Good Afternoon,
Hope you all had a wonderful weekend! We had a mini fall break, with no school Friday, Monday and today. We had a great weekend nonetheless. We celebrated my sister and Dad’s birthdays in Old Town Littleton on Saturday and did the usual Pearl St. Farmer’s Market followed by watching the Broncos on Sunday.
The highlight of our weekend was going to one of my Realtor’s client appreciation events on Saturday at Lone Creek Farms. For those that have not gone yet, it’s amazing. Tons of activities for kids to do for several hours. When we got there around 10:00 I noticed they had Mutton Bustin. My son asked me what it was and I said, “It’s where kids get to ride sheep.” Well, his idea of riding sheep was probably a bit different than reality. We came back to the Mutton Bustin arena about an hour later to find out there was a competition and they were making last call for any riders. Noah said he wanted to try and we quickly signed the waiver and he hopped on. He is only 4.5 years old mind you, and has never done this before. The video is below, and we are so proud of his courage to try something new and scary. Way to go little buddy!
Click Photo Here for Video:
Last week was a light economic news week, so the market basically moved based on war and oil headlines. However, it was our first weekly decline in yields and mortgage rates, albeit not much. Hopefully the top in the 10-Year treasury is in, at 5.35%, but that will all depend on tomorrow’s inflation data. The 10-Year is at 5.22% of this writing, so a nice move down from 5.35%. Mortgage rates, on average, are at 7.375%, down from 7.5% a week ago.
If you are a buyer, represent a buyer, or know someone looking to buy, remind them that the higher-rate environment may give buyers something they haven’t had in a while: more negotiating power and less competition. Not to mention, the payment they WANT!
Right now, we are seeing opportunities for buyers to negotiate seller concessions, which can potentially be used toward closing costs or a seller-paid rate buydown to help lower the buyer’s monthly payment. We can structure the financing to take advantage of the opportunities available today and explore a seller-paid buydown to help make the payment work.
As we have seen over the past 6+ years, as rates come down, many of the buyers currently waiting on the sidelines are likely to re-enter the market. That can mean more competition, multiple offers, and higher home prices.
What We’re Watching This Week
A Big Week Ahead for Inflation, Consumer Spending, and the Fed
This week brings a full slate of economic reports, Federal Reserve commentary, international meetings, and the start of Q3 earnings season, led by the major banks. With markets closely watching inflation and signs of economic weakness, several reports could influence the direction of interest rates.
Inflation Takes Center Stage
Wednesday’s September Consumer Price Index (CPI) report will be the week’s biggest event. Headline inflation is expected to rise 0.6% for the month, pushing the annual rate to 3.6%, up from 3.4% in August. However, the more important number will be core CPI, which excludes food and energy. Core inflation is projected to increase just 0.2% for the month, with the annual rate ticking up slightly to 2.5% from 2.4%. So far, higher energy prices have had limited impact on underlying inflation, while housing costs continue to show signs of cooling. If core inflation remains contained, it could strengthen the case for the Fed to leave rates unchanged at its October 28th meeting. Additional inflation reports include Thursday’s Producer Price Index (PPI), expected to ease slightly to 5.3% annually from 5.4%, and Friday’s import prices, projected to rise 0.6% after August’s 0.7% increase. These reports will provide further insight into whether higher costs are making their way through the economy.
Consumer Spending: Are Higher Prices Starting to Hurt?
Thursday’s September retail sales report will offer an important look at consumer strength. Sales are expected to increase 0.3%, a significant slowdown from August’s strong 1.1% gain. Even excluding gasoline, August spending was surprisingly resilient, rising 1.0%. The question now is whether elevated gas prices and broader affordability pressures are finally beginning to weigh on household spending. A meaningful slowdown in consumer spending could signal weaker economic growth ahead and potentially ease some of the pressure on interest rates.
Manufacturing and Small Business Confidence
Friday’s industrial production report is expected to show a modest recovery, with overall production rising 0.4% after remaining flat in August. Manufacturing output is projected to increase 0.3%, reversing August’s 0.3% decline. One area worth watching is technology manufacturing, which unexpectedly contracted in August. The upcoming report should help determine whether that weakness was temporary or the beginning of a broader slowdown.
Regional manufacturing surveys from New York and Philadelphia will also provide an early look at October business conditions. Both showed signs of weakening previously, and another decline could reinforce concerns about slowing economic activity.
Meanwhile, Tuesday’s NFIB Small Business Optimism Index slipped to 97.9 from 98.7. With hiring plans and sales expectations softening further, small businesses remain an important indicator of where the economy is heading.
The Fed: Will the Economic Data Support Its Optimism?
Wednesday’s release of the Federal Reserve’s Beige Book will provide a closer look at economic conditions across the country. Following the relatively optimistic and hawkish tone of the latest Fed meeting minutes, the big question is whether regional economic activity supports the Fed’s confidence or reveals more signs of slowing growth and labor market weakness. This will be particularly important following September’s disappointing employment report, which suggested the labor market may be losing momentum.
Several Fed officials will also speak throughout the week, including Beth Hammack, Christopher Waller, Michelle Bowman, and Fed Chair Kevin Warsh. Their comments could offer additional insight into how policymakers are weighing persistent inflation against a cooling economy.
Have a wonderful week ahead!
1 Year Look at the 10 YR Yield (1 Week Chart):
September Local Housing Data with 2019 Comparisons for Sales, New Listings, and Active Inventory
Data in Chart Form from Friday’s Michigan Consumer Sentiment Report (from David Rosenberg & Rosenberg Research)
If you talk to enough people, like I do, you start to realize that there is somewhat of a K-Shaped economy where the top 10% are experiencing a completely different economy compared to the bottom 90%. Below are some charts from the recent consumer survey backing up that claim based on how the majority of people are feeling and what they are experiencing. Based on surveys of consumers and businesses it sure feels like the economy isn’t booming, but Wall Street, the Fed and the Government are telling us that it is. It’s very hard right now to decipher what the economy is doing, but based on these charts you would think we were in the depths of 2008.
The Relationship Between the 10 Year Yield and Mortgage Spreads & 30 YR Fixed Mortgage Rates
Current Spread of 10 YR Treasury to 30 YR Fixed Rates increased to 2.15% We are still looking to get back to the long-term average of 1.50% – 1.80%.
This Week’s Economic Data & Reports:
- MON – Markets Closed for Columbus/Indigenous Peoples Day
- TUES – ADP Weekly Employment Change, NFIB Small Business Optimism, Fed Member Speeches, September Existing Home Sales
- WED – MBA Mortgage Applications, September CPI & Core CPI, US Leading Index (MoM), Fed Member Speeches
- THURS – Jobless Claims, Fed Member Speeches, September PPI & Core PPI, NY Empire State Manufacturing Index, Philadelphia Fed Manufacturing Index, September Retail Sales
- FRI – Export and Imports for September, Industrial Production, Capacity Utilization, Manufacturing Production
People have asked where to track this stuff daily so here is the Bloomberg Website where you can see the reports/data:
https://www.bloomberg.com/markets/economic-calendar
Thanks for reading and have a great day!
