneath 5%.

This is important to follow because if the 2-year Note can remain beneath 5%, it could limit how high long-term rates, like mortgages, rise.

The Buck is Strong
In response to our relatively strong economy and the Federal Reserve not cutting rates in the near term, the U.S. dollar is very strong relative to other countries. One benefit is some downward pressure on oil prices which are priced in dollars. If oil prices go down, that brings less inflationary fears, and this is good for bonds and interest rates.

A strong U.S. dollar also makes imports less expensive, which is good for inflation.
4.60%

The 10-year Note has traded in a range between 4.60% and 4.70%. For long-term interest rates, like mortgages to improve, we need to see the 10-year Note move beneath 4.60%. A move above 4.70% would be bad and likely bring another spike higher in interest rates.

Bottom line: Interest rates are trying to find a peak and next week's Fed Meeting and Treasury Refunding announcement may determine if the peak is here.

ADP Employment Report (March 2024)
Private sector job growth beat expectations in March, led by a huge boost in the leisure and hospitality sector, as employers added 184K new jobs versus the 148K that were expected. February’s figures were also revised higher (from 140K to 155K new jobs), with ADP adding that pay gains for job changers “rose dramatically.”

Case-Shiller Home Price Index (January 2024)
National home prices have “have continued to break through previous all-time highs set last year” per Case-Shiller, with January posting a seasonally adjusted 0.4% rise from December. Prices were also 6% higher than a year earlier, the fastest annual rate since 2022. All 20 cities in their composite index saw annual price increases for the second straight month, and home values are expected to remain supported this year.

New Home Construction (February 2024)
Housing Starts saw a big rebound in February, with both single-family and multi-family construction improving from January’s slump. Single-family starts were also 35% higher than a year earlier! And there are signs this trend should continue, as single-family Building Permits (which reflect future construction) reached their highest level in a year.

Why Buy Instead of Rent
What's better: buying or renting? To answer that question, you have to consider all the costs and benefits of homeownership over your time horizon. A simple comparison of monthly payments just doesn't cut it. If you've been thinking about buying your own place, let me show you how the numbers really pencil out.

Change in Home Value After 10 Years
Talk about a winning record! Buying a home and holding it for 10 years has earned a profit every year except one since 1942. Just look at those returns, too! Housing builds significant, long-term wealth.

Existing Home Sales (January 2024)
While existing home sales are still much lower than a few years ago, January brought a 3.1% rise when compared to December. NAR’s Chief Economist, Lawrence Yun, noted that "listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year."

Change in Home Value After 10 Years

Talk about a winning record! Buying a home and holding it for 10 years has earned a profit every year except one since 1942. Just look at those returns, too! Housing builds significant, long-term wealth.

Pending Home Sales (November 2023)

Pending Home Sales (signed contracts) were unchanged from October to November, though declining mortgage rates have “sparked a surge in interest” per the NAR. Sales are expected to improve next year, as lower rates have led “to savings of around $300 per month from the recent cyclical peak in rates.”

MBS Highway Housing Index (December 2023)
Buyer activity recovered somewhat in December, as the recent 1% fall in mortgage rates coaxed some buyers back from the sidelines. Home prices continued to hold up better than transaction volumes. But with lower rates, slightly improved inventory, and spring around the corner, activity levels may have already bottomed.

FYI - Have a great weekend.

IT'S THAT TIME OF YEAR

Stop by the Motto Mortgage Pacific office and drop off a toy or some non perishable foods.

Happy Holidays

Higher for (not much) Longer?

The market is no longer buying Mr. Powell's rhetoric. The Federal Funds Futures market is currently implying a 35% probability of a Fed rate cut in March 2024, and a 69% likelihood of a rate cut at the May 2024 meeting. All in, the FFF market is implying 80-100 bps of rate cuts by end-2024.

CALLING ALL AGENTS - 6.5 CE HOURS
November 9th, 2023 at 9am - 4:30pm

Motto Mortgage Pacific is sponsoring a CE class on REAL NEGOTIATION with Joe Still. Come learn skills on strategies, tactics, the balcony, and emotional intelligence.

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Existing Home Sales (September 2023)
Sales of existing homes hit a 13-year low in September as low inventory and elevated mortgage rates remain key headwinds for buyers. Yet, homes are still selling quickly (avg. 21 days on market) and prices are still up year-over-year due to the “pressing need for more housing supply.”

The Fed and Spreads
With 10-yr treasury yields at 4.86%, the 30-year mortgage rate should be around 7% (instead of almost 8% today). But thanks to Fed-induced uncertainty and a sharply inverted yield curve, the "spread" between 30-yr mortgage rates and 10-year treasury yields is today 1% wider than it was in 2007.

Consumer Price Index (September 2023)
While inflation was hotter than expected last month, annual Core CPI (which removes food and energy prices) reached a 2-year low of 4.1% - well below the 2022 peak of 6.6%. The Fed is looking for signs that its rate hikes are curbing inflation. Will this be enough progress for another pause at their Nov. 1 meeting?

BLS Jobs Report (September 2023)
Job growth was much stronger than expected in September, with the BLS reporting 336K new jobs, nearly double the forecasted amount. Over the last few months, revisions to prior months' data have been negative and large. That reversed course in September, with the BLS adding back 119K jobs. With the Fed looking for signs of a softening labor market, this strong data raises the risk of another rate hike at the Fed's Nov 1 meeting.

Cost of Acting vs. Waiting
According to Case-Shiller, national home prices rose nearly 6% in 2022. And they're on pace for another 5% appreciation in 2023. At current home prices and mortgage rates, the Cost of Acting can feel very high. But with home prices rising, the Cost of Waiting is even higher! Let me take me you through a detailed Cost of Waiting analysis for your area.

Pending Home Sales (August 2023)
Would-be buyers continue to press “pause” on a home purchase due to high rates and low inventory, as Pending Home Sales (signed contracts) tumbled in August. This data suggests closings on existing homes could fall below 4 million annualized this month. Yet there are positives to less competition. Reach out to learn how you can benefit in today’s market.

Signed contracts on new homes slipped from July to August, though they remain higher than a year ago as the lack of existing homes for sale is heightening the demand for new homes. Yet, more available supply is needed to meet this demand, as only 76K of the 436K homes available at the end of August were completed. This tight supply will continue to be supportive of home prices.

Big week, Fed talks on Wednesday,,,

Have a great week

Have a great week!

Have a great week :-)

The week ahead... Have a great one

The week ahead... Have a great week

This weeks economic calendar Have a great week