Weekly Market Update 2/23/2024

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Quick reminder that next week we do have the end of the month, so next Friday is the 1st. February is short, crazy how fast we flew through it. So as you're looking at closing, if you're looking at closing the end of the month, that would be Thursday, and then Friday is the 1st of March. Interest rates this week finally ticking down just a little bit for us, went from 7.14% to 7.10% according to Mortgage News Daily. And looking at the charts already this morning, likely going to see a little bit more decrease by the end of today, which, hey, we will take anything that we can get. Weekly mortgage tip, want to talk about interest rate locks here. One of the common misconceptions, even in the wording for it, is that when you lock in your interest rate, that you can't make any changes. In fact, you can. So if a client is looking at locking in an interest rate, they can still change their down payment amount. They can still change the rate that they get. What changes is when you lock, you're really just locking in what the market's doing at that point in time. You're taking a snapshot. It'd be the same as saying, hey, if you're in the stock market, you're looking to buy, call it 5 or 6 different stocks. But you locked in a rate, you'd basically get to freeze the price of all of those stocks, and then later you could choose which one you want to buy at a price that you've already locked in. Interest rates are the same, where if you chose initially to lock at a rate of 7%, but you said, you know, I really do have some extra money, I want to pay it down, maybe buy to 6.5%, even though you've locked, you can still buy it to 6.5%, and then the cost for 6.5% would just be the thing that you've locked in. That doesn't change with the market anymore day to day. So I usually recommend locking in sooner than later because there's a lot more to risk than there is to gain in waiting and letting people know, hey, you can lock in a rate now and still change it later. We're just not subject to the market fluctuations anymore. So great thing to talk with your clients about, make sure they're mitigating the risk, locking in early and not having to worry about the market changing in the middle of a transaction. And that's a great way to be able to get some fall-throughs if it doesn't move in your favor. Next up, just a heads up on this one. Capital One is acquiring Discover Financial Services. And so two massive credit card companies combining into one. This move, I mean, there are two of the largest in the US, so combining into one here. This combines over 100 million Capital One customers with over 300 million Discover customers. So if you have either Discover or Capital One, might be seeing some changes because of that. Next, new construction housing starts, they dropped 14.8% in January to a 1.33 million annualized pace, which is well below expectations for the month. A lot of this may have to do with inhospitable weather for many projects. Single-family permits were up almost 36% year over year, so even though you saw total construction starts dropping, new construction for single-family was much stronger year over year, and this is, you know, since hitting a low in January of 2023. Multifamily construction is down 27% year over year and now sits at one of the lowest levels seen over the past decade. So I know that a lot of people, as we saw the past 2 years, a lot of construction shifted over into multifamily. Now it seems like it's flipping again back to the single-family side. And then existing home sales increased 4% in January with single-family home accounting for the entirety of that gain. Year over year, they are still down 1.7% at a current annualized pace, about 4 million sales per year. But again, year over year, not bad at all, especially considering inventory issues. NAR Chief Economist Lawrence Yun also noted that cash deals are up and are elevated at 32% of all transactions right now, an increase from 29% in the previous month. Showing that there are still opportunities out there. Obviously, investors are feeling more confident getting into the game. And then we saw inventory increase about 2% for the month to 1.01 million units, which is up 3.1% year over year. Next up, the Fed minutes from January were released from their meeting on the 31st, showing that there is a hesitancy of cutting rates too soon. And several other Fed speakers talked this week in their presentations, one of them titled You know, what the rush? The idea being that they want to see more demand destruction. They want to see demand going down, spending going down, and unemployment rates going up before they're really interested in being able to drop those rates. One of the things that they are considering, though, which could be helpful, is a reduction in the tapering on their balance sheet, tapering off the reduction, because some of you may know quantitative easing and quantitative tightening is something that the Fed can do when they have run off from their balance sheet. So they buy bonds and these are fixed term, maybe 30 years. And at the end of those 30 years, then they get a specific return and they can either choose to let those bonds fall off or what they had been doing was reinvesting them and buying more bonds. Well, when there's more buying, there's more demand. More demand means lower mortgage rates for us. But over the last year or so, 2 years here, they, because of inflation, have started letting those run off their balance sheet. And as a result of that, in addition to inflation and hiking rates, that's where mortgage rates are spiking up. So they're contemplating letting that, you know, letting that runoff slow down a little bit, maybe not even necessarily reinvesting, but just putting a little bit into it or not letting as much run off, which could be helpful for mortgage rates. Even if they don't change the federal funds rate, if they're not cutting it. So we'll see. They are going to be discussing it at their next meeting, but they said no cuts for their March meeting. And lastly, initial jobless claims fell 12,000 week over week to 201,000 for first-timers, and then continuing claims also fell 27,000 to 1.862 million. Pretty strong number. And this again is adding more fuel to the fire for the Fed's case not to cut interest rates too soon because it does seem like employment is still strong. Unemployment rates aren't ticking up, and again, they want to see employment— unemployment rates much higher before they're looking at considering cutting those rates. So as always, hopefully have a wonderful weekend. We'll see you next time. Take care.