Morning! This is MF Lending welcome back! - 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:

1. Jan 11th CPI Print 🖨️

2. MF Lending: Best of 2023 🥇

3. Predictions for 2024 🔮

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Rates Today 📉

Jan 11th CPI Print 🖨️

The first CPI print of the year was released this morning. The Fed’s favorite measure of inflation, and the first big piece of economic news from the new year, was expected to send volatility through a market that has been all but flat.

Here were the numbers:

• Month/Month Core CPI (excludes food and energy)

  • 0.3 vs 0.3 forecast, 0.3 prev

• Year/Year Core CPI

  • 3.9 vs 3.8 forecast, 4.0 prev

• Jobless Claims

  • 202k vs 210k forecast, 203k prev

Overall, these numbers came in slightly higher than market forecasts - which is not going to drop inflation any time soon. Jobless claims also remain below forecasted levels, meaning the jobs market continues to remain strong, another inflationary pressure.

While we expected the report this morning to cause some volatility, the market remains relatively flat.

The 10-yr Treasury is up +.004 at the time of writing (that’s basically 0) and the MBS market is up .03 (again, basically nothing). The volatility did not come.

The next Fed meeting is Jan 31st. Currently, the odds for the Fed to hold rates is at 99.5% according to the CME Group.

For mortgage rates, you will see them around 6.625% - 6.75% on 30 yr loans for top tier borrowers. The same range we have seen all of January.

What are some takeaways from this morning?

This may be the first sign that 2024 will be much less volatile than ‘23. All of last year, we saw swings of 50-75bps daily…it was almost normal. This may be the first indication that this year will not be like last year.

We may have more reports like this, where we brace for impact and there is no force behind the blow. “Higher for longer” was the mantra of 2023. I think we may see “flatter for longer” here in 2024…the year of Flat Stanley.

MF Lending: Best of 2023 🥇

Top Edition (Open Rate + Click Rate):

🥇What Zillow’s ChatGPT Plugin Means For Agents…

🥈Q1 Recap: 3 Takeaways in 3 Minutes

🥉What You Need to Know About The Debt Ceiling…

Most Read Editions:

🥇“Date the Rate” is a Nightmare Clients are Waking up From

🥈FED Lunch & Learn - May 3rd Meeting

🥉What You Need to Know About The Debt Ceiling…

Thank you all so much for being a part of the MF Lending Community. This was launched February of 2023 and I have been so excited about the growth we have seen in less than a year.

My goal is to be a resource to real estate agents, investors, financial advisors, and even new home buyers where they can come and get knowledge about the current mortgage market and real estate news.

Thank you for being a part of this community 🙌🏻.

🪩Let me know in the comments what your favorite edition was of 2023!!🪩

Predictions for 2024 🔮

#1 Rates will Fall to 5.875%-5.75% starting in March

As much as we have heard about rates falling this year, I think the pace at which this happens has been blown out of proportion. We saw completely unprecedented rises and falls in interest rates during 2023 - one of the most volatile years in history.

I do not expect that to continue.

Here are my rate cut predictions: March, June, and September. For the Fed meetings outside of those months, I think they will hold the rates steady.

This would cut the Fed rates by .75% this year, I predict that will land mortgage rates in the 5.75%-5.875% range by the end of the year.

I do think we will see some volatility, so you may see rates dip as low as 5.5% at the absolute troughs.

To be clear - this is going to happen gradually. As you can see above, we are over 6.5% right now. I expect us to stay above that threshold until just before the March Fed meeting when the first rate rate cut should happen.

I am cautiously optimistic about 2024…but the wave of refinances may not come until early/mid 2025.

#2 Seller Concessions & 2-1 Buydowns will dry up by spring

As I continue to tell clients, if you want a 2-1 buydown or seller concessions, you need to go under contract in the next 60 days. When interest rates begin to fall, sellers are going to have less of an appetite to issue massive seller credits for things like 2-1 Buydowns or closing costs.

When rates begin to fall, you will begin to see a flood of potential homebuyers (we are already seeing it in the mortgage application numbers rising 10%).

The pent-up demand that has been building for those who felt that they missed out on the pandemic market will be let loose on the limited inventory we have in today’s market.

For borrowers that are adamant about waiting until the summer, set the expectations now of the cash needed, and assume the concessions will be a thing of the past.

#3 The “lock-in effect” narrative will disappear

I think there is more to the story of limited inventory than a scare for higher mortgage rates.

The jump in payments can leave some potential sellers on the sideline…but I think the other less talked about portion is that we saw a high number or transactions and migration during 2020-2021. People don’t like moving year after year, it is not a stress-free process.

I think some of this “lock-in” was merely potential sellers not wanting to physically move. These sellers have seen the largest equity growth in the last decade. They have a massive amount of wealth in their homes that they can then use for large down payments on homes in the future.

Yes, it comes with a higher rate, but I think that as rates continue to be less volatile and a “new normal” sets in, clients will be more willing to list their house and buy a new one as they look to upgrade, downsize, etc. (which happens every 3-4 years traditionally).

I would not be surprised if this “lock-in” narrative disappears, even as rates stay above 6%.

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