Another week is in the books on what has been an interesting and somewhat historic ride this year (I feel like I may have used this line more than once since I started writing this weekly update!). Federal Reserve Chairman Powel gave us a small glimpse into what the committee might be thinking going forward and it sent some mixed messaging. While firmly stating that the fight to bring down inflation is far from over, there is some realization that the actions being taken now, will take months to trickle down into the proper economic channels. With that, the financial markets gave us a muted to slightly disappointed response during the week before firming up on Friday. There had been growing speculation that we might hear more rhetoric around the possibility of slowing the pace of interest rate increases sooner than previously anticipated. While we heard some talk of lagging data, the intent remains to increase rates until the economy cools down. Unfortunately, the jobs data released today indicates a job market that remains tight and growing overall while unemployment remains low. Before the latest Fed hike on Wednesday, I saw the chart below posted on CNBC outlining how far we had come since May. Some very interesting data points to consume.
Consumer Loan Rates:
Type March 11th October 28th
30-Year Mortgage 3.85% 7.08%
Home Equity (HELOC) 5.96% 7.38%
Credit Card 16.34% 18.73%
New Car APR 5.23% 6.27%
With this latest interest rate increase and one “on deck” for December, this chart will look even more interesting in the months ahead. I’m afraid the mortgage and housing markets are in for a long winter. Steven found an article in the Wall Street Journal referencing the increase in mortgage rates and the impact to homeowners. “According to Black Knight, a mortgage technology and data provider, with rates over 7% now, just 133,000 current U.S. homeowners can save money by refinancing at today’s rates. That’s down from a peak of over 19 million in late 2020”. WOW!! Those are staggering numbers. What that tells me more than anything is that an already tight housing inventory, in general, will only stay that way in the years ahead. Many of us have refinanced or simply just moved and captured a much lower mortgage rate. Now, the motivation to move will be much less given the cost to borrow. The housing shortage just isn’t going away. As the Fed works its magic and attempts to slow the economy will home builders also be forced to take a pause as the underlying economic conditions ease? The old crystal ball moments are ever present! If anything, this environment should provide some stabilization to home prices overall. As always, more interesting times lie ahead as inventory problems linger and uncertainty reigns.
For now, we are forced to sit idlily by in the waiting room of the proverbial economic doctor. Interest rates are going higher, inflation persists, yet our spending levels remain surprisingly strong. The holidays are approaching and yes, we may be a bit more reserved this year given the current backdrop. But we still want to go out, live, and enjoy our friends and family. We may have a runny nose or slight cough right now, but is that not normal anymore? I for one would like to ask for a prescription and be shown the door. Not so quick I’m afraid. I think the wait is still going to be a while, anyone have a good book to read?
Have a wonderful weekend!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
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