The Big Bad Thing About Stocks and Wall Street: A Big Break in the S&P 500 After the Inflationary Data Release
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The markets went down after the red-hot inflation data raised fears that the Federal Reserve would hike interest rates aggressively. Then, something strange happened.
Stocks staged a massive comeback. The S&P 500 was in a trading range for the first time in 212 years, while the DOJ surged 1,500 points from peak to trough.
Inflation and the Financial Crisis: Implications for the Consumer and Financial Assets of the First Quarter of the Year 2009-2014 Financial Year
Annual inflation in September was 6.2%, according to the Fed’s preferred yardstick — unchanged from the month before. The better known consumer price index shows prices rising even faster, at an annual rate of 8.2%.
According to Ratiu, the Fed signaled that it will raise rates this year but it is expected to be a 25 basis point increment, a less aggressive tightening than in the past. The central bank sees monetary actions having a noticeable effect on inflation. The bank had its views confirmed by the data out this week.
There is a very sharp divergence between markets and inflation data. The better-than-expected inflation report could be seen as a sign that price increases are near their peak. The rollercoaster market illustrates how investors are desperately grasping for clues about what the Fed will do next.
According to a new report, household wealth is on track for a significant reduction due to the financial crisis.
Global assets are going to decline more than 2%, according to a report. This year, households will lose about a tenth of their wealth.
The report paints a bleak picture. The 2008 financial crisis was marked by a relatively quick turnaround, but the current outlook shows stagnant growth in the future. The average growth of financial assets is expected to be around 4.6% until 2025, compared with 10.4% over the last three years.
The Federal Reserve taught investors that they can’t beat it. Strong monthly jobs report will correlate to a weak market, so expect more good-is-bad economic news.
The Fate of the Mortgage Rates: Implications for Consumer Credit, Inflation and Household Debt in the U.S.
Household debt, meanwhile, has been on the rise globally. Researchers reported that rising interest rates and the high cost of living could pose a risk to household balance sheets.
According to the results of a new study, the changes in global wealth will take years to recover from. Today’s release of US retail sales for September will likely shed more light on the state of the consumer, as will earnings reports from some of the country’s largest lenders — JPMorgan
(JPM), Citigroup
(C), Wells Fargo
(WFG) and Morgan Stanley
(MS) all report this morning.
Fratantoni said that the mortgage rate is expected to come down next year. MBA is forecasting mortgage rates to end 2023 at around 5.4%. Freddie Mac says that the average rate on a 30 year fixed rate mortgage is 6.94%.
The Federal Reserve launched a campaign of interest rate hikes in a bid to tame inflation. Mortgage rates fell in November and December after data showed that inflation may have finally reached its peak.
“We continue to see a tale of two economies in the data,” said Sam Khater, Freddie Mac’s chief economist. Consumers have a positive balance sheet due to strong job and wage growth and affordability, but they are being adversely affected by inflation, recession fears and housing affordability.
The Impact of Mortgage Rates and Mortgage Acquisition Rates on the Construction and Construction Industry: The Case of Netflix a Few Months Before the Bell
A year ago, a buyer who put 20% down on a $385,000 home and had a 30-year fixed-rate mortgage with an average interest rate of 3.05% would have a monthly mortgage payment of over 1,250 in Freddie Mac calculations.
For the past few months, existing and new home sales have been steadily declining because of the spike in rates and the fact that home prices remain stubbornly high for first-time buyers. The figures for housing starts and building permits for the month of July are down from last year.
The new option will feature much of what’s available with Netflix’s current $9.99 a month Basic plan, but will include an average of four to five minutes of commercials per hour. 15 or 30 seconds will be the length of those ads before and after TV series and movies.
The company lost billions in market cap following that news. The future of the platform was questioned, and hundreds of employees were laid off.
JPMorgan Chase
(JPM), Wells Fargo
(WFM), Citigroup
(C) and Morgan Stanley
(MS) report third quarter earnings before the bell.
