Stocks are higher after the jobs report. Bonds and MBS are up.
The economy added 261,000 jobs in October, which is more or less what we added in September. The unemployment rate ticked up to 3.7% from 3.5%, an indication that the Fed’s tightening is beginning to have some effect on the labor market. The labor force participation rate ticked down to 62.2%. Average hourly earnings rose 0.4% MOM and 4.7% YOY.
Rocket reported third quarter numbers. Volumes were down again – 26% QOQ and 71% YOY – to $25.6 billion. Gain on sale and earnings were again supported by servicing. The company is guiding for volume to slow again in Q4 (though seasonality is playing a part) to a range of $17 to $22 billion.
UWM reported third quarter earnings. Volumes increased from $29.9 billion to $33.5 billion. Gain on sale margins fell from 99 bps to 52 bps, but net income rose QOQ.
Guild Holdings reported Q3 numbers. In-house origination volumes were down 23% QOQ, however net income increased. Gain on sale margins were flat.
Freddie Mac is adjusting the way it calculates rates in its Primary Mortgage Market Survey. Freddie believes that its methodology contains sampling bias and it is working to fix that. FWIW, Freddie’s PMMS numbers have been a sticking point with borrowers and loan officers: “Freddie says rates are X% and we aren’t offering anything close to that!”
It sounds like Freddie will be using loan application data going forward instead of a survey. The biggest impact will be that points and fees will no longer be included in the rate data.
For those wondering, in the Morning Report, I use data from Optimal Blue to get the prevailing mortgage rate.
TIAA is getting out of the banking business. It will be selling TIAA Bank (which used to be known as Everbank) to a consortium of private equity funds and Bayview. The new name will be revealed soon.
Stocks are lower this morning after the Fed hiked rates yesterday. Bonds and MBS are down.
As expected, the Fed hiked rates by 75 basis points. The statement included language about the Fed taking into account lags and past rate hikes in order to assess the further course of monetary policy. In the immediate aftermath of the statement, stocks and bonds rallied on that statement as it seemed to indicate that the Fed was opening up the possibility of a pause in rate hikes.
The press conference poured cold water on that however, as Powell said it is “very premature” to be thinking about pausing and that “we have a ways to go on rates.” Stocks and bonds sold off for the rest of the day, and here we are this morning with the 10 year around 4.2%.
About the only positive was that Powell signaled that further rate hikes might be smaller. The December Fed Funds futures have a toss-up between 50 and 75 basis points. which would take us to about 4.5% on the Fed funds rate. Looking out to December of 2023, the futures see another 25 or 50 basis points of tightening in 2023.
Between now and December, we should get another two readings of the consumer price index and the PCE price index, so perhaps the data helps us out. I have to say I am utterly confused that the Fed would add the statement about taking into account lags and past hikes and then announce to the market that they are going to keep hiking. I mean, what’s the point of that statement? Seems strange, but that was one heck of a head fake to the stock and bond markets.
Productivity rose 0.3% in the third quarter, according to BLS. Output increased 2.8%, while hours worked increased 2.4%. Unit labor costs rose 3.5% as compensation rose 3.8% and productivity rose 0.3%. Lagging productivity has been an issue for a while, which has been contributing to inflation and lower standards of living.
Announced job cuts rose to nearly 30,000 in October, according to outplacement firm Challenger, Gray and Christmas. This was the highest level since February of 2021. Most of the cuts were in technology and the automotive sector. Construction jobs fell a we enter the seasonally slow period and are dealing with an affordability issue with housing. Despite the increase, initial jobless claims remain low at 217,000.
The services sector expanded in October, according to the ISM Services Index. That said, it decelerated from its September reading, indicating that the Fed’s rate hikes are beginning to have an effect. The one disappointment was that prices increased after 5 straight months of declines.
“Growth continues at a slower rate for the services sector, which has expanded for all but two of the last 153 months. The sector had a pullback in growth for the second consecutive month in October due to decreases in business activity, new orders and employment. Supplier deliveries continued to slow, at a faster rate in October. Based on comments from Business Survey Committee respondents, growth rates and business levels have cooled. There are still challenges in hiring qualified workers, and due to uncertainty regarding economic conditions, some companies are holding off on backfilling open positions. Supply chain and logistical issues persist but are not as encumbering as they were earlier in the year.”
