Will Mortgage Rates Go Down Next Week

Will Mortgage Rates Go Down Next Week – Third-quarter gross domestic product data on Thursday showed the U.S. economy expanded 2.6 percent, ending the negative GDP trend we’ve had over the past two quarters. Does this mean that the Central Bank still needs to raise interest rates to stem the expected recession, or is it possible that mortgage rates could drop below 6% in the next six months?

After the release of the GDP report, the bond market rose and yields fell, confusing some people. Traditionally, when economic data improves, 10-year yields sell off and yields rise along with mortgage rates. Likewise, 10-year yields and mortgage interest rates fall as economic data weakens.

Will Mortgage Rates Go Down Next Week

Will Mortgage Rates Go Down Next Week

Let’s say the bond market and mortgage rates have been incredible all year! The weaker economic data we had earlier in the year didn’t matter: mortgage rates and bond yields rose throughout the year, even with negative GDP reports in the first and second quarters.

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When the central bank started aggressively fighting inflation in March Much has changed in mortgage interest rates and the bond market since the Russian invasion of Ukraine.

As core inflation data slows, the core rate of the equation is still rising. As can be seen below, housing construction is 42.2% of the core weight of CPI and housing inflation in 2022. should continue to expand where that data line remains. In September, before the price index was released, I was on CNBC to explain how it works.

The central bank has become the only central bank agency that focuses on fighting inflation and even says that to reduce inflation, more unemployment is needed. Despite the economic data, the bond market, the Fed’s interest rate hike and the US dollar rose despite weaker economic data trends.

The central bank thinks it can keep raising interest rates because the labor market is strong, and rightly so. Today, more than 10 million jobs remain vacant and initial jobless claims are below 220,000, a historic low.

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On August 5th, I raised the sixth recession red flag. The last time I raised all six warning signs was in 2006. Finally, it’s important because we had negative GDP numbers for the first two quarters of this year, so people were saying the United States was in recession. However, national data series such as jobs, production and consumption were not as negative. So far this year we’ve made 3.8 million. Jobs, which means there is no recession in the US.

However, the housing market in the United States is in recession, with all four factors evident in June of this year: declines in sales, production, jobs, and incomes.

Historically, the 10-year yield and mortgage rates have moved in sync, which is not unusual for decades. This policy has been in place since 1971 through every economic expansion and recession. Now, after 1982, bond yields and mortgage rates have fallen every time we’ve had a recession.

Will Mortgage Rates Go Down Next Week

But now the central bank is fighting against inflation and has even said that it will not lower interest rates even if we are in a recession with job losses as long as inflation is high. I don’t really believe them when they say it, I’ve even written that the Fed’s aggressive tone on the decline in job losses will change if the jobless claims data goes above 323k.

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The spread between 10-year yields and 30-year mortgages has widened dramatically this year, similar to what we saw during the brief COVID-19 recession. If the Federal Reserve wanted to help the housing market recover, it could do so with a single announcement that it would buy mortgage-backed securities and the spread would collapse.

In this case, mortgage rates would fall by themselves, even if the 10-year yield did not fall. But the Fed said we are in reset mode for the housing market, so don’t expect the Fed to help here.

The spread is improving on its own. But we are far from the typical 1.6% to 1.8% gap between 10-year yields and mortgages. We just hit 3.0 which shows how tight the market is. I mean this is a historical event. If spreads improve on their own in the future, mortgage rates could fall due to high spreads without too much support from the 10-year yield.

In 2021 we didn’t get a big interest rate hike from the central bank and some inflation data was still hot. That is no longer the case as the central bank has raised interest rates brutally this year to fight inflation.

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The central bank’s favorite recession indicator is the 10-year yield minus the 3-month Treasury yield, which was the last to signal a recession. This is what the Fed has historically watched and cited as one of the leading indicators of job losses in recessions.

It has caught their attention before and I believe it will catch their attention now. The question is: do they care if Americans lose their jobs or not? I think they’re interested if the data shows that American citizens are losing their jobs and we’re not there yet.

Inflation data growth in 2021 It’s been hot, it’s getting cold. The cost of shipping goods from China to the US has dropped dramatically, used car prices are rising, and we’ve seen many big box stores talk about discounting goods to get rid of excess inventory.

Will Mortgage Rates Go Down Next Week

The only data line that is still valid until 2023 is consumer price inflation. Although we see many new data lines that indicate that growth in accommodation is already slowing down, the CPI will be even higher in 2023. History, especially in the second year 2023 page

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Declining job losses will also continue to impact these data lines, which is why the Fed expects the unemployment rate to rise. I’ve seen comments from the Fed admitting housing inflation is lagging, so they know this data line should look very different in 2023. Halloween. I wrote about this recently as the 910,000 duplexes needed by the builders were being built. come to market next year. It should also help slow housing inflation.

As you can see, the historic rise in mortgages this year is truly unprecedented. Hopefully you can see the difference between the market data and what we have seen in the 2021. month of October. Although today’s GDP report was positive and the labor market strong, we see weakness in some economic data.

My six bearish warning pattern was raised on August 5th and the Fed market indicator raised a bearish red flag this week. The leading economic index has shown significant weakness this year, which is in line with historical business cycles. So while the overall economy is not in recession, it is so weak that the Fed believes it is nearing the end of its rate hike cycle, which it has been talking about for some time.

They believe they can better fight inflation than a recession with job losses and are getting closer to what they really want. If that happens, some inflation data that points to a slowdown is likely to slow further. The bond market should rise enough to keep mortgage rates below 6%.

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The central bank pointed out that it was monitoring the housing market because it is 20% of the economy and because it has the tools to pull the housing market out of the current recession. We’re not there yet, but the above points are worth considering next year.

I saw in the data that the housing market stabilized when interest rates went to 5%. I think the central bank saw that too and was upset. I expect we will have a very different conversation about interest rates and the Fed next year. As inflation decreases, the Central Bank increased the policy rate by half this week instead of 0.5 percent.

Taking a closer look at the data, the US Commerce Department report showed that prices are rising more slowly. They rose by 5.5% year-on-year in November and 5% in December.

Will Mortgage Rates Go Down Next Week

Inflation appears to be slowing as the Central Bank halved interest rates this week, instead of the feared 0.5 percent. Equity deposits bear interest at 4.65 percent.

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At Duffy’s Pub in Auburn Hills, pints are $3.25, a great way to beat inflation. But John Tyrell and Gary Eaken say it’s a small victory in a losing battle.

Eaken says, “I spent $350 heating the house last month and I keep it at 62 degrees.”

Faced with higher prices, they are not only concerned about inflation, but also about how the Central Bank will raise interest rates.

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