Even a flattening of rates in the 5.5% – 6.0% range in just two years would offer housing markets an improved foundation, he said.
The big question of the year is if the United States will enter a recession this year. There are three factors that will affect the health of the economy: strength of the labor market, American consumer and the Federal Reserve.
Would-be buyers have little appetite to get into the market now. That’s partly because there are few homes available to buy, since most sellers aren’t interested in parting with the ultra-low mortgage rates that were available for the past few years.
Mortgage application activity was at a quarter-century low this week as high mortgage rates continue to weaken the housing market said Freddie Mac’s chief economist. Inflationary pressures are expected to lower in the coming years, which should result in lower mortgage rates in 2023.
The number of purchase applications dropped to the lowest level since the start of the year and were more than 40% lower than a year ago according to the vice president and deputy chief economist. “Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”
MBA estimates that a 25% to 30% decrease in mortgage industry employment from peak to trough will need to occur, given the decrease in production volume from the record levels in 2020 and 2021.
Rate Increases, Consumer Spending, and the State of the Economy: How the Fed is Predicting a Rapidly Growing Rate of Inflation?
The central bank still has a commitment to hikes in the rate of inflation despite the fact that prices are still rising, according to Ratiu.
The chief financial analyst at Bankrate.com said that rates have increased at the fastest pace in 40 years. Home equity lines of credit are the highest in 14 years, mortgage rates are at 20-year highs and car loan rates are at 11-year highs. Savers are seeing the best yields since 2008 – if they’re willing to shop around.”
“With a Federal Reserve committed to bringing inflation down, investors expect business investments and consumer spending to pull back,” said Ratiu. “However, with most Americans still employed and seeing modest pay gains, the pullback in spending has yet to meaningfully materialize.”
“So we can see that there is a little bit of a savings buffer that is still sitting for households, that could allow them to spend in a way that keeps demand strong,” Esther George said. “That suggests we may have to keep at this for a while.”
Like her colleagues on the Fed’s rate-setting committee, George has expressed a determination to control inflation. At a time of uncertainty, she cautions against raising rates too quickly.
“I have been in the camp of steadier and slower [rate increases], to begin to see how those effects from a lag will unfold,” George said last month. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”
The Fed risks slowing the economy to a crawl, while failing to slow rising prices that continue to harm people, wrote Sen. Elizabeth Warren, D-Mass., and colleagues in a letter on Monday.
The Spread of Mortgage Rates in the Fed Era: The Kansas City Chief Builder’s Dream, Not Your Dreams: Why Interest Rates Should Go Up and What Happens When They Go Up
Kansas City homebuilder Shawn Woods said his company has gone from selling a dozen houses a month before the Fed started raising rates to fewer than five.
“Never in my dreams would I think that we’d go from 3% to 7% within six months,” said Woods, president of Ashlar Home and the Home Builders Association of Kansas City.
According to Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, long-term rates, like 30-year mortgage rates, are a function of market expectations for the economy. The Fed’s eventually victory over inflation is expected to result in lower rates over time.
A base rate is tied to the yield of a 10-year treasury note, which is used because most people will move to another residence within a decade of getting a mortgage. The second rate is linked to the yield on the notes and M.B.S., which are both interest-paying bonds. In Wall Street, this difference is known as the spread.
Finally, there is an additional amount of interest charged that reflects the profits that lenders, servicers and other players make in the mortgage chain.
Since M.B.S. investors such as insurance companies expect interest rates to keep going up, they also expect people to stay in their homes longer, making them slower to prepay or refinance their mortgages. That changes investors’ calculations of the returns they expect on their holdings over a certain time frame. Instead of staying, some investors sell bonds in order to get higher returns elsewhere. Others demand higher interest rates from lenders to compensate for the additional risk of holding mortgage bonds.
In normal times, the spread between Treasuries and mortgage-backed securities is not very different. But that changes when interest rates rise, especially as swiftly as they have now.