Stocks are lower as we await the Fed decision. Bonds and MBS are flat.
The Fed decision is due today at 2:00 pm. The market expects to see a hike of 75 basis point, and there won’t be any new dot plot of set of projections. Jerome Powell will hold a press conference at 2:30 pm.
The economy added 239,000 jobs in October, according to the ADP Employment Report. The vast majority of the jobs were added in leisure / hospitality and trade / transportation. Manufacturing jobs fell. “This is a really strong number given the maturity of the economic recovery but the hiring was not broad-based,” said Nela Richardson, chief economist, ADP. “Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.
The number that jumped out at me was the increase in wages. From the report: “Job changers continued to record double-digit, year-over-year pay increases, but momentum in those gains is ebbing. For these workers, annual pay growth edged down for the third straight month, to 15.2 percent in October from 15.7 percent in September. For job stayers, pay gains were 7.7 percent, in line with recent months.”
This report seems way out of step with other reports on wage gains. FWIW, the market sees average hourly earnings increasing 4.7% in Friday’s jobs report, which is a far cry from the 7.7% reported here. Also this seems out of step with the employment cost index as well. If this report is true (especially for job stayers) then wage are more or less keeping up with core inflation (ex-food and energy).
Mortgage applications fell 0.5% last week as purchases fell 1% and refis fell 0.2%. The refi index is down a whopping 85% compared to a year ago. “The 30-year fixed rate decreased for the first time in over two months to 7.06 percent, but remained close to its highest since 2002,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “Apart from the ARM loan rate, rates for all other loan types were more than three percentage points higher than they were a year ago. These elevated rates continue to put pressure on both purchase and refinance activity and have added to the ongoing affordability challenges impacting the broader housing market, as seen in the deteriorating trends in housing starts and home sales.”
Home price appreciation decelerated in October, according the the Clear Capital Home Data Index. Overall home prices rose 0.5% quarter-over-quarter, and 12.6% on a year-over-year basis. Prices are beginning to soften dramatically on the West Coast, with areas like Seattle and the Bay Area falling in the mid-to-high single digit range. Rising prices and quality of life issues are causing people to exit these MSAs, and home prices are reacting accordingly.
Interestingly, the Northeast (which really missed this whole rally over the past few years) is beginning to exhibit decent growth. Places like Hartford CT and the NYC metro area were among the leaders. Florida remains the biggest beneficiary of migration as cities like Miami, Orlando and Tampa exhibited 25%+ growth.
Stocks are higher as we begin the Fed meeting. Bonds and MBS are up.
The Fed meeting begins today, and the focus will be on the pace of future rate hikes. The market is hoping that this meeting will be the last in the string of 75 basis point hikes. Generally speaking an increase of 50 basis points is considered to be an assertive move against inflation, while 75 basis points is pretty dramatic. We won’t get projections or a dot plot this meeting, so it all comes down to parsing the language in the press release and hanging on every word Jerome Powell says at the press conference.
The manufacturing economy barely expanded in September, according to the ISM Survey. The 50.2 reading is the lowest since May of 2020. Leading indicators such as new orders, are contracting.
“The U.S. manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began. With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies’ preparing for potential future lower demand. In the meantime, demand eased, with the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index below 50 percent for a third consecutive month and at a faster rate of contraction, (3) Customers’ Inventories Index remaining at a low level, with the same reading as in September and (4) Backlog of Orders Index slipping into contraction. Output/Consumption (measured by the Production and Employment indexes) improved month over month, with a combined positive 3-percentage point impact on the Manufacturing PMI® calculation. The Employment Index shifted from contraction to a reading of 50 percent (unchanged), and the Production Index increased by 1.7 percentage points, staying in modest growth territory. Business Survey Committee panelists’ companies are continuing to manage head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand still uncertain.Inputs — defined as supplier deliveries, inventories, prices and imports — mostly accommodated growth. The Supplier Deliveries Index indicated faster deliveries and the Inventories Index dropped 3 percentage points as panelists’ companies continued to manage the total supply chain inventory. The Prices Index decreased for a seventh straight month and fell into contraction territory, which should encourage buyers.
