Mortgage Market Analysis
Mortgage Market Analysis 11 21 2022|Fed Rate Hikes|New Home Sales|Jobless Claims|Mortgage Rates
www.todduzzell.com Market Analysis – 11/21/2022 Monday… Stocks have ended the day lower. The Dow closed -45.41 at …
Federal Reserve Rate hikes are often put into place in an attempt to reduce inflation. If you look at a historical chart, this strategy has always been effective, eventually. The problem with the premise of these rate increases is that they are designed to slow down economic growth and progress. If you are a business owner, or someone that would take out a loan to build something or grow your company, then Fed Rate Hikes are not your friend. As interest rates increase, borrowing money becomes more expensive, and it is less attractive for potential investors to lend or borrow money.
New home sales are a metric that is used to determine how well the mortgage market is doing with respect to the recent past, and expectations. New home sales are of function of the amount of new homes that are being built, the amount of ‘resale’ homes being purchased, and the number of new mortgage application being filed over a 30/60/90 day period. In our current market, we have historically low inventory which makes the prospect of purchasing a home more difficult than it has been over the past few years. When you couple the Fed Rate Hikes with low inventory, we get lower than desired new home sales. As interest rates rise, the number of potential home buyers decreases. This phenomenon is due to two things: higher interest rates mean higher mortgage payments. Consumers that could buy find these higher mortgage payments less attractive, so they wait to buy or buy a lower priced home. The other effect of higher mortgage payments it that it ‘prices people out of the market’. For example, if a potential homebuyer could qualify for a $300k home when rates are at 4%, they can only qualify for a $225k home with rates at 7%. In Arizona, there aren’t many home options in the low 0’s so those people don’t have the option to buy do to lack of accessible inventory
At the end of the day, the Federal Reserve has a great deal of control over the lives of everyday people. It is important for all of us to understand why they do what they do and how we can make the most out of the economic highs and lows.
The Federal Reserve and Fed Rate Hikes
The Federal Reserve is an organization that is responsible for managing the United States’ monetary policy. It is the central banking system of the United States, and it is the most powerful financial institution in the world. The Federal Reserve was created in 1913 with the passage of the Federal Reserve Act. This act was a response to the financial panic of 1907 and the ensuing recession, and was designed to provide a more stable and secure financial system. It is composed of twelve regional Federal Reserve Banks located throughout the United States, and each of these banks is responsible for its respective region, and has voting power when the Fed Chair, Jerome Powell calls for a vote.
Policymakers in Washington D.C are not directly connected to the Federal Reserve, but seem to consider the Fed’s forecasts when deciding how to govern. Fed rate hikes are generally dependent on data from the U.S. and global market news. The Fed funds rate is the tool that is wielded by the Federal Reserve to curb inflation, assess risk, and increase or decrease rates according to the pace of the markets. There are many factors used to understand inflation data, like unemployment rate, consumer confidence, GDP projections, comments by officials, and other general economy information. When evidence of inflation or stagnation occurs, the Federal Reserve increases or decreases their interest rates according to the markets levels. If there is ‘too much growth’ then inflation is the common enemy resulting in rate hikes, ‘not enough growth’ will often result in rate cuts. Investors are another big piece in the movement of the markets as they often determine prices of stocks and bonds. The main function of the Federal Reserve is to reduce risks by keeping rates in a target range.
New Home Sales
New Home Sales are a major factor of gross domestic product in the United States. This data is released at regular calendar intervals and offers a window into the total supply of inventory available. Inflation can have a significant impact on the mortgage market, as it can affect the amount of money available for borrowing, the cost of borrowing, and the availability of mortgages, all of which can be seen in the data released at regular intervals that offers a window into the total supply and demand of the mortgage market. New home construction is also an important piece to the new home sales report.
There are a number of regions in the U.S. and Canada that affect the real estate market. Places like Michigan (midwest), Louisiana (South), New York (northeast), California (west) and Washington (Northwest). Homes for sale in these markets vary greatly and are calculated by number of units sold, and price per unit. Mortgage rates have a direct affect on home sales and the economy. When rates are low, and inventory is high, it is often called a sellers market. If there are less houses for sale, then a buyers market is more likely The questions people have regarding housing often depend on what stage they are in. For example, a family buying a starter home will need different information that one looking for a move up home, or an empty nester selling their house, and opting for a condo. It is very helpful to enlist the services of a mortgage loan officer to better understand prices and interest rates. The news will offer content on the mortgage markets when new home sales numbers are released.
Jobless Claims
U.S. jobless claims are a report that details the number of people participating in the United States labor market. This report is released by the U.S. Department of Labor on a weekly basis and is used to measure the health of the labor market. It is a key indicator of economic activity, as it provides a snapshot of the number of people who are employed and actively participating in the labor force. It is a measure of the overall health of the economy and can be used to determine the strength of the job market. The unemployment rate is calculated by dividing the number of unemployed people by the total number of people in the labor force. This rate is an important indicator of the health of the economy, as it reflects the number of people who are actively looking for work but are unable to find it. When the unemployment rate is high, it means that there are more people looking for work (using unemployment benefits) than there are available jobs. This can be a difficult and disheartening situation for many people, as they search for employment with limited success. The effects of high unemployment can be felt on a national level, as the economy slows and fewer people have money to spend. This can lead to a decrease in consumer spending, which can have a ripple effect on businesses and the overall economy. When businesses don’t have as much money coming in, they may have to lay off employees, which can further increase the economic hardship for those affected. This can be especially difficult for those who are already struggling financially, as they may not have the resources to find a new job quickly.
Unemployment insurance is a vital safety net for those who have lost their job through no fault of their own, as it provides a steady source of income while they search for a new job. Unfortunately, the amount of money that is provided through unemployment insurance is often not enough to cover all of the costs associated with a job search. This can include the cost of preparing a resume, attending job fairs, or even paying for transportation to and from interviews. In addition, many job seekers find themselves having to pay for other expenses associated with the job search process. This can include purchasing professional attire, printing resumes and cover letters, attending networking events, and even purchasing memberships to job search websites. The cost of living in certain areas can be higher than the average across the country in other markets. Market data from certain areas, such as New York and California, can show that the average cost of living in those areas is higher than the average cost of living across the country, indicating that market data from these areas should be taken into consideration when making decisions about investments or other financial matters. Inflation (a function of GDP estimates) can have a significant impact on the financial matters of Federal and State employees, as their benefit options are often not adjusted to keep up with the rising cost of living, leaving them at a disadvantage compared to their private sector counterparts.
Financial professionals like Mortgage Lenders, Real Estate Agents, and Certified Financial Planners will be very helpful when you are ready to make your next Real Estate purchase.