Jeacqueline Melendez Senior Loan Officer NMLS # 626307

07/31/2023

For those waiting for rates to come down here is a true market update.
If you are in the market to buy refi or sell you need to read this. Yes rates will improve but not yet here is why.

This past week home loan rates were unchanged, despite the Fed raising rates to the highest levels in 22 years. Let's discuss what happened and look at the week ahead.

Another Rate Hike

On Wednesday, the Federal Reserve raised the Fed Funds Rate to a range of 5.25 to 5.50% and this move was widely expected. Fed Chair Powell also shared that if the data comes in strong over the next two months, they will raise rates again in September. The opposite is true.

One of the main reasons interest rates remain high and the Fed has continued to raise rates is the underlying resilience of the economy. Many economists, market watchers and central bankers were calling for a recession by the middle of this year. In fact, one reputable publication back in November said there was a 100% chance of a recession in 2023. Fortunately, or unfortunately, depending on how you're looking at it, the economy is currently growing near 2% and unemployment is at 3.6%, which are not conditions that lead to an economic recession.

Looking forward...watching the economic data will be important to determine whether the Fed increases rates further. At the very least we should be prepared for the Fed to hold the Fed Funds Rate at current levels for quite a bit longer.

How much longer? The Federal Reserve wants to see inflation come down to 2%. The Fed's favorite gauge of inflation is currently running at 4.6% so, there is a lot of wood to chop for inflation to get near the Fed's target. In fact, the Fed's forecast calls for core inflation to reach its goal in the year 2025. So, when we hear higher for longer, that's what we mean.

For reference: In the last rate hiking cycle back in 2018, the Fed cut rates 7 months after the last hike. Meanwhile, during that same time, home loan rates steadily improved.

Bottom line: The Federal Reserve may very well be done hiking rates. However, long-term rates may likely edge lower slowly. Why? The economy is slowing. Slowly, unemployment is rising, slowly, and inflation is rising slowly.

03/14/2022

Interest rates ticked up this week, despite the ongoing and uncertain Russia/Ukraine war. Let’s break down what happened this past week as we prepare for an important Fed meeting.

This is probably a good week to remind everyone that inflation is an economic killer. When inflation fears rise both stocks and bonds perform poorly with rates rising.

Last Tuesday, President Biden sanctioned Russian energy including coal, natural gas, and oil. On the latter, this measure caused oil to touch nearly $130 a barrel. This increase has led to gas at the pumps hitting a historic high of $4.25. Oil and gas at these levels are highly inflationary in the absence of a material and sustained decline.

If this was not enough, commodity prices are soaring in response to the uncertainty. Wheat, lumber, copper, nickel…you name it and it’s trading sharply higher, leading to higher costs on goods through the supply chain and down to the customer.

An important metric to track is the 10-year break-even rate, That number has climbed sharply over the past week and is the main reason why the 10-yr note yield and mortgage rates increased this week.

The Federal Reserve is in a tough spot.

The Fed Chair recently said they are going to hike rates several times this year and more next year. It sounded like a reasonable plan a few months ago, but our economy has since been punched in the mouth with Omicron, continued supply chain issues, labor shortages, and fast declining consumer sentiment.

Oh, wait…now factor in the Ukraine/Russia war. This has elevated prices further. Wheat is a major product supplied by Russia and Ukraine…those prices are soaring and may stay quite elevated for some time, thereby slowing consumer spending on other items.

Consumer spending makes up two-thirds of our economic growth or GDP. If energy, food, and commodity prices remain elevated, we should expect GDP to stall.

As you can see, consumer demand is already fragile and slow. Fed Rate hikes will only slow the economy further.

Lastly, look at the 2/10 year note yield spread. It is narrowing every day and down to the smallest margin since 2018 which could signal an economic slowdown. Back at that time the Fed hiked rates too much and ended up cutting rates in 2019.

Here we are in 2022, and the Fed “says” they are going to hike rates several times with a similar-looking 2-year vs.10 yield spread as 2018. Time will tell if, how much, and when they can hike.

Bottom line: Fed Rate hikes have no direct impact on mortgage rates. So, when the Fed hikes rates next week, it will not have a .25% hike to Mortgage rates. If you, a family member, or a friend is considering a mortgage, now is a great time as rates remain just beneath the 2022 peaks.