It is clear the Fed’s tightening regime is gaining traction, and the report of the Prices index falling into contraction is a leading indicator that inflation is being brought under control. The decrease in prices is being driven primarily by lower energy and metals prices.
Notwithstanding the ISM report, there were 10.7 million job openings at the end of September, according to the JOLTs jobs report. This partially offset a pretty big decline in August. Hires decreased to 6.1 million and the quits rate remained stuck at 2.7%
Construction spending rose 0.2% in September, which was up 10.9% year-over-year. Residential construction was flat.
Stocks are lower this morning as we start Fed week. Bonds and MBS are down.
The upcoming week will have a lot of market-moving events. The biggest event will be the FOMC meeting on Tuesday and Wednesday, with the Fed Funds futures handicapping a 86% chance of a 75 basis point hike and a 14% chance of 50. We will get the jobs report on Friday, along with the ISM data and productivity.
The government is beginning to worry about liquidity in the Treasury market. One of the problems with borrowing a lot of money is that you need to continue to attract a lot of money in order to roll over the maturing debt. The fear is that we could get some failed auctions. Part of this is being driven by the events in the UK, where yields on UK Gilts (The UK’s version of a Treasury) spiked some 120 basis points in the course of a few days.
The root of the buyers strike is due to a lot of things, but the ultimate reason is nothing more than price and value. With inflation running at anywhere between 5% to 6%, a 10-year Treasury paying 4% isn’t an attractive investment. Global central banks have engineered a bubble in sovereign debt, which is something I don’t think we have seen before. Central banks in general have only been around for about a century so this is all new territory.
Note that the Fed is now paying more in interest than it receives in income from its Treasury and MBS portfolio. The Fed pays all of its profit to Treasury, and now that it is running losses, it is accumulating an IOU. When the Fed starts earning profits again, those profits will pay off the IOU. The Fed also does not mark its portfolio to market, which is good news because it is probably a few hundred billion dollars underwater on its MBS portfolio.
Public interest lawyers are warning that the 5th Circuit’s ruling on the CFPB’s funding structure could upend the mortgage market. “The Fifth Circuit’s decision threatens to paralyze mortgage lending in Mississippi, Louisiana, and Texas because lenders will lose certainty about what law applies to future mortgages that they make,” McCoy said, referring to the states within the Fifth Circuit. She was part of the original leadership team at the CFPB during the Obama administration.
“We do like to settle rules that give us some safe harbors for the way that we make mortgages and we don’t want that to all go away,” Mortgage Bankers Association president and CEO Robert Broeksmit said Monday at the trade association’s annual convention. Still, he vowed to keep fighting what he called the bureau’s regulatory overreach. “Now is no time to make you hire more lawyers to try to understand what the bureau is doing.”
FWIW, the MBA believes this ruling would only affect payday lenders, however the CFPB’s days of being exempt from the appropriations process are probably over.
Stocks are lower this morning after Amazon.com earnings missed expectations. Bonds and MBS are down.
Personal incomes rose 0.4% MOM in September, according to the BEA. Spending rose 0.6% MOM. The PCE Price Index rose 0.3% MOM, while it rose 0.5% if you exclude food and energy (i.e. the core rate). On an annual basis, prices rose 6.2% and the core rate rose 5.1%.
The highlighted numbers show the monthly changes in both indices. July certainly looks like an outlier, but I see no discernable downward trend in the core rate, which is what the Fed is targeting.
The employment cost index (in other words the cost of employees from an employer’s point of view) rose 5.2% YOY in September, according to BLS.
I sat down with Clear Capital’s Kenon Chen at the Nashville MBA and discussed interest rates, the housing market, and what to look for going into year end. Here is the podcast.
Consumer sentiment improved in October, according to the University of Michigan’s Consumer Sentiment Index. Inflation expectations continue to remain elevated, which is bad news for the Fed. “The median expected year-ahead inflation rate rose to 5.0%, with increases reported across age, income, and education. Last month, long run inflation expectations fell below the narrow 2.9-3.1% range for the first time since July 2021, but since then expectations have reverted to 2.9%. Uncertainty over inflation expectations remains elevated, indicating that inflation expectations are likely to remain unstable in the months ahead.”
