Rate Watch 6/13/22 - Yikes!

By
Mortgage and Lending with Finance Of America NMLS #311662

In The News

 

The story that is controlling the media right now is inflation. Friday’s numbers showed inflation came in higher than expected and at a new 40-year high. The markets reacted accordingly: a stock market sell-off and mortgage rate increases. The problem now is that this opens the door for the Fed to do a 75bp rate hike this week (a 50bp hike is expected). A 75bp hike will essentially double the rate to 1.5%. If there was ever a time for the Fed to do a surprise hike/increase, now is the time.

 

Although the short-term volatility will be chaotic (remember, I said do not believe in the “soft landing” the Fed has talked about), long term I still believe in my thesis that the Fed will be forced to pause and then cut rates to stimulate the economy and prevent a default in the debt markets. Having said that, I also don’t believe that the worst is over and we may see things get worst before they get better. The future problem is when the Fed will eventually be forced to cut rates, we will still have to deal with higher inflation.

 

 

Monday

  • 1 and 3 yr NY Fed inflation expectations

 

Tuesday

  • Fed Meeting Begins

 

Wednesday

  • Fed Statement
  • Fed Projections
  • Fed Chairman Powell speaks after policy decision announced
  • Home Builders Index

 

Thursday

  • Initial and Continuing Jobless Claims
  • Building Permits
  • Housing Starts

 

Friday

  • Leading Economic Indicators

 

Chart Check (see above)

 

Last week I mentioned how everything was riding on Friday’s inflation report. You can tell from the chart below that we broke the mini channel we were into the downside. The market is expecting a 50bp rate hike but I can see Monday and Tuesday being rough days as some bet on a surprise 75bp rate hike. We get another Fed meeting in July, none in August (they meet in Jackson Hole), then again in September.

 

 

I am still not floating. I mentioned I will only bring back the possibility of floating rates when we get peak inflation numbers. That has not occurred yet. When it does, the markets will rejoice and we may see a Fed rate hike pause as they celebrate their accomplishment of stabilizing inflation.

 

I have been utilizing the Lock and Live program, as well as our extending locks, for clients and it has been very successful in protecting them from the inflation risks. I plan on continuing to utilize these programs as well as lock as soon as I can. Ever since the Fed started increasing rates, any “relief” days we see have been temporary and not a true indicator of a reversal.

 

As I said in an earlier newsletter, “Don’t Fight the Fed.” And as long as inflation remains high, we have a general idea of what they will be doing.

 

Posted by

Matt Brady

Builder Sales Manager, NMLS ID#311662

(858)342-8659 cell |844-268-1952 fax

mabrady@financeofamerica.comfamadvisor.com/matthewbrady   
8885 Rio San Diego Dr │ Suite 201  San Diego, CA 92108     

 

BIA SanDiego 19 year Member and P2 Sponsor

 

BIA SMCBoard Member since 2012

 

 

 

 

Comments (3)

Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Happy Monday Matt  and Thank You for sharing this great information with us here in the Rain.  Make it a great day!

Jun 13, 2022 09:03 AM
Cindy Edwards
RE/MAX Checkmate - Johnson City, TN
CRS, GRI, PMN - Northeast Tennessee - 423-677-6677

But it will get better!

Jun 13, 2022 10:18 AM
Matt Brady

Yes Cindy Edwards, it always gets better.

Jun 13, 2022 11:23 AM
Ray Henson
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA
Realtor

I think we can safely say that we are already past any soft landing.  Thank you for your update!

Jun 13, 2022 01:13 PM