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Market Snapshot 10/17/23- Getting Slammed Again

Good Tuesday AM,

Bonds are just getting slammed again.

A three-day rally sure did fizzle fast. Today, the culprit is retail sales, which came in much better than expected. However, I will say that they came in less than last month. So you would think the market would find some comfort in that, but no, we’re going to keep selling off. Another thing interesting is we’ve been hearing some, some slightly more dovish comments from, from some of the Fed presidents. But again, the markets seem to want to do the opposite. It’s just still a really bearish situation. We’re back up at 4.85 on the ten-year note which is this level that goes back to 2006. We will likely hit 4.90. Capacity utilization came in stronger as well. We were looking for 79.5. We got 79.7. The Atlanta Fed came in with a blockbuster prediction for GDP. None of this was good today. Tomorrow, we have housing starts and building permits and then we have Philly fed and existing home sales on 19th. Tough to hold on, its like catching a falling knife today.

A little more on retail sales today…

Interest rates are high, inflation remains elevated and pandemic savings are dwindling. Yet the American consumer continues to spend steadily—at least for now. Tuesday’s retail-sales report, which includes spending at stores, online and at restaurants, will show whether a strong display of consumer resilience continued in September, or a slowdown took hold. Punch line is that spending remains resilient.. How, I do not know.

On a more positive note and under the heading of a rising tide lifts all boats…

Total mortgage origination volume is expected to increase to $1.95 trillion in 2024, says the Mortgage Bankers Association (MBA). That’s up from the projected $1.64 trillion in 2023. MBA’s Chief Economist and Senior Vice President for Research and Industry Technology Mike Fratantoni, along with Joel Kan, Vice President, Deputy Chief Economist; and Marina Walsh, CMB, Vice President of Industry Analysis, presented MBA’s 2024 outlook at MBA’s 2023 Annual Convention & Expo. Purchase originations are forecasted to rise by 11% to $1.47 trillion next year. Origination volume is expected to increase by 19%, for a total of 5.2 million loans in 2024. That’s a jump from 2023’s projected 4.4 million.

Fratantoni predicts a mild recession in the first half of 2024.

This is due to higher interest rates, tighter credit conditions, and a depletion of pandemic-era household savings. Lower rates are expected to boost homebuyer demand and increase the inventory of existing homes in 2024. However, the job market is likely to slow down, with fewer jobs added and an increase in the unemployment rate. Fratantoni added that he expects inflation to gradually decline towards the Federal Reserve’s target. The MBA’s baseline forecast for mortgage rates is 6.1% by the end of 2024 and 5.5% by the end of 2025. The housing market is expected to grow, driven by first-time homebuyers, said Kan. But he warned that challenges such as high prices, low inventory, and limited credit availability remain.

Mortgage lenders continue to face challenges with production losses and excess capacity.

Please remain safe and healthy!