Pending home sales fell 10.2% in September, according to the National Association of Realtors. “Persistent inflation has proven quite harmful to the housing market,” said NAR Chief Economist Lawrence Yun. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers. The new normal for mortgage rates could be around 7% for a while,” Yun added. “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”
Let me geek out for a second about Yun’s comments. This is real inside-baseball stuff.
FWIW, I don’t see mortgage rates sitting at 7% for long. If the Fed hikes another 75 basis points in December, and that appears to be the end of the hiking process, then I could see the 10-year going nowhere as the yield curve inverts in anticipation of a recession.
With MBS spreads at 15 year highs, if spreads revert to normal, then we should see a 110 basis point decrease in mortgage rates, even if the 10 year goes nowhere. This chart is from AGNC Investment, a mortgage REIT. Note that MBS spreads are wider than the depths of the financial crisis.
MBS spreads are simply the incremental yield that investors demand to hold mortgage backed securities versus Treasuries. If the spread is 180 basis points, (or 1.8%) and the 10 year yields 4%, that means MBS investors expect to receive a yield of 5.8%. Historically, they would have required 4.8%.
Mortgage rates are based on what MBS investors are willing to pay for these securities. If spreads are large (as they are now), you could say that MBS are cheap relative to Treasuries. If spreads are narrow (as they were in early 2021), you could say that MBS are rich. Right now, MBS are extremely cheap relative to Treasuries. Bond fund managers are always swapping in and out of different fixed income asset classes to find the best returns, and we should see them swap into MBS at some point, which should put some downward pressure on mortgage rates.
Bond funds have seen outflows, and when fund managers need to raise capital to fund redemptions, they generally sell the most liquid part of the portfolio. They do this because they can raise the most money with minimal impact on the price of the security. If they tried to raise funds by selling, say non-QM loans or junk bonds, they would crash that market, which would lower the net asset value of their portfolio. So, they raise capital first, then make the adjustments for the best returns later. So when we see a sell-off in fixed income as an asset class, MBS are the first to get whacked. And I think that is where we are now.
If the Fed’s dot plot in December indicates that the tightening cycle is largely done, I expect bond investors to flood into MBS since you can get a government-guaranteed rate of return far in excess of Treasuries. That will cause a furious rally in MBS, with a corresponding drop in mortgage rates. I suspect we will see a mortgage rate in the low 6s by mid 2023.
Stocks are higher this morning after the GDP report. Bonds and MBS are up as well.
The advance estimate for third quarter GDP came in at 2.6%, an uptick from the 0.6% decline in the second quarter. The increase was driven by an uptick in consumption as well as government spending. Housing was a drag. Trade was also a positive contributor as exports increased and imports decreased. Personal consumption expenditures rose 1.4%. Both numbers were better than expected, which put a bid under stocks.
The report contained some good news on inflation. The PCE price index rose 4.2% compared to an increase of 7.3% in the second quarter. Ex-food and energy, the PCE index rose 4.5% compared to 4.7% in the second quarter. The inflation news pushed the 10 year bond yield back below 4%.
In other economic data, durable goods orders rose 0.4%, which was below expectations. Ex-transportation they fell 0.5%. Core capital goods (a proxy for business capital investment) also declined. Initial jobless claims ticked up marginally to 217k, which is historically a very low number.
Homebuyer affordability declined in September, according to the MBA. “Homebuyer affordability took an enormous hit in September, with the 75-basis-point jump in mortgage rates leading to the typical homebuyer’s monthly payment rising $102 from August,” said Edward Seiler, MBA Associate Vice President of Housing Economics, and Executive Director with Research Institute for Housing America. “With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking. The median loan amount in September was $305,550 – much lower than the February peak of $340,000.”
New home sales continue to decline. In September, new home sales came in at 603,000, which was a decline of 10.9% compared to August and 17.6% from a year ago.
Stocks are lower this morning after disappointing numbers out of Google and Mr. Softee. Bonds and MBS are up.
