Mortgage Market

Good morning, everyone. Today’s update revolves around the latest ADP jobs report and insights from the Fed minutes. Mortgage-backed securities are slightly down, and the 10-year treasury yield shows a modest increase. Let’s delve into the details of these developments.

ADP Jobs Report: Leisure and Hospitality Sector Surges

The December ADP report indicates a gain of 164,000 jobs, exceeding the recent average trend of around 100,000 jobs. This surge is primarily attributed to the leisure and hospitality sector, reflecting increased activities in dining and travel during the holiday season. However, this could be a seasonal spike, and we might see a return to normalcy in January. 

Wage Increases Slowing Down

An interesting aspect of the ADP report is the slowing pace of wage increases. While wages continue to rise, the growth rate is decelerating, especially among job switchers, who previously saw significant pay increases. This slowdown could be indicative of a stabilizing job market.

Insights from Fed Minutes

The Fed minutes from the December 13th meeting, which marked a dovish pivot by Fed Chair Powell, provided several key insights:

Inflation Under Control: The Fed acknowledged that the annualized rate of core PCE over the last six months is below its 2% target, indicating that inflation is moving towards control.

Risk of Overly Restrictive Policy: There’s an acknowledgment of the risk associated with keeping the fed funds rate too high for too long, which could harm the economy.

Potential Rate Cuts in 2024: While most Fed members anticipate rate cuts in 2024, the specifics remain uncertain, reflecting the market’s unpredictability.

Apartment Listing Data and CPI Discrepancy

Apartment listing data for December showed a decline in new rents, contradicting the shelter component within the CPI report. This discrepancy might be due to CPI’s data collection method, which is refreshed semi-annually, with the next update in February and March. We might see a catch-up in the CPI’s shelter costs in the coming months, potentially lowering overall inflation figures.

Jobless Claims and Upcoming BLS Jobs Report

Initial jobless claims fell to 200,000, with continuing claims also seeing a decrease. However, these figures could be skewed due to the holiday season, so it’s wise to await next week’s data for a clearer picture. Tomorrow’s BLS jobs report is highly anticipated, with expectations of 170,000 job gains and a potential rise in the unemployment rate from 3.7% to 3.8%.

Technical Analysis and Market Stance

Currently, mortgage-backed securities are down, and the 10-year Treasury is hovering around 4%. We are approaching tomorrow’s jobs report with a floating stance, anticipating that it might reflect recent market trends and potentially lead to a decrease in yields. The overhead ceilings in the technical charts suggest that a major surprise in the jobs report could significantly impact the market. 

The market is positioned cautiously ahead of the BLS jobs report, and we will closely monitor any developments. I hope you all have a great day, and stay tuned for further updates.

Good morning, everyone! Today’s market journey has us cruising through a mix of data, with the CPI report in the rearview mirror and the Fed’s meeting revving up. While stocks show a bit of pep, mortgage-backed securities navigate a series of vacillations. Let’s buckle up and dissect the CPI’s role in shaping our economic drive.

CPI Report – A Closer Look Under the Hood

The latest CPI report, while aligning with market estimates, threw us a curveball with used car prices. Despite expectations for a smoother ride, used cars surprisingly accelerated inflation figures. The headline inflation increased slightly, showing a gentle deceleration year over year. However, the core reading, which excludes the volatile food and energy sectors, remained steady, missing the mark for a further slowdown. The devil is in the details – used cars and shelter costs are fueling these numbers, but there’s a lag in real-time data that’s keeping the inflation engine running hotter than expected.

Shelter Costs and Inflation – Reading the Economic GPS

Shelter, a significant component of the core CPI, showed an uptick, but there’s a lag effect at play. Real-time rent data suggests a cooling trend, yet CPI’s shelter costs are still revving high. This lag is significant – it’s like your GPS recalibrating long after you’ve taken a turn. We expect a considerable update in March, which could realign these figures more closely with the real economy’s route.

The Fed’s Meeting – Navigating the Monetary Policy Highway

As we gear up for the Fed’s meeting, all eyes are on their rate decision and economic projections. While the CPI report plays a crucial role, the Fed’s stance on rate hikes and quantitative easing will significantly influence the market’s direction. Think of it as the Fed setting the speed limits and traffic rules for our economic highway. Jerome Powell’s comments will be pivotal – will he signal a more cautious drive, or are we in for more rate hike speed bumps?

As we navigate this week’s economic landscape, staying alert and adaptable is essential. The CPI report has some markers, but the Fed’s meeting could reiterate our expectations. Please keep your eyes on the road and your hands on the wheel of your investment strategies as we await further signals from the Fed.

As we delve into another exhilarating day in the world of mortgages and real estate, let’s unpack the latest ADP numbers and their implications on the market. With a surprising downturn in job creation and a shift in the labor landscape, we’re at the cusp of potentially pivotal changes. Let’s explore what this means for you.

ADP Disappointment: A Sign of Changing Times

The ADP report, often a precursor to the BLS data, has shown a significant downturn, with only 103,000 jobs created in November, against an expectation of 130,000. This decline echoed in downward revisions of October numbers, signals a cooling job market. Particularly notable is the decline in leisure and hospitality – a sector once booming post-pandemic. What could this mean for the overall economy, and how might this influence the Fed’s rate decisions?

Wage Gains and Productivity: A Silver Lining?

While wage gains continue, there’s a noticeable deceleration, marking 17 consecutive months of slowing increases. This, coupled with improved productivity and falling unit labor costs, could spell good news for inflation control. The Fed’s Beige Book further underscores this trend, with two-thirds of districts experiencing contraction. How will these factors converge to shape monetary policy and mortgage rates?

Mortgage Market Insights: Applications and Future Predictions

Last week’s mortgage applications showed a fascinating dynamic: while purchase applications remained flat, refinances saw a jump, driven primarily by debt consolidation efforts. With oil prices hovering around $70 a barrel and the housing market’s resilience, Friday’s much-anticipated BLS jobs report could catalyze further market movements. Keep an eye on the unemployment rate – will it hit the 4% mark?

In the ever-evolving real estate and finance landscape, staying ahead means keeping a keen eye on these subtle yet significant market shifts. From job reports to wage trends, each element plays a crucial role in shaping the future of mortgage rates and real estate investments. As we anticipate Friday’s BLS jobs report, let’s remain vigilant and prepared for the opportunities and challenges ahead.

Remember, in California Platinum Loans, we navigate these market waves with expertise and foresight, ensuring you’re always a step ahead. Stay tuned for more updates and insights!