How the housing market will evolve in 2023
The unrelenting Fed policies to combat inflation will eventually instigate an economic recession sometime in 2023.
The unrelenting Fed policies to combat inflation will eventually instigate an economic recession sometime in 2023.
The mortgage rate for 30-year fixed mortgages fell this week, with the current rate borrowers were quoted on…
Mortgage rates for 30-year fixed mortgages fell this week, with the current rate borrowers were quoted on…
Mortgage rates for 30-year fixed mortgages rose this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 4.16 percent, up from 4.11 percent.
The US Fed has rate decisions slated for Feb. 1, March 22 and May 3, with expectations that more hikes are slowly coming to an end based on inflation reports showing signs of easing, he noted. Despite the Fed reporting in December it would raise rates to 5% in 2023, a 0.25 percentage point hike … [Read more…]
Last week’s housing market data provided mixed news, but the year-over-year purchase app numbers were the big story.
The Housing Market Tracker shows weekly inventory rose slightly and with mortgage rates falling, more people should list their homes.
Overall inflation is cooling, but the index for shelter is still on the rise, as more Fed rate hikes are expected this year.
Recently, the bond market’s job description seems to be almost entirely focused on reacting to CPI and then waiting for the next one. Perhaps we can throw the Fed into the mix as well, but Fed days have been a distant second fiddle to CPI. So with CPI out just a day ago, what do we do until the next one comes out? What does the bond market do? These are surprisingly fair questions in early 2023, and we won’t be entirely sure of the answer until we see what actually happens. We know that markets were more than willing to react to other data besides CPI recently. This was especially true of last week’s various labor market reports on Thursday and Friday. Those actually made for bigger moves than yesterday’s CPI, but possibly because Thursday accounted for a quick break outside the prevailing consolidation pattern in Fed rate hike expectations and Friday quickly restored the range. Either way, it’s notable that this week’s CPI data merely left that range intact as opposed to challenging it (notable, but perhaps not surprising considering CPI was in line with expectations). That consolidation pattern suggests the Fed Funds Rate is homing in on 4.875% (technically 4.75-5.00 target range) as the “terminal rate” (aka ceiling). That would make the path of this rate hike cycle look like this, assuming the Fed can fulfill its goal of holding rates at the ceiling for a long time. While the Fed Funds Rate moves in a wider range than 10yr Treasury yields, the 10yr tends to move first–sometimes by many months. In late 2018 through the middle of 2019, 10yr yields were falling as the Fed Funds Rate held steady. Another takeaway from the chart above is that 10yr yields began to decline even as the Fed undertook the last leg of its rate hike cycle. In other words, the longer view was that, although the Fed would continue to hike just a bit more in the short term, rates would end up being lower, on average, over the next 10 years. That’s not too different from what many investors are thinking right now, with the downtrend in rates since November looking a lot like the initial drop from ceiling levels in late 2018. In the short term, the challenge for further progress would be to break below a level of 3.40%. While this isn’t some magical gateway that guarantees additional downward momentum in rates, it would be a somewhat important milestone that confirms traders are comfortable with tentatively beginning the journey toward lower long term rates. Whether that journey begins or not, it will still depend on incoming economic data. As long as the labor market situation remains strong and unless prices in the services sector unexpectedly deflate, the Fed won’t be seen as having any major motivation to be friendlier toward rates. That could ultimately change the traditional dynamic between longer and shorter term rates in the next few months.