Mortgage applications fell 1.7% last week, as purchases fell 2% and refis actually ticked up. “The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “Refinance applications were essentially unchanged, but purchase applications declined 2 percent to the slowest pace since 2015 – over 40 percent behind last year’s pace. Despite higher rates and lower overall application activity, there was a slight increase in FHA purchase applications, as FHA rates remained lower than conventional loan rates.” Mortgage rates increased 20 basis points, from 6.94% to 7.16%.
Mortgage REIT AGNC Investment reported earnings yesterday, and discussed the current market. Mortgage originators should think of mortgage REITs as the buyers of their production. Inside the investor presentation, they showed just how wide MBS spreads have become. Take a look at the chart below.
The MBS spread is the difference in yield between a 10 year Treasury and corresponding mortgage backed security. The yield that investors like AGNC demand for these securities are the basic input to determine mortgage rates in general. AGNC investment holds primarily agency securities (in other words, bonds backed by Fannie and Freddie loans).
On the conference call, the CEO described what is going on the MBS market. The first thing he said is that in the early stages of market downturns agency mortgage backed securities are the first ones sold. This is because agency mortgage backed securities are the most liquid fixed income market in the US after Treasuries. So there tends to be a “sell what you can” aspect to this. And certainly bond funds have seen outflows.
The hiccup in the UK bond market was a big catalyst for the widening of MBS spreads. Since agency mortgage backed securities have no credit risk (they are government-guaranteed) the widening is due to liquidity and volatility overall in the bond market.
MBS spreads right now are wider than they were in December 2008, when the financial crisis was peaking. They are wider than they were in early-mid 2020 when the MBS market froze and the mortgage REITs were beset by margin calls. Can they go wider? Sure. But we are seeing a historically unprecedented market and these spikes don’t last very long.
Over the past 10 years, MBS spreads have averaged about 78 basis points, and are at 190 bps now. Here is what that means. If the 10 year yield stays the same, there is a built-in improvement in mortgage rates of 112 basis points. In other words, we could see rates fall to the low 6% range over the next few months, even if the Fed continues raising rates and the 10 year stays where it is.
From the standpoint of MBS investors, a government-guaranteed 6% rate of return is pretty attractive, certainly compared to investment-grade corporate bonds or junk. And if the economy does enter a recession, investors will sell credit risk and hide out in Treasuries and MBS. I expect this to happen at the end of the year, when lots of asset managers revise their risk allocations.
During the call, one of the analysts asked about the dividend. AGNC currently pays a monthly dividend of $0.12, which works out to a 18.6% dividend yield. Mortgage REIT investors have been waiting for the other shoe to drop, which means a dividend cut.
The analyst asked point-blank if the portfolio can cover the dividend yield. ANGC’s CEO said, after the caveats about always re-evaluating the correct dividend yield “But what’s really, I think, critical to understanding, I think is the heart of your question is you have to understand what drove the decline in our book value. And if you look at the performance of mortgages and you look at that graph that we show, I think it’s clear to everybody when you look on Page 7, that mortgage spreads have gone in one direction only for the better part of the last 18 months, 65 basis points wider, if you will, from August to now. So the decline in our book value is driven primarily by wider spreads. So while it hurts your book value currently because the decline in book value came from wider spreads, it also enhances the go-forward return on our portfolio…So, going forward, I still believe that those two things are reasonably well aligned, and obviously, conditions change and markets are volatile and we’re going to continue to be diligent about monitoring that. But to go forward, the return on our portfolio still is consistent with our dividend.”
The mortgage space is about as popular as mask mandates right now, but the sentiment might be too dour.
Stocks are lower this morning as earnings continue to come in. Bonds and MBS are up.
The FHFA House Price Index declined 0.7% in August. Prices were up 11.9% from a year ago. “U.S. house prices declined in August at a similar pace to the previous month. This is the first time since March 2011 that the index has seen two consecutive months of decline.” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The recent monthly decline solidifies the deceleration of 12-month house price growth that began earlier this year. Higher mortgage rates continued to put pressure on demand, notably weakening house price growth.”
The index value for August was 392.03. The 10/1/21 index value was 357.59. This works out to be a 9.63% increase over the past 11 months. This would put the 2023 conforming loan limit around $709,500, with one last data point needed.
