Friday Market Update: March 25th 2022 with BRIAN MANNING

Happy Friday! Brian Manning here with the weekly update. Let’s see. So… Unfortunately, this week, we haven’t really seen great news for mortgage interest rates. And let’s talk about why we’re seeing that. So… Monday this week, we had a Fed President, Jerome Powell, giving a speech and certainly, he just had the most hawkish tone that he’s ever had so far. An in this speech, he was talking about being considerably more aggressive in its rate hikes that they’re going to do for the rest of this year. And also hinted on balance sheet reduction. If you watch any of my updates, you hear me talking about the balance sheet reduction. Certainly, the balance sheet reduction is going to be the most impactful as far as mortgage rates are concerned. Marcus did not love Jerome Powell stance on Monday and it definitely had an impact on mortgage rates, unfortunately, this week.

Wednesday, this week, we got new home sales. So, new home sales are from new construction. This was down 2%. The media had a field day with this about how the market is crashing and… oh, my gosh, new home sales were down 2%. But… let’s look a little deeper at what that means as far as new home sales are concerned. So… for the month of February, there was 407,000 new home sales available. So, this is for new construction. But the thing about the 407,000 homes that were there, only 35,000 homes were actually available for delivery. That’s across the entire United States. Of the 407,000 homes that were available, 25% haven’t even been started yet. So… if you look at builders and what they’re saying right now, certainly, they’re having supply chain issues. There’s a lot of homes that haven’t even been started yet, and that’s definitely having an impact. So… you know, I really take that new home sales report with a grain of salt because… that’s just such a minimal amount of inventory. If you look at inventory in general, you know, for the month of February, we had 870,000 new homes available. And then you throw 35,000 in there for new construction. That’s only 905,000 new homes available in the month of February. You know, I’ve said this before. If you look back in December 2007, leading into the housing crisis there, there was 3.6 million homes available for sale.

Well, here we are in February, resale and new construction, we only had 905,000 homes available. So… you know, certainly, seeing some challenges there as far as availability. Today, we get pending home sales. Once again, the media has a field day with it. They’re absolutely wrong. I can’t stand what the media does to these reports. Pending home sales, this is measuring sign contracts. For the month of February, it was down 4.1%. Expectation was that it would be up 9/10th of a percent. What’s crazy, if you look at pending home sales for the last five years, we’re really on track for consistent pending home sales over the last five years. Yes, we had a blip in there because we had COVID. We had historically low interest rates. But if you take that little blip out and you just look at pending home sales over the last five-year average, we’re just right on track with exactly what happened. Additionally, if you look at inventory, inventory is down 16%. So… of course, pending home sales are lower right now because when you have inventory down 16%, there’s just less inventory to choose from and without a doubt, you’re going to see less pending home sales. So, the media is just wrong in the way they interpret this. They don’t even look into the report. They don’t even give you feedback on why it’s down. So, I don’t agree with them, but it’s not a shocker to see this report down a little bit.

Today, we have mortgage rates moving, unfortunately, not in the direction we’re hoping to see because we had Fed governor Waller talking about his stance and really wanted to be more aggressive. But Fed governor Waller, his comments really were that and what they’ve done at the federal reserve has only been impactful to rates by around 40 basis points, which is completely incorrect because if you look at what the federal reserve did through COVID, they really had an impact of almost 2%. So, 200 basis points. So, completely incorrect in what he said there. But what’s really more concerning here is that, you know, he’s definitely in favor of a faster runoff of the balance sheet. So… if there’s anything that’s going to move mortgage rates faster than anything, it’s going to be a mismanaged runoff of the Fed balance sheet. So, something we have to pay close attention to, we have to see what’s going to happen this year. Fed rate hikes are going to be a given. They need to hike rates. They really needed to hike rates since last year because they needed to combat inflation. And now here we are, magically, they’re realizing, oh, my gosh, inflation is an issue. Now we need to jump on the bandwagon and do something about it. So, markets aren’t really loving this right now. Mortgage rates are worsening today. I’m sorry to be the bearer of bad news. But… you know, the Fed is definitely the driving force there. I’m available all weekend. If you have any questions, let me know. If you want to go through our strategic buyer consult consultation, learn how we can close your purchase transaction in 18 days, call me on my cell phone, text me. I’d love to help you. Happy Friday. Have a great day.

I”m available Saturday & Sunday, for your convenience – Don’t hesitate to call me!