9/23-9/27 Headline: Another Inflation Win Clouded By News In China

Last week was a pretty exciting week for mortgage rates. Since the Fed has cut the Fed Funds rate, mortgage rates have been up and down trying to figure out the next move.

 Inflation reporting was solid but some surprising news from China and stronger than expected GDP numbers sent mortgage rates slightly higher.  The stage is set for another MASSIVE week as worse than expected employment news can send rates falling (or higher - but let's think positive).

 Despite the ups and downs, the average rate on a 30-year fixed rate conventional loan stayed FLAT again at 6.06%!  Sign up for our weekly Friday rate texts to see how much lower our rates are compared to the average - you don't want to miss it!

China Goes Big to Revive Economy

China's economy has been struggling, and last week China unveiled an aggressive stimulus package in an attempt to bring their economy back. The package is being described as a way of putting a floor beneath their housing and stock markets. China has been making headlines for years for their housing market oversupply issue (a problem that we wish we had). In any event, the move by China is seen as inflationary - as most stimulus packages are - and mortgage rates went up as a result. A sign that global markets - especially China - can have a big impact on the US! TBD on if this move up by mortgage rates is just temporary until the market digests the news or more permanent.

Another Win in the War Against Inflation

 Personal Consumption Expenditure Index- the Fed's favorite inflation measure - reported Friday. The PCE index , rose 0.1% for the month, putting the 12-month inflation rate at 2.2%, down from 2.5% in July (and less than the 2.3% expected). The reporting is the lowest we've seen since February 2021. 

 “All quiet on the inflation front,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. “Add today’s PCE Price Index to the list of economic data landing in a sweet spot.”

 Of course, housing was once again an outlier in the inflation data. The housing costs PCE price index, which is part of core services, jumped by 5.7% annualized in August from July (+0.47% not annualized), the second month in a row of sharp acceleration! 

 US GDP on track for 3% growth

 In another blow for mortgage rates, GDP came in better than expected at 3% annualized growth as of the 2nd quarter.  The uptick from the 1.4% annualized growth seen in the 1st quarter backs up Powell's claims from the September Fed meeting that the economy is on solid footing. 

 Pending Home Sales Rise as Rates Fall

 Pending home sales in August ticked up a just 0.6% in August as many buyers stayed on the sidelines, waiting for the big September rate cut. “A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August,” said NAR Chief Economist Lawrence Yun. “However, contract signings remain near cyclical lows even as home prices keep marching to new record highs.”

 The average 30-year fixed rate on a conventional loan has fallen from 6.37% to 6.06% since August 31st, so I would expect pending home sales in September to be even stronger. However, I also believe that many homebuyers are still waiting for the election before making a move, which gives buyers in October a big advantage.

 Remember- Don't be afraid to offer under asking price and ask for seller concessions for rate buydowns or closing cost credits. ALSO, buying today will automatically enroll you in our Rate Rebound program so you can save on future refinances!

In other news -

47,000 Port Workers are set to strike at midnight. The strike would impact as many as 36 ports between Maine and Texas - and could cause shortages and price hikes! Prices coming up even a few tenths of a percent could be a problem for the Fed. The good news is that major importers like big retail chains have been preparing for a strike for months, moving shipments earlier in the year, so analysts expect there will be NO shortages on the shelves or price hikes in the short term.

Return to work mandates are causing some former remote workers to have to sell. On the flip side, it's also causing demand (and prices) to rise wherever those offices are located. If you're in this situation or know someone who is, make sure you're looking into our Buy Before You Sell program so you don't have to rush to make a move.

I STRONGLY believe that this week is one of those make-or-break weeks for homebuyers! With inflation mostly under control, the Fed will need to see a weak labor market if we want mortgage rates to fall from here. Pay close attention to employment reporting this week and let's hope for some worse than expected numbers. Follow us on Instagram for immediate reactions to all the news this week.

Key reporting dates this week: 

 Mon, 9/30: Federal Reserve Governor Michelle Bowman speaks, Powell speaks

Tues, 10/1: Construction spending, Job openings, Auto sales

Wed, 10/2: ADP employment, Federal Reserve Presidents speaking

Thurs, 10/3: Initial jobless claims, Factory orders

Fri, 10/4: US employment report, U.S. unemployment rate

Don't forget - the average rate we quote DOES NOT EQUAL your rate. Sign up for our weekly Friday rate texts to better understand where our rates are relative to the average (Note: You'll be pleasantly surprised!)

As always - I'm grateful for those of you who appreciate this content! If you have any questions or just want to learn more, feel free to email or call/text me at 512-701-1819. 

Talk soon!

Eric

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