Fed Week, Rate Pause Anticipated - Dec 11 - Weekly Mortgage Update
The Federal Reserve is likely to maintain current interest rates amidst mixed economic signals, with a focus on the job market and mortgage trends.
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2024 housing: a chill market where home prices 'slightly dip' - perfect for buyers who like their rates like their coffee, mildly steep.
U.S. home prices rose 4.7% year-over-year in October 2023, with stable month-over-month growth.
Holy Toledo, Toledo, OH is the hottest real estate market for 2024 according to Realtor.com. Starter homes begin at a cool $160k.
Redfin forecasts a 2024 buyer's market with falling home prices, more listings, and rising sales, amidst changing mortgage rates.
📊 Market Update
It's a big week in the world of finance, especially for those of us keeping an eye on mortgages, as the Federal Reserve gears up for its much-anticipated end-of-2023 interest rate decision. It's a bit like waiting for the final episode of your favorite TV show, where you're hoping for a satisfying conclusion but bracing for a twist.
According to the Chicago Mercantile Exchange (CME), there's a whopping 97.1% chance that the Fed will hit the pause button on rate hikes this time around. Only a slim 2.9% chance points towards an increase in rates. It's almost like betting on whether it'll rain in the desert – possible, but highly unlikely.
No big shocks are expected on Fed decision day, December 13th. The Fed seems to be taking a 'steady as she goes' approach, steering clear of any dramatic moves that could send waves through the market. This 'no pivot' prediction is like telling everyone to keep calm and carry on.
Job Market Update
The addition of 199,000 jobs in November is significant for mortgage rates. Why? Because a strong job market can lead to higher wages, and higher wages can increase spending, which can then drive up inflation. Higher inflation often leads to higher mortgage rates.
However, the revisions showing fewer jobs in previous months and the lower-than-expected job openings in October suggest a cooling job market. This is generally good for keeping mortgage rates stable, as a cooler job market can slow down inflation.
So, the job market gives different vibes when you compare past revisions vs. the latest releases…
Unemployment Rate Falls
The unemployment rate dipping to 3.7% is a double-edged sword. While it's a sign of a healthy economy (which can lead to higher mortgage rates), the slower wage growth (up 0.4% from October, and at the lowest annual increase since June 2021) might ease worries about spiraling inflation and, in turn, could keep mortgage rates from rising too quickly.
Mortgage Applications Rise
Now, shifting to the mortgage market itself, the recent lower rates have sparked a noticeable increase in refinancing. The increase in refinancing applications (up 14% from last week and 10% from last year) is a clear indicator of how sensitive homeowners and buyers are to rate changes.
However, the flat growth in purchase applications indicates that, despite stable rates, there's still some hesitation or barriers (like housing prices or supply issues) in the home-buying market.
Later This Week
Looking ahead, the upcoming Federal Reserve meeting is key. While no change in rates is expected, the Fed's economic forecasts can influence mortgage rates. Their outlook on inflation and economic growth can directly impact how lenders set their mortgage rates.