The spread is widening because bond investors believe they will be paid more than a Treasury note. So far this year, the spread has more than doubled, to 1.7 percent from 0.7 percent. The wider the spread, the more consumers pay because lenders pass on to them the cost of those increased rates.
“That insulates you from [future] rate hikes, and it gives you a clear runway to pay off your debt once and for all,” McBride said. It is especially valuable to have less debt and more savings if the economy sours.
If you have deposited cash at the big banks that have been paying no interest for certificates of deposit or savings accounts, don’t expect that to change any time soon.
The national average savings rate was just 0.16% in October, up from zero in January, according to Bankrate.com.
But all those Fed rates hikes are starting to have a more significant impact at online banks and credit unions, McBride said. They’re offering far higher rates – with some topping 3% currently – and have been increasing them as benchmark rates go higher.
There is an increase in return for certificates of deposit. The average rate on a one-year credit union CD is 1.05% as of October 27, up from 0.14% at the start of the year. But top-yielding one-year CDs now offer as much as 4%.
Series I savings bonds are designed to preserve the buying power of your money, so they may be attractive given high rates of inflation. They’re currently paying 6.89%.
But that rate will only be in effect for six months and only if you buy an I Bond by the end of April 2023, after which the rate is scheduled to adjust. If inflation falls, the rate on the I Bond will fall, too.
There are some limitations. You have to invest $10,000 a year. You can not redeem in the first year. If you sell out between years two and five, you’ll lose three months of interest.
If you don’t have to touch it for at least five years, they preserve the buying power of your $10,000. They are also of particular benefit to people planning to retire within the next six to ten years since they will be able to use them as an annual investment if needed in their first few years of retirement.
“If inflation is sticky despite higher interest rates, you may want to consider putting some money into Treasury Inflation-Protected Securities,” Ma said. Unlike Series I Bonds, TIPS are marketable Treasurys – meaning they can be sold before term. They pay a fixed amount of interest every six months based on your adjusted principal. And that rate is fixed at auction but never falls below 0.125%. At the most recent auction in October, for instance, the 5-year TIPS had an interest rate of 1.625%.
What are the Rates of Interest Rates Meaning for Personal Credit Cards? A Case Study in a Zero-Rate Balance Transfer Card
The hike in interest rates will affect consumers who do not pay off credit card balances in full through higher minimum monthly payments, predicts a VP of US research and consulting at TransUnion.
If you have balances on credit cards that have high variable interest rates, you should transfer them to a zero-rate balance transfer card that will lock in a zero rate for between 12 and 21 months.
Just be sure to find out what, if any, fees you will have to pay (e.g., a balance transfer fee or annual fee), and what the penalties will be if you make a late payment or miss a payment during the zero-rate period. The best strategy is always to pay off as much of your existing balance as possible – on time every month – before the zero-rate period ends. Otherwise, any remaining balance will be subject to a new interest rate that could be higher than you had before if rates continue to rise.
If you don’t transfer to a zero-rate balance card, another option might be to get a relatively low fixed-rate personal loan. Currently rates on such loans range from 3% to 36%, with the average at 11.27%, according to Bankrate.com. But the best rate you can get would depend on things like your income, credit score and debt-to-income ratio. Ask a few lenders for quotes before applying for a loan, according to Bankrate.
Source: https://www.cnn.com/2022/11/02/success/what-rising-interest-rates-mean-credit-mortgage/index.html
Home Equity Loans and Investments in a Rising Rate Environment: A Case Study of the Emerging Consumer Price Index and Implications for Technology Companies
If interest rates go up, don’t jump into a large purchase that isn’t right for you. Rushing into the purchase of a big-ticket item like a house or car that doesn’t fit in your budget is a recipe for trouble, regardless of what interest rates do in the future,” said Texas-based certified financial planner Lacy Rogers.
