Morning Report: Richmond Fed President Tom Barkin is in no hurry to cut rates

Posted on February 9, 2024 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are flat.

The Consumer Price Index was revised downward slightly in December and the fourth quarter was unchanged.

Mr. Cooper reported fourth quarter earnings this morning. Funded volume fell 16% YOY and gain on sale margin fell slightly to 197 basis points. The servicing book is being valued at 155 basis points.

Richmond Fed President Tom Barkin is in no hurry to cut rates. The Fed is committed to returning inflation all the way to 2 percent. “As I think about that commitment, I can’t help but look to lessons from the past. History tells many stories of inflation head-fakes. For example, at the end of the Volcker era, inflation seemed to settle in mid-1986. The Fed reduced rates. But inflation then escalated again the following year, causing the Fed to reverse course. I would love to avoid that roller coaster if we can.”

Mortgage delinquencies increased to a seasonally adjusted rate of 3.88% in the fourth quarter, according to the MBA. This was up 26 basis points compared to the third quarter, but down 8 basis points year-over-year. “Mortgage delinquencies increased across all product types for the second consecutive quarter,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “While the overall delinquency rate is still very low compared to the historical average, the pace of new loans entering delinquency picked up and some loans moved into later stages of delinquency. The resumption of student loan payments, robust personal spending, and rising balances on credit cards and other forms of consumer debt, paired with declining savings rates, are likely behind some borrowers falling behind at the end of 2023.”

Mortgage rates moved little last week, according to the Freddie Mac Primary Mortgage Market Survey

“Mortgage rates remain stagnant, hovering in the mid-six percent range over the past several weeks,” said Sam Khater, Freddie Mac’s Chief Economist. “The economy and labor market remain strong with wage growth outpacing inflation, which is keeping consumer spending robust. Meanwhile, affordability in the housing market is an ongoing issue due to continued high home prices, elevated mortgage rates and low supply of homes on the market, particularly for first-time and low-income homebuyers.”

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