Separately, the S&P CoreLogic Case-Shiller Index reported a 0.3% monthly decline in July (it is a month behind FHFA). Prices rose at a 15.8% annual clip, with the Southeast showing the biggest growth. The leading cities were Miami and Tampa.
“Consumer confidence retreated in October, after advancing in August and September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index fell sharply, suggesting economic growth slowed to start Q4. Consumers’ expectations regarding the short-term outlook remained dismal. The Expectations Index is still lingering below a reading of 80—a level associated with recession—suggesting recession risks appear to be rising.”
“Notably, concerns about inflation—which had been receding since July—picked up again, with both gas and food prices serving as main drivers. Vacation intentions cooled; however, intentions to purchase homes, automobiles, and big-ticket appliances all rose. Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers. And, given inventories are already in place, if demand falls short, it may result in steep discounting which would reduce retailers’ profit margins.”
Note that we will be getting the first estimate of Q3 GDP on Thursday. The Atlanta Fed’s GDP Now index sees a gain of 2.9%. This seems out of step with the majority of the economic reports, but perhaps the comment about retailer inventories, specifically inventories in place, explains it.
If retailers built up inventory for the holiday shopping season, that would bump up Q3 GDP, but if the sales don’t materialize it would mean Q4 is looking rough. And if retailers are forced to discount in order to move the merchandise, then that will dampen inflation.
I suspect that this will push the Fed to begin to slow the rate hikes, and we could see the Fed signal that with its December projections. Don’t forget that all of these summer and fall rate hikes haven’t had time to impact the economy yet.
The MBA issued a statement supporting Fannie and Freddie’s steps to widen credit scoring and appraisals to open credit to underserved borrowers.
“Given the ongoing affordability challenges facing homebuyers, FHFA’s targeted adjustments to the GSEs’ pricing framework announced by Director Thompson at MBA’s 2022 Annual Convention are well-timed and will improve access to credit for low- and moderate-income households, first-time buyers, and minority buyers.
“The announced updates on credit scoring models should help broaden the scope of eligible borrowers and expand access to homeownership for underserved communities. MBA supports competition in the credit scoring space, and we will work with FHFA to ensure costs and the implementation process are monitored to mitigate unintended consequences to lenders and borrowers.
“FHFA’s increased focus on appraisal transparency – a years-long recommendation by MBA – will help the industry work together on data collection, with a shared goal of providing more accurate and equitable appraisals for borrowers.”
Stocks are higher as earnings continue to come in. Bonds and MBS are up.
The upcoming week has a lot of important economic data. Tomorrow, we will get the FHFA House Price Index for August. Lots of mortgage bankers are looking at this number and trying to game what the new conforming loan limits will become after the September index level gets reported.
We will get new home sales, consumer confidence, GDP, personal incomes and outlays, and consumer sentiment. The personal incomes and outlays contains the Personal Consumption Expenditures Index which is the Fed’s preferred measure of inflation.
The MBA sees 2023 origination volume declining 9% to $2.05 trillion. “Next year will be particularly challenging for the U.S. and global economies. The sharp increase in interest rates this year – a consequence of the Federal Reserve’s efforts to slow inflation, will lead to an equally sharp slowdown in the economy, matching the downturn that is happening right now in the housing market,” said Fratantoni. “MBA’s forecast calls for a recession in the first half of next year, driven by tighter financial conditions, reduced business investment, and slower global growth. As a result, the unemployment rate will increase from its current rate of 3.5 percent to 5.5 percent by the end of the year. Inflation will gradually decline towards the Fed’s 2 percent target by the middle of 2024.”
The MBA sees home price appreciation declining to about zero next year. That said, the supply issue (or lack thereof) will remain an issue. The MBA forecasts that the number of jobs in the industry will contract some 25%-30% from peak levels.
We will get GDP on Wednesday, and the consensus seems to be that growth will be in the mid-to-high 2% range. The negative growth of Q1 and Q2 probably overstated the economic weakness, and this report will probably overstate growth. Retail sales bounced back in Q3, and that drove the increase in the Atlanta Fed’s GDP Now index.
Finance of America is getting out of the forward mortgage business but will continue to do reverse mortgages. The specialty finance and services products such as fix and flip will continue as well.