If you use a portion of your home equity line of credit to do a home improvement project and have an outstanding balance, you can ask your lender for a fixed rate home equity loan, which will effectively create a fixed-rate home equity loan.
In terms of inflation, Ma noted, the costs of services – which make up a big part of the Consumer Price Index – is the thing to watch. “The big question now is how sticky the services side of inflation proves to be. While wage pressure has likely peaked, the job market still looks quite strong and that could keep wage growth elevated and filter through to service inflation for some time to come,” Ma said.
As for geopolitics, he added, “The market seems to have put geopolitical concerns in Europe on the back-burner, but as winter looms there is a risk that the energy warfare could escalate again.”
Financial service companies can do well in a rising rate environment because, among other things, they can make more money on loans. But if there’s an economic slowdown, a bank’s overall loan volume could go down.
Small cap value stocks, which have underperformed this year, are still bullish according to him. “We expect that outperformance to persist going forward on a multi-year basis,” he said.
Ma suggests making sure your portfolio is diversified. The idea is to hedge your bets, since some of those areas will come out ahead, but not all of them will.
That said, if you’re planning to invest in a specific stock, consider the company’s pricing power and how consistent the demand is likely to be for their product. Technology companies don’t usually benefit from rising rates. But since cloud and software service providers issue subscription pricing to clients, those may rise with inflation, said certified financial planner Doug Flynn, co-founder of Flynn Zito Capital Management.
Source: https://www.cnn.com/2022/11/02/success/what-rising-interest-rates-mean-credit-mortgage/index.html
Finding a Bond in a Rising Rate Environment with Floating Rate Instruments and Other Bond Income Strategies: The Case of Municipal Bonds
Flynn said there was a good chance to get in short-term bonds. “For those in higher income tax brackets a similar opportunity exists in tax-free municipal bonds.”
Flynn said that floating rate instruments may be well suited for companies that need to raise cash. The floating rate is tied to a short-term benchmark rate, such as the fed funds rate, so it will go up whenever the Fed hikes rates.
But if you’re not a bond expert, you’d be better off investing in a fund that specializes in making the most of a rising rate environment through floating rate instruments and other bond income strategies. Flynn suggests searching for a flexible income mutual fund or an exchange traded fund that can hold different types of bonds.
Editor’s Note: Erik Lundh is a principal economist at The Conference Board. The opinions expressed in this commentary are his own. CNN has more opinion.
The 2000s Housing Bubble: Real Estate, Banks, Derivatives, and Mortgage Originators – A Reassessment
But the housing bubble in the 2000s was underpinned by predatory lending, poor underwriting, adjustable-rate mortgages and rampant speculation. Americans were convinced that housing was a great short-term investment and that prices would only continue to rise. This famously turned out not to be the case.
New regulations were introduced in the years after the financial crisis. Banks are now required to be better capitalized; lending standards are much more rigorous, leading to higher-quality loans; most mortgages are fixed-rate; and financial derivatives, such as asset-backed securities, are better regulated. This is the best way to keep the financial system strong in case of another housing downturn.
George Ratiu is the manager of economic research at Realtors.com. he said that mortgage originators are following suit with easing inflation pressures.
Americans have more equity in their homes than they did before the last financial crisis. The loan-to- value ratios have fallen to a 12-year low. This creates more of a “cushion” for prices to decline before home values fall below the loans that underpin them. If a home is sold at a loss it will be hit by homeowners before it hits the banks.
The latest government reading shows that inflation is running at its lowest rate in nearly a year.
The Fed Chairman said at the press conference that the Fed has a long ways to go to get back to price stability after the board announced its latest rate increase.
The Fed Fed Fed Federal Reserve Interest Rates Decline Rate Benchmark: Implications for Consumer Finance and the “Pendemic”
Many Americans are paying higher interest on their loans due to price increases and the effect this is having on them. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.
The central bank said that inflation was high because of supply and demand imbalances related to the “pandemic” and higher food and energy prices.
