Friday Market Update: March 18th 2022 with BRIAN MANNING

Happy Friday! Brian Manning here with the weekly update. So much to talk about this week. Oh my gosh. Let’s see. So, Monday this week, we get some feedback from Zillow. They just have record of new listings. Right now, it’s down 25%. So, inventory is still a challenge and then if you look at February 2022 compared to February 2021, you have inventory of new listings down 48%. So… So, still inventory challenges across the board. To give you some color on this, in December of 2007, we had 3.6 million homes for sale and in December of 2021, we had 911,000 homes for sale. So, if you look at the last time we went into a housing crisis compared to now 3.6 million versus 911,000 Absolutely no comparison. And if you look at inventory available right now across the country, it’s at about 780,000. So, it’s down even lower than where it was before.

We also got PPI this week, that stands for Producer price Index. This measures inflation at a wholesale level, never really got a lot of attention but certainly, should now. PPI is running at 8.4%. So inflation everywhere is running hot. As far as rents are concerned on a year-over-year basis, rents are up 12.6%. So, this is an average. So, this is an average showing what rents are doing for renewals and also for new leases. You know, new leases are running around 18%. Renewals are definitely running less. But 12.6% is the average for rents increasing on a year-over-year basis. Certainly, you know, good cause for someone to consider becoming a first-time homebuyer because rents are just escalating everywhere.

Wednesday this week, we just had, you know, big fed day and so much to talk about from Wednesday. So, of course, we had a quarter percent rate hike. We’ve been calling for a rate hike for a long time. You know, it probably initially would have been a half a percent but you got the war with Russian and Ukraine now which is definitely having an impact on global supply chains as well. So, you had a quarter percent rate hike. So, that was really already priced in. It didn’t have much impact because that was what everybody already expected. The question we’ve been paying close attention to and anyone that’s paid attention to, you know, my mortgage rate update that I did, any of these updates I’ve been talking about for quite a while was really the fed balance sheet.

So, in this meeting, Jerome Powell, he did say that the balance sheet is going to be addressed in an upcoming meeting. He didn’t say when so my guess is maybe May. We’ll have to wait and see what happens. The thing about the balance sheet is that’s at over 8 trillion dollars right now. So, if the Federal Reserve really jumps into the runoff of the balance sheet, that’s definitely gonna have an impact on mortgage rates. Right now though, you look what’s happening in the markets as of today and the fed rate hike is actually helping us for interest rates and this is completely counterintuitive. I’ve talked about this before but a fed rate height does not mean that mortgage rates go up. So, the federal reserve really has two jobs that they focus on. Number one is they have to make sure the US economy is staying at full employment and number two, they have to keep inflation in check. Well, the fed rate hike at a quarter percent is assigned to the markets that the federal reserve is now really focused on keeping inflation in check and there’s really an anticipation that we’re going to see 6 or 7 more rate hikes this year. So, it’s counterintuitive but fed rate hikes heights does not mean that mortgage rates are rising and as well, usually, it’s completely opposite. Typically, a fed rate hike means that mortgage rates will come down because they’re taming inflation. The crazy thing is you look right now at fed president Bowler and Waller…

Last year, all they talked about was oh my gosh, inflation is transitory It’s transitory. It’s transitory. They did nothing about it as inflation rose all last year. Now, they get their first fed rate hike. And you look at their interviews between yesterday and today and now, they’re like firemen trying to put out these fires because they’re trying to control inflation. It’s just crazy to me how they change their tune from one year when you have inflation running really high now to another year here we are now, they’re trying to control it. You know… It just, kind of, shows you the federal reserve doesn’t always know what they’re doing, certainly is cost for boom or bust cycles because they’re just… they’re always behind the eight ball and what they’re doing there. I also say that they don’t see these rate hikes would put us into a recession but… also if you watched any of my mortgage update classes, if you look at what Greenspan did and you look at what Burns and Volkers had coming through them as far as rates of inflation are concerned, and then taming those rates of inflation with fed rate hikes every single time in history always led into recession.

So… It’s, kind of, crazy what they’re doing in the news right now as far as these fed presidents. But I would say we’ll see 6 or 7 more rate hikes this year. That’s not bad for mortgage rates. Anyone getting a mortgage right now, I’d highly suggest… that you do not pay points to buy your rate down. I think going into the future, you are going to see lower mortgage rates again. It’s going to be a good opportunity to refinance because fed rate hikes will tame inflation. Eventually, they will do their job and it will cause mortgage rates to come down. I’m available all weekend. If you have any questions, let me know. Call on my cell phone, text me. If you want to go through our… strategic buyer consultation, I’d love to help you. If you want to learn how we’re closing purchase transactions in 18 days reach out. Happy Friday. Have a great day.