- MF Lending
- Posts
- 🪩 June CPI Print | What's Next For Rates
🪩 June CPI Print | What's Next For Rates
Michael DiLucchio
July 11, 2024
Morning! This is MF Lending - the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)
Here’s what we’ve got for you today:
The CPI print we have been waiting for 🥳
Where do we go from here? 🤔
By the way, this article on 4th of July Week Movement is the most clicked link in this newsletter, you should check it out if you are interested.
Was this email forwarded to you? Subscribe to get it directly!
[Est Read Time: 3-4 min]
Rates Today 📉
The CPI print we have been waiting for 🥳
June CPI came out this morning - it has been the single most important data point for the Fed over the last two years.
Month-over-month and year-over-year CPI came in below expectations.
As a result, the bond market rocketed up 40 bps (which is great for interest rates). You can see the immediate impact in the rate estimates above, they have dropped meaningfully in just one month.
We are quickly heading towards the magic 6.5% ceiling - and should be there by the early fall.
Here are a few notes from Matt Graham at MBS Live -
…if this report were repeated for 12 months, core inflation would be under 0.8% for the year. Considering the Fed's inflation target it 2%, it's no surprise that bonds are rallying in response, even though official year over year core inflation is still over 3%.
To make matters better, the most problematic component of the core CPI numbers--the one that tracks housing expenses--finally made the big downward shift that analysts have been waiting for. "Shelter" dropped to an unrounded 0.17% from 0.4% last month. That's actually lower than most of the PRE-Pandemic trend.
Overall, this report was the best-case scenario for anyone in the market for property. Rates fell, all the data is positive, and all signs point to this trend continuing.
Other Resources & CPI Notes:
Where do we go from here? 🤔
Since late winter, it has been clear that we would not see a rate cut this summer. The focus and hope was always on the September meeting - that has nearly solidified itself.
CME Group, who projections for rate cuts now shows the likelihood of a rate cut in September at 92%. (chart below) - the highest it has been all year.
What does that mean for real interest rates?
Typically, mortgage companies will get ahead of the Fed when they know that a rate cut is coming.
In this rendition, the projection is a cut in the September meeting. So it is likely to start to see mortgage companies cut their rates in August (about 3 weeks away 👏🏻).
It would not suprise me to see our magic friend 6.5% back on the rate sheets even before the Fed makes the announcement.
How can you prepare your clients?
When this happens, there will be a wave of new buyers in the market. The best thing you can do for your clients is have them - get preapproved.
They need to get ahead of this wave if they are wanting to purchase something in the fall. Check your credit, make sure there are no red flags, set up your budget, etc. Have all your ducks in a row so that, when rates fall, you do not need to wait on an LO or a full approval process to put offers in on homes.
--
This will be a few exciting upcoming months. If you need a preapproval, please DM me @mf.lending or email [email protected]. I am here to help and serve your clients. Enjoy the weekend🪩
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
Reply