Wall Street thought the Fed’s warning that there would be more rate hikes to come was a reason for the stock market to fall. But stocks recovered and the major indices were mostly flat by mid-afternoon.
Inflation peaked at 9% in June but appears to be showing some signs of decline. The prices of used cars and TVs have gone down as the price of gasoline has gone down.
Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.
The price of haircuts rose 6.8% in the last twelve months, while the price of dry cleaning jumped 7.9%. Services other than housing and energy are the largest component of consumer spending.
Source: https://www.npr.org/2022/12/14/1142757646/fed-federal-reserve-interest-rates-december-inflation-benchmark
Housing Applications Decline during a Cooling Recession and Mortgage Rate Mixing: The Last Minute of Mortgage Sales and Construction Activity in the United States
“We see goods prices coming down,” Powell said. “We understand what will happen with housing services. There is not much progress there and the big story will be the rest of it. And that’s going to take some time.”
Ratiu said that most recent indicators point to a still-resilient economy. There were 11 million job vacancies in December, the highest since July, and despite the Feds efforts to cool the economy, the labor market remains tight.
Many older workers who retired in the last two years may not return to the job market. With the supply of workers constrained, the Fed is trying to restore balance by tamping down demand.
The Bureau of Labor Statistics reported on Tuesday that consumer price index inflation cooled considerably in November and was at its lowest level in a year.
Freddie Mac receives thousands of mortgage applications from many different banks across the nation. The survey includes only borrowers who put 20% down and have excellent credit. People with less-than- perfect credit will pay more than the average rate.
Ratiu said that the continued cooling in inflation measures should make the upward pressure on mortgage rates less.
But he said the tight inventory picture and strong unmet demand to buy a home suggests to him that, should mortgage rates drop a bit, there will be more movement in the market.
After a month of declines, last week mortgage applications increased as people looked to take advantage of lower rates, according to the Mortgage Bankers Association.
The still volatile time of the year for housing activity caused overall application activity to decline last week, according to the vice president and deputy chief economist of the Mortgage Bankers Association. “Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth. Some buyers will benefit from the trends.
A long list of housing data is on tap. On Tuesday the US Census Bureau will report housing starts and building permits figures for November, followed by Friday’s release of new home sales data for the same month. The existing home sales numbers from the National Association of Realtor will be released on Wednesday, followed by weekly data on mortgage rates and applications on Thursday.
There are some promising signs that the worst might soon be over. The stock of the largest homebuilders in the US rallied after reporting earnings last week. The company had higher expectations for the number of homes that it expected to deliver next year due to the fact that revenue was better than expected.
Lennar investors “may be looking ahead to 2023, perhaps crossing the valley from recession to potential recovery,” according to CFRA Research analyst Kenneth Leon.
Amherst said home prices are still up about 40% from pre-pandemic levels. Even a further drop of 15% will make them to mid- 2021 levels. In other words, this isn’t like the mid-2000s real estate bubble bursting.
It’s also worth noting that the job market is still strong and wages are growing. What’s more, many consumers still have decent levels of excess savings thanks to pandemic era government stimulus.
Even though the housing market may be weak due to high home prices and elevated mortgage rates, most existing homeowners are still paying their monthly mortgage on time, according to others.
There were many borrowers with poor credit histories in 2008 who were unable to keep up with their mortgage payments, compared to now.
“Housing is not bringing down the economy. The housing market has been affected. But mortgage delinquencies are still low,” said Gene Goldman, chief investment officer at Cetera Investment Management.
There aren’t a ton of companies reporting their latest earnings this week. There are more clues about the health of consumers and the state of corporate spending that the few that are can give.
General Mills will release their earnings on Tuesday. Analysts are expecting a slight increase in both sales and profit. Consumers may be growing increasingly wary about inflation and the broader economy, but they’re still eating their Wheaties. Shares of General Mills
(GIS) have soared nearly 30% this year.
