Friday Market Update: December 2nd 2022

Are Mortgage Rates Moving Lower?

Happy Friday! Brian Manning here with your weekly update. Let’s get right to it. Let’s see. So, if you watched my update on Wednesday, I was actually wrong there.

So, Wednesday this week, we had Jerome Powell talking. He spoke at 1:30 Eastern time. And if you look at all the speeches over the last couple of months, he was very hawkish, his tone was rather negative, and I really thought he was going to come out and talk about, you know, future rate hikes and this really tough talk.

Well, it’s actually contrary to that Jerome Powell came out and he actually said that he might think it’d be time for the Federal Reserve to start reducing their rate hikes, which is really good to see because we have other local Fed voting members that have been in line with this as well. And he also started to say that, you know, looking at what the Federal Reserve is doing and that they’re hiking rates, that he did acknowledge that there is a lagging effect, meaning when they hike rates, it does take six to nine months to really start to see the impact on inflation from their Fed rate hikes. So, definitely, the tone was very welcome.

You look what happened in the markets on Wednesday. All the markets rallied and it was very beneficial for us. And I just, kind of, wonder if you got a sneak peek into the inflation report that was coming on Thursday, because it would have been funny if on Wednesday, Jerome Powell was talking in a very hawkish tone. And then Thursday, the PCE came out, which is their favorite gauge of inflation, and then it was showing inflation coming down.

So, Thursday this week, we got PCE. That’s the Personal Consumption Expenditure. This is the Federal Reserve’s favorite gauge for measuring inflation. On a month-over-month basis, this moved down from 5.2% to 5%. The most recent highs were 5.4%. So, good to see the inflation come down there. The headline number moved down to 6%. That was at a recent high of 7%. So, as we’ve talked about in the past, we’re continuing to see inflation come down. Inflation is the arch enemy of mortgage rates. As inflation comes down, mortgage rates are coming down as well.

If you are considering buying a home, I’m telling you, right now is absolutely the time to do that. Mortgage rates are going to keep coming down. We really think they’re going to hit that 5% range in the beginning to middle of the upcoming year. If you’re sitting on the sideline right now and you want to buy a home in spring or fall, I’m sorry, spring or summer, and rates move down to 5%. Currently, there’s 4 million people on the sidelines waiting to buy a house. And as rates come down and the media gets ahold of this and these buyers jump in, it’s definitely going to make for more competition in the marketplace.

I don’t think it’s going to be a market like it was last year or the year before. But when rates do come down and everyone jumps back into the market, there’s definitely going to be more competition than before. So, if you’re considering buying a house, I tell you right now that this is the time to do it. Today, we get the BLS. So, the first Wednesday of every month, we get the ADP employment report.

First Friday of every month, we get the BLS report. That’s the Bureau of Labor Statistics. BLS reports today came out for the month of November. It was expected to be 200,000 jobs created in the month of November. We got 263,000 jobs created. You know, I do really question how accurate the BLS is. So, for example, the ADP report has samples from 25 million records, whereas the BLS is really doing some modeling. And I’ll give you an example here. ADP came out on Wednesday, and ADP said that in manufacturing, we lost 100,000 jobs. So, that’s sampling from direct payrolls for people that are getting paid across the US. Well, the BLS came out today and said we gained 14,000 jobs in manufacturing, and that’s from their modeling.

So… I’m not sure how we have 114,000 miss there between the two, but that’s definitely a big discrepancy. I think if you look at the markets, the immediate reaction in the marketplace because of the expectation of 200,000 jobs and getting 263,000, I think there’s a little wonkiness in the marketplace. But as the markets digested this report, they started to look at the ADP. We started to see some calming down in the markets, and everything really level back out. I’m around all weekend. If you have any questions, let me know. If you want to go through our strategic buyer consultation, give me a call. If you need to get a pre-approval, reach out to me anytime. Happy Friday. Hope you have a great day.



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