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Friday Market Update for the Week of June 18th 2021

Happy Friday, Brian Manning here with the weekly update. Let’s see, Monday this week was pretty quiet news day, not much to talk about there. Tuesday this week, we got what’s called the producer price index, it’s another gauge of inflation, producer price index was up 7/10% on a month over month basis, which again, is another hot number for inflation. And really, it’s primarily just due to labor shortages. So we’re still seeing some high inflation numbers there. Wednesday this week, we got some new construction info housing starts for single family residence were up 4.2% permits were slightly lower, and probably because most builders are just experiencing some labor shortages right now. So still seeing really strong housing demand for new construction and that’s going to propel that market for quite a while now.

We also got some information on rents on a year over year basis, rents are up 5.4%. So I think we’re just starting to see rents now catch up with this bump that we’ve seen in the housing prices, I wouldn’t be surprised if we see kind of rents continually rise for quite a while because if you’re an investor buying a rental property right now you’re buying at today’s prices, you have to come in a slightly higher rent to cash flow based on today’s prices. So we’ve seen some rent rises, and we’re probably going to continue to see them.

Wednesday this week, at the end of the day, we got Federal Reserve announcements. So Federal Reserve is wrapping up the end of a two day meeting at the end of every two day meeting, you have Jerome Powell do kind of a press conference. First, they have a formal press release, and then they take questions and answers. They just get drilled there based on what’s going on in the economy, what they’re seeing with our inflation, but really, they also put out what’s called this dot plot. So the dot plot takes 18 fed members and it anonymously posts where they think fed rates are going to go and what they’re going to do here in the future. So now you had seven opposed to four fed members that think there’s going to be a rate hike in 2022. Not necessarily meaning is a mortgage rate hike. That’s completely different. So don’t confuse the two. But certainly the Fed is gonna have to do something here to combat home inflation the near future.

Also, we got some information from the National Association of Realtors that vacation home sales are up 16% I know us being in Colorado here, looking at all of the mountain towns – Crested Butte, Steamboat, Ville, Breckenridge, Telluride, everywhere, has just seen a significant decrease in home sales, but across the country and markets that never saw it before see an increase of vacation home sales. So still just continuing to propel strong housing market.

And today we get fed President James Bullar talking and you know, a couple of really interesting comments which really actually moved the markets today. First, he said that the Federal Reserve was kind of caught off guard and surprised that inflation is coming in as hot as it is. I mean, I’m no rocket scientist and we’ve been talking about inflation for months now leading into what’s going to happen here. So it’s kind of shocking that they’re caught off guard. He also says that they should stop buying mortgage backed securities immediately. So the Federal Reserve right now we’ve talked about this, has this kind of form of what’s called quantitative easing taking place right now. So the Federal Reserve, every single month is purchasing US Treasuries and mortgage backed securities. And essentially, they have right now what’s called the yield curve control. So they’re buying so many treasuries and mortgage backed securities that they are forcing keeping rates low right now. And James Bullard is saying, hey, inflation is running hot, we need to stop buying mortgage backed securities immediately, which is interesting.

This is the first time there’s really been talk of tapering out of their bond buying program. So certainly moved the markets a little bit today, we’ll have to keep an eye on it. He really thinks that if they stopped buying mortgage backed securities, which would cause mortgage rates to rise a little then it would potentially calmed down our frothy housing market, maybe a little bit but you know, they definitely seem relatively disconnected. Because right now, the other thing is that there’s just an imbalance of inventory versus demand. And if you look at the housing market, and you watch what’s been going on over the last year or so, inventory has just been at a record low. So yes, if rates go up a little bit,it might take a couple of people on the market, but it still does not do anything to really cure this lack of inventory that we have right now. Although I would say at the end of August, the Federal Reserve has their two day meeting in Jackson Hole. This is really notoriously just, you know, a meeting where a lot of information comes out, I wouldn’t be surprised based on the data that we’re going to get between now and then especially inflation data that’s still going to continue coming out hot that we see more announcements from Jerome Powell at the end of that in regards to tapering on our bond buying programs which could have some impact on interest rates, so we’re going to have to wait and see but end of August I think there’s going to be some movement there.

I’m around all weekend. If you have any questions, let me know. I would love to help you any way I can. If you have questions about the home buying process, want to go through strategic buying consultation, figure out how we can do 21 day close for you, make it competitive in today’s market, call me, text me. I’d love to help you any way we can. Happy Friday. Hope you have a great day.

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