Morning Report: Fannie sees little changes to mortgage rates through 2023

Vital Statistics:

 LastChange
S&P futures4,70915.2
Oil (WTI)76.020.08
10 year government bond yield 1.58%
30 year fixed rate mortgage 3.26%

Stocks are higher this morning on M&A news. Bonds and MBS are down small.

The upcoming week contains the Thanksgiving holiday, so volumes should be relatively light. Market are closed on Thursday, and Friday is an early close in the bond market. The big day for data will be Wednesday, when we get GDP, personal incomes and spending, and new home sales.

The Wall Street Journal is reporting that Jerome Powell will be re-nominated to run the Fed. Lael Brainard will be the Vice Chairman. The difference between the two is probably not of any issue to the markets – the big issue is inflation and whether the Fed has the stomach to raise rates. The left wanted Brainard who would supposedly be tougher on the banks and climate change. I wonder what the correlation is between the overnight reverse repo rate and the temperature of Gaia.

Existing home sales rose 0.8% in October, according to NAR. The median home price rose 13.1% to $353,900. Inventory remains tight, with only 2.4 months’ worth at the current sales pace. “Home sales remain resilient, despite low inventory and increasing affordability challenges,” said Lawrence Yun, NAR’s chief economist. “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

Investors comprised 17% of all sales, and the first time homebuyer accounted for 29% of all transactions.

The Chicago Fed National Activity Index improved in October, after declining in September. This means the economy grew above trend during the month.

Fannie Mae is predicting that mortgage rates will rise to 3.5% by the end of 2023, which is not too far from where they are now.

“The Fed has taken pains to broadcast its tapering and rate hiking plans to avoid a repeat of the 2013 temper tantrum, when market expectations suddenly shifted regarding the long-run real rate, and for now both financial market and survey measures of long-term inflationary expectations remain mostly anchored,” Fannie Mae forecasters said. “Therefore, our baseline forecast is that these effects are largely ‘baked in,’ leading to only a modest drift upward in mortgage rates over the next few years.”

Note that the MBA sees rates heading much higher in the second half of 2022. Fannie Mae is forecasting that the Consumer Price Index could hit 7% or 8% in the back half of 2022 as all of the home price appreciation from the past 18 months begins to filter through to the CPI.

6 Responses

  1. The logical end point:

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    • I love how they pre-emptively declared the term “reverse racism” to be harmful and problematic.

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      • I’m not a fan of the term myself. There’s just racism and anybody can be racist, and anyone can experience racism. But certain folks want fine-tuned control over the definition so racism always means: something bad you do but that I don’t. Or something structural for which I, because of my race, deserve special privileges and powers that you, because of your “privilege”, are not entitled to.

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    • i’ve got to get off of this DEI committee my boss asked me to serve on.
      ugh.

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    • The current “equity” dogma means this universally–not just for voting, but for everything imaginable. Prices in the store. Taxes. Access to tickets for concerts. Grades in school.

      With one escape hatch which might be the point, ultimately: it’s a “either all votes are reliable and accurately weighted by race–or there is no vote. Either everything is weighted, or there is no “thing” if it cannot be weighted. Equity is at its basis an all or nothing philosophy that often negatively impacts lower-class groups and the racial minorities in them by saying because we cannot evenly distribute a good to most of you, none of you get to have it. Because that would be inequitable.

      I’ve seen it happen! We are finally a digital 1:1 district but it never would have happened without COVID, because we could not get every student a computer, and get every student the same kind of computer, and we could not ensure them the same kind of internet access at home and so on–so nobody could have one.

      The COVID blew that up. And now everybody has a computer (not all the same) because we got money to do it but also because the equity issue no longer came the most important thing. Equity as a concept is pernicious and needs to be defeated. Almost every successful 1:1 district got there by rolling out computer access by grade–so 1 year only one grade had laptops, then the next year 2 grades had laptops, the next year maybe 4 grades had laptops—or by elementary, middle, and high schools. Which just makes sense, but “equity” philosophy says you can’t do because it would be inequitable to do it that way.

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