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and…happy FED week!

Here’s what we’ve got for you today:

1. FED Predictions Ahead of Wednesday's Meeting

2. Consumer Credit at New Record High: Led by Credit Card Debt

By the way, this article on Apple Vision Pro is the most clicked link in this newsletter, you should check it out if you are interested.

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Nuwave Rates Today 📉

Early FED Predictions

The FED will be meeting Tuesday and Wednesday to decide whether to raise interest rates by an additional 25bps for the 11th consecutive month…or to skip rate hikes for the first time in over a year.

This will be a game-time decision as the FED’s favorite measure of inflation - CPI - will be released on Tuesday just before the start of their meeting.

Here is the early prediction per CME FED Watch Tool:

The market believes there is a 75% chance the FED will pause rate hikes in this cycle.

What does this mean for mortgage rates?

If the CPI print shows inflation cooling, we could see rates come down and make their way back toward 6.5% (a much-needed relief as we have seen most residential markets heating back up).

If the CPI print shows inflation continuing to be sticky, it could mean we see rates elevated through the summer, and may even creep back above 7%.

This report can truly swing the market in two directions.

Here is a look at the MBS market - the prominent driver of mortgage rates. It peaked at the end of May during the debt ceiling negotiations and has basically flattened throughout June - a clear indication that the market is in a holding pattern leading up to this meeting.

What could the rest of the year look like?

If we see good news tomorrow, it means we could be at the peak of market interest rates.

But, don’t expect rates to begin to plummet quickly.

Real estate always leads the economy into and out of a recession. The FED will be careful sparking growth in the housing sector and risking running inflation hot once again. I wouldn’t expect large rate cuts until early 2024.

But, with limited inventory in the market, any rate change in a positive direction will pique the interest of potential homeowners and clients.

For agents this week, I would emphasize the opportunity that is in today’s market. Many clients are fearful of interest rates and payments. That could mean strong negotiating power, large seller concessions, and limited competition. The next 4-5 months could be the last time we see seller concessions in the market for a significant period of time.

As soon as rates begin to fall, market experts are expecting home sales to rise 25%. With limited inventory, that means a lot of competition on the houses for sale.

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Keep an eye out for our Wednesday FED Lunch & Learn Edition to hear all the updates on the FED meeting.

Consumer Credit at New Record High: Led by Credit Card Debt

If your clients ever ask, how can I prepare to buy a house when rates drop? - a simple response is to get out of the rest of personal debt, specifically credit card debt, if possible.

Credit card debt rose $13.48B to a total of $1.24 Trillion, a new record high.

As an aside - it is truly mind-blowing to me that potential clients are unwilling to accept a 7% interest rate on a home, but completely willing to pay 25% on their credit cards.

Clients who want to prepare for a home purchase by the end of this year or early 2024 should start by analyzing their other debt obligations.

Focus on high-interest credit cards - especially those with high monthly payments.

If clients can set a goal to clear out their credit card debt, even if it means they have less for a down payment, it will help them tremendously when starting the home search.

There are options for down payment assistance, first-time homebuyer 3% down programs, and other strategies that can help with less of a down payment. But, if you only have your mortgage to focus on and not a mountain of credit card debt, it’s a much easier pill to swallow.

The Cul-de-Sac

Mark your GCal & Potential Impacts 📆

1. Tue Jun 13th - CPI Print

2. Wed Jun 14th - FED Press Conference

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio