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Are Rates "Likely at Its Peak”? Market Update 2/5/24 · Mastering Encompass®

• 0:30
  Hey, welcome everyone. Larry Bailey here with Awesome Technologies, Inc. We're gonna go through a newsletter here.
• 0:36
  Today is February 5th, 2024 and this is for the week of January 29th, 2024 in review. This information is brought to you from MBS Highway. You can find out more information at mbshighway.com if you want to subscribe to any of this to get your daily information.
• 0:53
  It's also brought to you from Awesome Technologies, Inc. Visit awesometechinc.com.
• 0:59
  Also, if you're not part of the mortgage doc community, hopefully you're listening to this through our podcast or if you're already part of the mortgage doc community, thank you very much. If you're not joined, it's free. It's available to anyone regardless of who you work for or where you work and it provides for a ton of information.
• 1:16
  If you are an Encompass user, check out all of the spaces in the Mastering Encompass collection and let's get ready to help you out.
• 1:26
  We have a lot of live sessions happening every Tuesday at 4 p.m.
• 1:30
  Eastern and they're only 30 minutes and we're going through a lot of settings this week and and as well as the rest of the month. So let's get into this newsletter here. So this is again for the week of January 29, 2024 and the Fed held rates steady while there were mixed messages from the labor sector and home prices continued to hit new highs. Here's the news stories to come.
• 1:55
  First one is Fed funds rate quote likely at it's peak close quote.
• 2:00
  We'll see about that. The next story is was January, January's job report. Really a blockbuster.
• 2:06
  The next story is slow start for the private sector job growth.
• 2:09
  The next story is surprising uptick in December's job openings.
• 2:13
  The next story is unemployment claims rise for the second straight week.
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  And the last story is home prices are moving or not. On up.
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  If you want to sing that along to the old Jefferson's show, go for it. Here's that first story.
• 2:30
  So the Fed funds rate quote likely at its peak close quote.
• 2:34
  So after a period of aggressive rate hikes that began in March 2020.
• 2:37
  The Fed once again left their benchmark Fed funds rate unchanged at a range of five and a quarter to five and a half percent.
• 2:43
  And this decision was unanimous and marked the fourth straight meeting where the Fed paused additional rate hikes. The Fed funds rate is the interest rate for overnight borrowing for banks. And it's not the same as mortgage rates, not even close. The Fed's 11 hikes between March 22 and July 23 were done so to make the economy slow down uhm and curb the inflation that was absolutely run away uhm seen over the last couple of years. Bottom line here for this story is the Fed said they believe they have reached their peak in Fed funds rate for this cycle.
• 3:16
  However, and the cycle means like for their cycle of decisions.
• 3:21
  However, members don't expect to begin cutting rates until they have quote greater confidence that inflation is moving substantially towards that 2% close quote.
• 3:30
  Again, this 2% number is what everybody's been like living and breathing for forever.
• 3:36
  Note that the Fed's favorite measure of the core personal consumption expenditures, that's the PCE. PCE number, in case you ever watched that, that declined to 2.9% annually.
• 3:45
  As of the latest job, I'm sorry, as of the latest report for December, during his press conference, Fed Chair Jerome Powell acknowledged that inflation data has been favorable over the last six months, however, he does not think that the Fed will be ready to start cutting rates at their next meeting, which is March 20th, explaining that members want to see, quote, more good data. And I don't know if you've, if you're watching this as this is happening, but again, over the last couple of weeks, this thing, this price has been getting lower and lower. Lower towards 100 MBS Highway just initialed an alert to lock because rates did come out and investors may be at a point now where they might go back and, and adjust their pricing to be worse.
• 4:25
  So MBS Highway does a lot of that stuff if you, if for nothing else. Just getting those, ah, lock alerts or float alerts, ah, is, is extraordinarily powerful in MBS Highway.
• 4:36
  So the next story was J-, was January's job report really a blockbuster?
• 4:41
  And on screen you'll see that, ah, it's kind of like a flat line. So the Bureau of Labor Statistics also known as BLS reported that there were 350,000 jobs created in January, which was nearly double the expectations revisions to November and December were also adding 126,000 jobs in those months combined, and this led the unemployment rate to hold steady at 3.7%, which is like you add all these jobs but why is the unemployment rate still the same? So the bottom line here is while the headline job growth figure for January appears strong on the surface, future revisions low or a very real possibility.
• 5:18
  January is also a heavily adjusted month as new benchmarks, seasonal adjustments, and population controls play a big role in calculating this data. Remember there are always two reports within the jobs report and there's a fundamental difference between them. So the first one is the business survey and this is where the headline job number comes from.
• 5:36
  And it's based predominantly on modeling and estimations.
• 5:39
  So the household survey, that's where the unemployment rate comes from and it's considered more real time because people actually call households and they're like Thank you.
• 5:48
  Hey you got a job? Umm and they take all that information.
• 5:52
  So the survey umm you know had its own component and it told a completely different story showing 31,000 job losses.
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  So average weekly hours also declined to the lowest since 2010 excluding the pandemic.
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  This is important because one of the ways businesses cut costs is to cut the number of hours worked. On average the entire labor force is working 30 minutes fewer per week which equates to 2.4 million job losses all on its own. Okay.
• 6:21
  So the next story is slow start for private sector job growth.
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  You've got ADP employment report image up here and you kind of see these bar charts going up and down up and down from August through January.
• 6:31
  So ADP's employment report showed that private payrolls which began.
• 6:36
  Again. In 2024 slower than expected as employers added just 107,000 new jobs in January.
