Which events could move the market this week?
The following announcements, reports, and events may have an impact on the financial sector or the mortgage markets this week:
Monday, February 5th
S&P final services PMI – January 2024
Chicago Fed President Austan Goolsbee TV appearance
ISM services – January 2024
Atlanta Fed President Raphael Bostic gives remarks
Tuesday, February 6th
Cleveland Fed President Loretta Mester speaks
Minneapolis Fed President Neel Kashkari speaks
Boston Fed President Susan Collins speaks
Philadelphia Fed President Patrick Harker speaks
Wednesday, February 7th
U.S. trade deficit – December 2023
Fed Gov. Adriana Kugler speaks
Boston Fed President Susan Collins speaks
Richmond Fed President Tom Barkin speaks
Fed Gov. Michelle Bowman speaks
Consumer credit – January 2024
CBO briefing on budget and economic outlook
Thursday, February 8th
Initial jobless claims – Week of Feb 3rd
Wholesale inventories – December 2023
Richmond Fed President Tom Barkin speaks
Friday, February 9th
CPI seasonal factor revisions
Dallas Fed President Lorie Logan speaks
What’s the cause of high mortgage rates?
In a recent interview with CNBC, senior economist Orphe Divounguy discussed the factors that impact mortgage rates, and his point of emphasis is that it isn’t the Federal Reserve.
Divounguy stated, “Mortgage rates tend to follow the 10-year Treasury yield. We also know that very often there’s a spread between mortgage rates and the yield on the 10-year. Most of that spread is due to uncertainty about a number of factors in the market.”
Divounguy pinned the blame on two key factors, current inflation and economic growth. Divounguy said, “Inflation came down in the past year from almost 9% year-over-year to about 3%. We’ve seen some cooling of the labor market. We’ve seen a normalization in rent growth and price growth in the housing market. We’ve seen wage growth cooling. All of that tells me the U.S. economy is cooling. As a result, yields have come down since October.
When it comes to the Fed’s involvement, Divounguy said the following, “Mortgage rates don’t really depend on the Fed. They depend on inflation, expectations over future inflation and economic growth.
There’s only so much the Fed can do to influence where mortgage rates end up. In fact, historically, when the Fed policy rate changes, it’s the short-term yields that move along with the policy rates.”
How low should rates get to help the housing market?
A recent article from the team at Yahoo! Finance surveyed experts on how low mortgage rates need to get to help the housing market really get moving.
The answer? Well, it varied depending on who was asked.
Doubleline portfolio manager Ken Shinoda said, “There is a magic number for fixed mortgage rates that I think would unfreeze the housing market — in other words, a price bringing together willing buyers and sellers; a market-clearing price. By my lights, that number has a 5% handle.”
While, Mark Zandi, chief economist at Moody’s MCO Analytics, stated, “Six percent is a key threshold for the housing market, as that appears to be the rate necessary to restore affordability to the point that home buyers and sellers begin to transact in earnest.”
Will mortgage rates get to a sustainable level for home buyers to feel comfortable this year? Only time will tell.
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