Analysts are less optimistic about the outlooks for sneaker king and Dow component Nike
(NKE), used car retailer CarMax
(KMX) and memory chip maker Micron
(MU), whose semiconductors are used in devices ranging from cell phones and computers to cars.
S&P 500 companies’ fourth-quarter earnings are projected to decline 8.2% from a year ago, according to data from FactSet. Analysts have been busy cutting their forecasts too. John Butters, senior earnings analyst at FactSet, noted in a report that fourth-quarter profits were expected to rise 3.7% as recently as September 30.
It’s very likely that a recession is going to happen, said the chief economist and macro strategist at Dreyfus & Mellon. It will have an effect on corporate earnings. Higher rates and weaker earnings suggest more pain for stocks.”
Tuesday: The Bank of Japan makes a rate decision; China sets a loan prime rate; and the US starts housing starts.
The Minneapolis home sales market has fallen 10 months straight, and inventory has not been low in the past – or what happened in the last 10 months?
Paul, 34 said they got to that place in their lives where they were financially stable, and wanted to start having kids and settle down.
The Fed continued to raise its interest rates. The homes the Pauls were looking at were no longer feasible due to rising mortgage rates.
“There’d be, you know, two dozen other offers and they’d all be $100,000 over asking,” says Paul. The place was gone before we could even see it at the open house.
Yun and others describe the market as frozen, one in which home sales activity has declined for 10 months straight, according to NAR. It’s the longest streak of declines since the group started tracking sales in the late 1990s.
Home prices have remained mostly high despite the slump in sales activity because inventory has remained low. The unsold inventory of existing homes decreased for a fourth consecutive month in November.
At an open house for a cute starter home in Hollywood, agent Shin didn’t see as many people swing through as he did a year ago.
Implications of the 2022 Mortgage Rate Jump for New Home Buyers: The NAR Monitors Region-by-Region Variability
The median price for a home is expected to be $385,800 at the end of the year, according to the National Association of Realtors. The small shift masks a lot of regional variability, warned the NAR.
He said more inventory would then become available from the locked-in homeowners clinging to their ultra-low mortgage rates from the past couple of years.
Lawrence Yun, chief economist for the National Association of Retailers, said that half the country might see a small price gain. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10%-15%.”
“Markets like Manchester, New Hampshire; Columbus, Ohio; Fort Wayne, Indiana; Hartford, Connecticut; Lancaster, Pennsylvania; or Topeka, Kansas are still seeing homes change hands as buyers from more expensive locations are lured by solid local economies and median prices, which in some cases are still below $300,000,” Ratiu said.
In November the monthly mortgage payment fell by 1.8% to $2,017 from $2,012 as mortgage rates began a six-week tumble.
Ratiu said, “With interest rates running well below the 7% range we saw in the fall, the psychological shock of the 2022 rate jump is wearing off for buyers, leading to a favorable adjustment in expectations.”
In 2023, we may see a mirror image of 2022 — a somewhat trying first half that gives way to a surprisingly strong back half of the year for buyers, said Leonard Steinberg, corporate broker at Compass in New York.
There were many would-be buyers who stepped back from the market early in the 21st century, and even though they were able to return, they wouldn’t stay away forever, given the number of people looking to move or downsize.
Chronic under-building of new homes is going to continue to be a challenge, as builders wrestle with balancing a short-term decline in demand with the long-term need for more new housing, he said.
The Market for a Wonderful Change of Continuum: Predictions for the Next Three Months and the Prospect for the New Year
Tucker said that the market will be busy during the spring and calmer in the next two months.
Tucker said the market has a boring year and it may surprise a lot of people. It’s a great change of pace. A plain, boring, vanilla year in the housing market would be a wonderful surprise.”
“This expectation is becoming more visible in the growing number of companies resorting to layoffs as a hedge against a potential economic slowdown,” he said. Consumers who are laid off may pull back on their purchases because of fears that they will lose their jobs, thus potentially sending spending into a downward spiral.
