The MartiniFactor | last week and this week with real estate and mortgage rates | April 8, 2022 Edition

April 4, 2022 by Kevin Martini

The MartiniFactor provides a glimpse of what happened last week in real estate and in the mortgage arena. In addition, it shares thoughts on what to keep on the radar for the week ahead.

last week (4/1/2022) & this week (4/8/2022)

LAST WEEK

Employment Data

On Friday, April 1, 2022, we learned that 431,000 jobs were created in March of 2022. The market was expecting 500,000 jobs however there were upward revisions to the January and February reports which made up for the miss and confirmed that hob creation was strong.

Inflation

This past week we saw data on Personal Consumption Expenditures (PCE). The PCE is the Fed’s favorite measure of inflation. The headline number indicated that inflation is on the rise since it rose 0.6% in February. Year-over-year the PCE increased from 6% to 6.4% which is the highest level in 40 years. Core PCE strips out volatile energy and foods prices and that was up 0.4%…year-over-year, Core PCE increased from 5.2 to 5.4%

The nemesis to mortgage rates in Raleigh is inflation.
Raleigh Mortgage Lender & Certified Mortgage Advisor Kevin Martini

Housing News

The Case-Schiller Home Price Index, which measures the changes in sales prices of single-family homes certain markets showed a home prices increased 1.1% in January and 19.2% year-over-year. The Federal Housing Finance Agency (FHFA), measures home price appreciation on single-family homes with conventional (a.k.a. conforming) loans rose 1.6% in January and 18.2% year-over-year.

THINGS ON THE MARTINI MORTGAGE GROUP RADAR THIS WEEK

The economic calendar is relatively quiet this week after last week’s wealth of data. Many are thinking that the Federal Reserve could move interest rates significantly higher than the markets currently expect. The Martini Mortgage Group will be paying close attention to the minutes from last month’s Federal Reserve monetary policy meeting, scheduled for release this Wednesday.

Raleigh mortgage rates have already increased by more than 1% since the beginning of the year. Even so, the market may take a little break from the recent volatility due to a relatively quiet economic calendar this week. That doesn’t mean the volatility is over.

The Martini Mortgage Group Bottom Line

Right now, real estate and the current mortgage rate environment remains an opportunity. The Martini Mortgage Group is here to talk about what you have just read and here to help you on the path to buying you home. Contact the Martini Mortgage Group by dialing (919) 238-4934.

The MartiniFactor | last week and this week with real estate and mortgage rates | April 1, 2022 Edition

March 28, 2022 by Kevin Martini

The MartiniFactor provides a glimpse of what happened last week in real estate and in the mortgage arena. In addition, it shares 3 things to keep on the radar for the week ahead.

last week (3/25/2022) & this week (4/1/2022)

LAST WEEK

New Home Sales and Pending Home Sales

If you just look at the headlines and don’t read the full story, it is understandable one could be scared about real estate. Last week reports were released that showed a decline in New Home Sales and Pending Home Sales too – OH MY! It is critical to know the major reason for the decline was not a deceleration of demand but low supply.

Let me get granular on Pending Home Sales, they fell 4.1% in February, which was weaker than expected and comparing February of 2021 to February 2022, Pending Home Sales were down 5.4%. Sure, one could say the decline was caused by higher mortgage rates, but I do not think so. The real story behind the decline is inventory.

The Fed and Raleigh Mortgage Rates

There was a lot of Fed chatter last week. Here is what one needs to know, the Fed has 2 tools on their belt to tighten the economy and they are: 1) increase their benchmark Fed Funds Rate and 2) reduce their balance sheet.

Over time, it is my opinion, the Fed raising the Fed Funds Rate will be a good thing for Raleigh mortgage rates because the Fed should be able to curb inflation and preserve fixed return on mortgage bonds. You see, mortgage rates live in the bond market and inflation is the nemesis to a bond. With inflation in check, Raleigh home loan rates will improve but from a historical perspective, Raleigh mortgage rates are still very low.

As a primer, the Fed purchased $2.9 trillion of mortgage bonds since March 2020. As the Fed plans to reduce it mortgage bond holdings in the coming months it could cause Raleigh mortgage rates to increase.

3 THINGS ON THE MARTINI MORTGAGE GROUP RADAR THIS WEEK

Major Economic Reports on the State of the Jobs Market

The closely-watched jobs report is scheduled for release this Friday (4/1/2022). In addition to looking at the unemployment rate and the number of jobs created in March, the market will closely examine the “average earnings” component of Friday’s jobs report. It’s widely expected that wages will have jumped by roughly 5.5% year-over-year. Meanwhile, the ADP employment report is due for release on Wednesday, and this is often interpreted as a sneak peek into Friday’s official numbers. Also, the JOLTS Job Openings report is due for release on Tuesday and is expected to show over 11 million job openings in the economy, the highest numbers on record.