• 6:43
  Most of the growth came in the service providing industries about 77,000 jobs there. With goods producing goods producers adding to the rest.
• 6:52
  Thanks watching! Annual pay for job stairs increased 5.2% while job changers saw an average of 7.2%. There these figures have cooled considerably from recent highs in 2023 especially.
• 7:04
  In addition the difference between pay growth for job stairs versus job changers has also shrunk uhm indicating there's less incentive for switching jobs.
• 7:13
  So to bottom line here gang, Neil Richardson who's a chief economist for ADP said quote, progress on inflation has brightened the economic picture despite a slowdown in hiring and pay close quote. She also noted that quote wages adjusted for inflation have improved over the past six months and the economy looks like it's headed towards a soft landing in the U.S.
• 7:34
  And globally closed quote. MBSI or you got a little typo there.
• 7:38
  Might want to catch that.
• 7:41
  The next story is surprising up to tech and December's job openings.
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  So this is all about the latest job opening and labor turnover survey also known as jolts because you know it's government and everything needs an acronym.
• 7:54
  So the jolts reports show that Good job. Openings were stronger than expected in December rising from 8.925 million in November to 9.026 million in December. Umm so the hiring rate rose from 3.5% to 3.6 and while the quit rate remained at 2.6%. 2.2% suggesting there's a lack of employers trying to entice workers with other offers. Bottom line here in this story is while the Fed watches this report to monitor the slack in the labor market, there are flaws in the data. Because there's data, there's always flaws in the labor market. The increase in working from home means job listings are posted multiple times more frequently in multiple states.
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  As a result, they're being over counted in the jolt's total.
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  We've seen this before, so the report may be weaker than the headline suggests.
• 8:42
  I just, I just, especially if the number of high profile companies have announced more layoffs and that was in the tech. So tech keeps laying off everybody.
• 8:50
  Umm, game, sales force, you name it Microsoft.
• 8:55
  Umm, I don't know all the names, but yeah, plenty of layoffs. Umm, which leads us directly into our next story so that unemployment claims rose for the second straight week. And this is because of the ton of layoffs that were announced. So the latest weekly initial jobless claims, that reached their high level since November umm at 2023 as or a thousand people filed for unemployment benefits for the first time. Continuing claims also surged up higher 70-70,000 with 1.898 million people still receiving benefits after filing their initial claim.
• 9:29
  Bottom line here is both initial and continuing jobless claims.
• 9:32
  Claims have risen over the last two weeks to nearly three-month highs plus the latest job cuts report from Challenger Gray and Christmas showed that announced layoffs in January surge from December and this could be reflected in unemployment claim filing. In the future we're going to keep going here gang.
• 9:50
  The next story is home prices are moving up and on screen is a case show or home price index bar chart and showing different areas of growth. So the case show or home price index which is considered the quote gold standard. Endered close quote for appreciation.
• 10:05
  Showed home prices nationwide rose 0.2% from October to November after seasonal adjustment. This marked the 10th straight month of gains and a new record high.
• 10:15
  Home values in November were also 5.1% higher than a year earlier with S&P's head of commodities. Brian Luke noting that quote November's year over year gains saw the largest growth in US home prices in 2023 close quote.
• 10:31
  The Federal Housing Finance Agency that's the FHFA.
• 10:34
  That house price index also saw some I don't know. Umm prices rise 0.3% from October to November and an aggregated over the year at 6.6% with their index setting new record highs in home prices every month since February 23. Note that the FHFA's report measures home price appreciation.
• 10:52
  And the family homes and single family homes again ranges from you know $50,000 in some counties up to over a million.
• 11:01
  So bottom on here gang is home prices continue to make gains and it shows is that home ownership continues to provide wealth building in ways other sources don't.
• 11:14
  Here's the family hack of the week and this is all about baked chicken wings from all recipes and these are easy.
• 11:20
  And guess what get ready for the big game! Happened in Sunday. So preheat the oven to 375 degrees Fahrenheit in a large resealable bag combine three tablespoons olive oil three cloves pressed garlic two tablespoons chili powder one teaspoon of garlic powder and salt and pepper to taste. First, add 10 to 12 chicken wings to that bag and reseal that shake it around make sure it's sealed before you shake it. Cut a lot of stuff all around the wings arrange the chicken wings and a single layer on a baking sheet and cook until wings are crisp which is about 30 to 45 minutes.
• 11:57
  Check on them so they don't burn. Enjoy those wings with classic like ranch dressing carrots or celery sticks. Sure why not.
• 12:04
  Here's what to look for this week gang the economic this week's economic calendar is much quieter than last week's but there are a few key items to note. Ladies job claims will be delivered on Thursday this week while investors will also be closely watching Wednesday's 10 year note in 30 years.
• 12:18
  Sorry Thursday's 30 year bond auction for the level of demand.
• 12:22
  Again money's getting more expensive like I always say you have to make sure if you've got a deal get the money I said this last week I'll say it again I've been saying it since 1993.
• 12:34
  Heh heh. Just never changes. My name's Larry Bailey thank you very much for listening to this. If you have any questions about this or anything we can help you with over at Austin Tech you can email me using Larry at etihelps.com and we will be at the lenders one conference from March 3rd to March 6th and that's at an LA and then we'll be at the ice mortgage technology experience 2024.
• 12:59
  That's running for March Thank watching. 18th to the 20th and then make sure if you go into that pay attention join the wrap up event it's sponsored and supported by awesome technology Zinc free it's the last day before you head home join us we're going to collaborate with you. With everything that's going on head over to mortgage.community for more details for the wrap up. See ya now take care.