But traditional seasonal norms are expected to kick in come March as more inventory becomes available and more buyers starting to look at what’s available — as long as buyers can stomach the current rates and sellers are willing to give up the ultra-low rates they enjoyed in the past couple years.
He said that they could have to wait until the start of the spring shopping season to know more about the direction of housing markets this year.
We’re in the salad days of the New Year — that period where many feel refreshed and motivated and perhaps even optimistic about the year to come. There’s a certain clarity that comes during this time in January.
The Fed’s Facing Rate Cuts Will Not Drive the Economy into Recession, and Will It Continue to Increase? An Investor’s Perspective
In the last week, jobs has been the word of the week as investors watch a lot of data to see if a strong labor market is resistant to the Fed attempts to cool the economy.
In an interview with the Financial Times this week, Gita Gopinath, second in command at the International Monetary Fund, urged the Fed to continue with rate increases this year, citing the labor market’s resilience.
So will wages moderate this year? Analysts anticipate that they will. Wage growth will slow from over 5% in 2020 to 4% by the end of this year, according to them.
The Fed would be interested in seeing if a sizeable drop in this would provide a proof of concept for their theory of gradual labor market calming, no matter what happens.
Bank of America CEO Brian Moynihan told CNN around the holidays that the continued strength of the US consumer is nearly single-handedly staving off recession.
But weaker-than-expected retail sales in November pummeled market sentiment last month and raised the odds that the Fed’s punishing interest rate hikes would push the economy into recession.
This is the main question on every investor’s mind — and the answer will not only help determine what happens to markets this year, but also whether the economy will fall into recession.
Even as rate cuts are off the table, the Fed may decide to increase the pace of increases as the year progresses. After four hikes of three-quarters of a point last year, it would be good to have some relief.
And while officials welcomed softer inflation reports in recent months, they stressed that “substantially more evidence of progress” was required and said that inflation was still “unacceptably high.”
Source: https://www.cnn.com/2023/01/06/investing/premarket-stocks-trading/index.html
Mortgage Rate Rises as Freddie Mac Gets Better at Home Buyers: Implications for the Fed and Wall Street and Other Real Estate Issues
In its regulatory filing, the home goods chain said that it is not certain of the company’s ability to continue.
According to the Wall Street Journal, Bed Bath & Beyond is preparing to file for Chapter 11 within the next weeks. CNN requested comment from Bed Bath & Beyond, but they did not respond.
“This one percentage point reduction in rates can allow as many as three million more mortgage-ready consumers to qualify and afford a $400,000 loan, which is the median home price,” said Sam Khater, Freddie Mac’s chief economist.
He said that the mortgage rates will stay under a ceiling for the next few weeks thanks to the actions of the Fed.
Housing economists and those in the mortgage market are looking to the next report on inflation, set to be released February 14, to see if the pace of price hikes continues to slow.
Ratiu said that the down payment is lower for a median priced home than it has been in the past. Affordability is a challenge for first-time buyers and that is positive news.
Mortgage rates rose this week after four weeks of declines, as a stronger-than-expected jobs report suggested the Federal Reserve would continue hiking its benchmark lending rate in its battle against inflation.
Powell said the economy’s resilience could mean the central bank would do more and raise rates more than was priced in.
The tension between expectations and economic data will continue to seep through financial markets for several more months, said George Ratiu, Realtor.com’s manager of economic research.
Mortgage Rates and Mortgage Application Trends in the Market: Theoretical Expectation and Predictions for the Next Three to Five Years
Even with rates trending down since November, they are nearly double what they were a year ago and mortgage applications are down 58% since then, according to the Mortgage Bankers Association.
“Affordability — especially at the lower end of the market — continues to be a challenge, but MBA expects purchase demand to continue to recover heading into the spring,” said Bob Broeksmit, MBA president and CEO.