Friday Market Update: September 11th 2020

Happy Friday, Brian Manning here with the weekly update. Let’s get right to it, so… Monday of this week, everything was closed for labor day, it was a wonderful, 3-day weekend but we’re back at it on Tuesday. Tuesday, there was a lot of talk about the Federal Reserve and inflation and what they’re going to do. So, the Federal Reserve really looks at inflation as gauge-through reading called the PCE, which is the personal consumption expenditure and we just think it’s a lie, we think it’s the wrong gauge to look at. And the reason why we disagree with using the PCE is because the PCE doesn’t take into account for us as consumers, out-of-pocket medical expenses or cost of living or cost for housing.

So it was really hard for us to really wrap our head around how are you going to measure a gauge of inflation for the entire country when medical and housing expenses are not being looked at? It is what it is, I’m not going to tell you I agree with it but it’s something to keep a close eye on because the Federal Reserve is in the process of changing their monetary policy in regards to inflation and inflation is the biggest enemy to bonds and interest rates going up, so we have to really watch this closely.

We also got some information from CoreLogic looking at delinquency, so delinquencies on people that have mortgages that are 60-89 days late was down to 1.8% so that was good to see. And then, 90+ late payments was up from 1.5% to 3.5%. It kind of makes sense right now, we’re going through this pandemic where we had people 90 days ago that stopped making their mortgage payments. Yes, we’re going to see some fall-out from this, yes we’re going to see some fore-closures. It is nothing like 2008-2009. Trust me, I lived in Miami at that point in time, I saw the worst of it, and this is nothing like what happened there but in the short term, it’s really good to see that currently, people that are late on their mortgages now is a declining number which is really great.

This Wednesday and every Wednesday, we get Mortgage Bankers Association and information on applications. And on a year-over-year basis purchase mortgage applications are up 40%. This is unbelievable, the housing market is still very strong, it’s very robust, purchases are on the rise and it’s just really good to see.

Today, we get the CPI, that’s the consumer price index. So this is actually the gauge of inflation that we get on a monthly basis that we really believe to be more accurate because it does include out-of-pocket medical expenses, and it does include housing. So, we specifically look at the core rate on the CPI, and the reason why we look at the core rate is because the core rate excludes volatile items such as energy construct, oil and food. So if we strip out the core rate on a month-over-month basis, the CPI was up 4/10th of a percent, that’s the hottest number we’ve seen in a while, that’s a pretty substantial increase and on a year-over-year basis the core rate for CPI is up from 1.6% to 1.7%. So this is the hottest ratings that we’ve seen in 6 months. The reason why this is really important right now is because if you or anyone you know is considering refinancing, right now is the time, do not wait, rates are at all time lows.

There’s going to be one of two things that’s going to be a catalyst for mortgage rates to go up here, in the future. What are they? Number one is going to be COVID. If we start to see good news on something COVID related, such as a vaccine. Something promising from a reputable sources, stock markets are going to rally because the economy is likely going to do better and that’s going to cause mortgage rates to go up. Number two is going to inflation, we’ve talked about this a lot lately and inflation is the enemy of bonds, inflation is the enemy of interest rates. So as the economy starts to rebound and consumers are out there spending more money and buying more goods. When there is a breakdown or purchases that outpay supply, just purely looking at supply and demand, you’re going to see cost increasing and you’re going to see inflation increase as well, so that’s going to be an enemy of interest rates, as well. So, if you’re interested in refinancing I’m telling you, right now is the time. Mortgage rates are at rock bottom, something here is going to be a catalyst for rates to go up in the future, don’t get caught.

Give me a call, I’d love to help you in any way I can. Also, I’m around all weekend, if you have any questions, call me, email me, text me, call my cellphone, texting is the best way to catch me over the weekend. I would love to help you in any way I can. Happy Friday, hope you have a great day.