By Ryan Casey Stephens, FPQP®
Special Contributor
This is one of those funny weeks where nothing happens, then everything happens all at once.
Data-packed holiday weeks can cause havoc in markets since traders don’t have much time to digest the readings and reports coming in. With any luck though, we’ll get some positive figures, and the trend of easing mortgage rates might continue.
Let’s get specific in this week’s Three Things To Know.
It’s Housing Week – How Bad Can it Be?
Although it’s a short week, the last three days are packed with important housing data. Mortgage Applications, the NAHB Housing Market Index, Housing Starts and Permits, and Existing Home Sales will come at us relentlessly on Wednesday, Thursday, and Friday.
We’re setting an incredibly low bar to begin the year. Mortgage application demand is at its lowest level since winter 2015 and Housing Starts are expected to come in even weaker than last month. It’s not all glib, however, since Building Permits and Existing Home Sales are predicted to make small gains.
First Thing to Know:
Winter is a difficult time to begin with, but being in a housing recession has made it all the harder. Every good recovery needs a low point. Call me optimistic, but this is as good a time as any to begin the climb back to a healthy housing market.
Inflation is Ever Present
Trust me – I’d be glad to write a weekly edition free of any discussion on inflation, but that’s not going to happen this week. The Fed meets in two weeks to discuss another rate hike and they’ll be closely watching on Wednesday as we see the latest Producer Price Index inflation numbers.
The PPI measures the change in selling prices of goods received by American producers. Most inflation reports measure the rising cost of goods from our perspective as consumers, making this one unique. The consensus is that we’ll see small disinflation in the latest reading.
Second Thing to Know:
Most experts agree the Fed will hike a quarter point in February, but we need to be on guard as always. Any unexpected hiccups in reports like the PPI might result in a knee-jerk reaction and the chance for more aggressive rate hikes to begin the year.
The First Sign of Weakness
Speaking of the Fed and their rate hikes – another week brings us yet another Initial Jobless Claims Report. The Fed wants to see a spike in unemployment in 2023 and that fact has become commonly accepted. Whether or not that occurs is up for debate. Initial claims have remained stubbornly low. The new year brings in ‘layoff season’, though, and the consensus is that we’ll see a slight rise in those experiencing joblessness.
Third Thing to Know:
A recession marked by higher unemployment is not guaranteed, which makes the Fed’s desire to see it riskier. No one’s sure how Powell and his crew will respond if they never see the higher numbers. A slight rise in jobless claims could prove the safest path for lower mortgage rates in the short term.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
