Video
December 22, 2023
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December 22, 2023
New Inflation Data + Narrowing Spread Could Bode Well for Rates
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Mortgage rates flatlined this week, showing virtually no changes the entire week. After significant drops last week and falling over 1.4% over the last 60 days, the markets appear to be taking a pause to catch their breath and digest all of the data. In Bill's opinion, Wall Street wants to make sure that all the favorable economic reports that push mortgage rates down are going to continue.
This may also be a case of taking a break for the holidays before they dive in deep at the beginning of the year! It could be a great year next year.
This week, we had the Fed's favorite indicator of inflation released, known as the PCE - Personal Consumption Expenditure. This came out better than expected and actually was negative month over month.
Inflation continues to gradually decline, which always bodes well for mortgage rates. I think that's going to continue into next year. Another unknown factor that could help mortgage rates in 2024 is what we call "the spread". Historically, mortgage rates are approximately 2% above the 10-year U.S. Treasury bond. When rates skyrocketed earlier this year, that spread jumped to over 3%, making mortgage rates even worse.
Why did this occur? The mortgage bond traders believe that all the high interest rate mortgages that consumers were getting are going to be refinanced out just as soon as mortgage rates come down. The traders were hesitant to buy mortgage securities because they make money over the long term and not if a mortgage is refinanced out.
The high spread is starting to come down and starting to get reduced. Once mortgage rates get to "normal" level in the minds of Wall Street, that spread should drop even more, bringing interest rates down. This might bode well for 2024.
Finally, on another note, Bill posted an Instagram reel this week that went viral, garnering 4.5 million views and counting. It has been shared over 120,000 times. It was a prediction for 2024 and really sparked a nerve with homebuyers. We would love to get your thoughts on it as well. Check it out here!
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