PCE Inflation Reports

The Fed’s favorite measurement of inflation is the PCE inflation report and we’ll get two perspectives on that this week. On Wednesday, we’ll get the quarterly inflation numbers for Q4 2021, and on Thursday we’ll get the monthly inflation numbers for February. Both reports are expected to show up to 5.5% year-over-year annual consumer inflation.

The Fed’s Reaction

The Federal Reserve indicated in recent weeks it will be removing its pandemic-era stimulus programs and increasing interest rates more aggressively, starting with its monetary policy meeting in May. This caused bond prices to plummet across the entire global bond market with mortgage rates jumping by more than 1% since the beginning of the year according to the Freddie Mac weekly survey of mortgage rates. The volatility is likely to continue as the market continues to react.

The Martini Mortgage Group Bottom Line

How the Fed Impacts Raleigh Mortgage Rates

March 20, 2022 by Kevin Martini

2.9 Trillion - is the amount of mortgage bonds the Fed has purchased since March 2020. The Fed plans to reduce its bond holdings in the coming months which could drive up mortgage rates.

This is a Special Report by Raleigh mortgage lender and Certified Mortgage Advisor Kevin Martini on how the Federal Reserve impacts Raleigh mortgage rates.

THE FED IMPACTS FIXED-RATE MORTGAGES BY BUYING AND SELLING MORTGAGE BONDS.

Raleigh interest rates on fixed-rate mortgages change whenever the Fed buys or sells mortgage bonds, and whenever the Fed makes statements about buying and selling mortgage bonds. Since the pandemic hit the economy in March 2020, the Fed has purchased an eye-popping $2.9 TRILLION of mortgage bonds, making it the biggest buyer of bonds in the market. This purchase of mortgage bonds by the Fed is what caused caused Raleigh interest rates to go down to record levels.

raleigh mortgage rates by kevin martini a raleigh mortgage broker

However, as you can see from the chart above, mortgage bond prices fell off a cliff in Q1 2022 when the Fed announced it would be scaling back its massive bond-buying program. When mortgage bond prices go down, mortgage rates go up. The average interest rates on fixed-rate mortgages went up by 1% + so far this year according to Freddie Mac’s weekly survey of mortgage rates.

I expect more volatility in mortgage rates as the Fed continues to release more details about when and how it plans to roll back its bond-buying programs and reduce its bond holdings.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini

THE FED IMPACTS HOME EQUITY LINES OF CREDIT BY CHANGING THE “FED FUNDS RATE” NOT MORTGAGE RATES.

Raleigh interest rates on home equity lines of credit (a.k.a. HELOCs) change whenever the Fed lowers or increases the “Federal Funds Rate.” That’s because HELOCs are based on the Prime Rate and the Prime Rate is based on the Fed Funds rate. The Fed increased rates in March 2022 for the first time since 2018 and indicated more rate hikes are on the way. This means that rates on home equity lines of credit are likely to increase significantly by the end of 2022.

WIth the projected increase in HELOCs cost, one should consider refinancing the balance into a new first fixed rate mortgage and lock in their housing costs.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini

Credit cards, personal loans, student loans, auto loans and business loans are directly impacted when the Fed raises rates

MARTINI MORTGAGE GROUP TOP 3 RISKS TO RALEIGH HOME LOAN RATES FOR THE BALANCE OF 2022

Inflation

The nemesis to a bond is inflation because inflation erodes the bonds return. Right now, bonds are trading at negative yields relative to inflation. For example, if a bond investor is earning 3% and the inflation rate is 7%, the investor is losing 4%. At some point, it seems likely that bond investors may demand higher yields in order to account for higher inflation. This could drive up Raleigh interest rates even higher.

The Federal Reserve

The Fed has injected an eye-popping $4.516 Trillion into the economy since March of 2020 by buying Treasury bonds and mortgage bonds. 2.9 Trillion of the 4.516 Trillion of stimulus was mortgage bonds. This infusion caused Raleigh mortgage rates to go down to record levels. As the Fed unwinds the mortgage bond purchases, many economists are anticipating that Raleigh home loan rates will rise significantly.

Good News vs. Bad News

As a primer, news impacts Raleigh mortgage rates. On the aggregate, when negative news about the economy hits the wires, investors flock to the bond market for safety, driving down interest rates. When positive news hits the wires, investors shift their bias toward stocks and away from bonds, causing interest rates to go up. Many economists are anticipating that the economy will remain strong in 2022 however with geopolitical events and unwinding of the 2.9 Trillion of mortgage bonds, it is likely that Raleigh home loan rates may go up as a result.

Let’s Chat About Raleigh Mortgage Rates and How You May Benefits from Buying a Home Or Refinancing Your Current Home.

If you have question about this article, if you have questions about buying a home as a first-time homebuyer or as a repeat homebuyer, if you have questions about refinancing your current home loan, simply call the Martini Mortgage Group at PCL Financial by calling (919) 238.4934.