12/27/2021

Fallout from Rapid Omicron Variant Spread

This past week Omicron surprised the financial markets by exploding across the US. Despite the uncertainty, stocks attempted to stabilize and shrug off last week’s losses at the expense of bonds.

The financial markets are looking beyond the rapid rise in cases as it appears, for now, most cases are somewhat mild. The markets will continue to watch the response for more restrictions, mandates, and potential shutdowns that will impact economic activity.

Build Back Better off the Table, for Now

President Biden’s Build Back Better (BBB) bill is no longer being debated as Sen. Joe Manchin said he is a “no” and will not vote for the legislature. We shall see what happens in 2022 and if a leaner bill comes to pass. If BBB doesn’t pass or is watered down, it does help interest rates in three ways:

Less bond issuance: The Treasury will not be tasked to issue new bonds to help pay for the plan.
Less inflationary fears.
Less economic stimulus.
Some big financial institutions are already out saying that if BBB doesn’t pass, our Gross Domestic Product (GDP) will come in .50% lower. With that said, any further economic slowdown will remove the likelihood of three Fed rate hikes in 2022.

Bottom line: The rise of Omicron has introduced uncertainty, which may soon pass. If you have clients considering a purchase or refinance, now is the time to secure a home loan before we return to pre-pandemic mortgage rates.

Tagged Market Trends

12/06/2021

. Omicron Uncertainty

A new Covid variant, Omicron, emerged with its first case in the US. Initially, the stock market tanked, and interest rates improved on the rumors, chaos, and uncertainty surrounding the new variant.

It will take a couple of weeks before we have more data and insights, but at first glance, it appears the cases are mild, which if proven true, would be very good news as we head into winter. Remember stocks like good news, bonds/rates hate good news.

In the weeks ahead, we will also have to see the response by the Federal government and States. More restrictions and mandates create uncertainty and negatively impact economic activity, all of which hurt stocks and help rates.

Bottom line: The Fed just completely shifted its position from dovish to hawkish. The speeding up of the taper and growing likelihood of rate hikes, means we are likely to experience more volatility in the weeks and months ahead. If you have clients considering a purchase or refinance, now is the time to secure a home loan before we return to pre-pandemic mortgage rates.

11/13/2021

Happy when I am able to make it to the Closing nowadays. Congratulations to this lovely couple that was a referral from a past client. It was a pleasure to work with you both Claudy and Ivan. Congratulations on your new home. Wishing many years of blessings and happiness. Thank you to my team for another successful Closing. Are you in the market to buy, sell or refinance? We are in the business of making it happen. Reach out to me 516-658-1646 I can help you.

10/25/2021

Interest rates ticked up week over week and are near the highest levels of 2021. Let’s break down three things moving the markets and what to watch for in the weeks ahead.

1. Buy on the Dip is Back

Stocks had a bad September, with the S&P 500 falling 4.8%, its worst month since March. After a multi-year rally with major indices doubling in value since March 2020. Many market analysts called for a much bigger drop in September.

It has not come to pass and in October, we are seeing investors jump back in and “buy the dip”, sending stocks to fresh historic highs. What has been the main driver of the stock gains?

Earnings, earnings, earnings. Many firms from the banking to the technology sector reported stronger than expected 3rd quarter earnings and maintained their future growth targets.

As stocks go higher, it is typically at the expense of bonds/rates as has been the case this month.

2. Fed Taper Cometh

November 3rd is just around the corner. That is the day the Federal Reserve meets and, likely announces their intentions to start tapering or scaling back their $120B monthly bond purchases.

The Fed started this bond-buying program in March 2020 to help stabilize the mortgage-backed security (MBS) market and help pin down long-term rates to stimulate the purchase and refinance market. Those goals have been met, so the Fed is ready to taper.

MBS prices have been moving lower the past few weeks in anticipation of the Fed taper announcement. Are we seeing a sell on the rumor and a potential buy on the news? Meaning, is the bond market moving lower on the news we expect to hear only to stabilize once the official announcement is made? It’s quite possible if history is any guide. Back in 2013, the bond market endured a “taper tantrum” when the Fed remarked about possibly scaling back purchases. However, when the Fed started the tapering many months later, MBS prices improved as did home loan rates.

This will be an important event and subsequent bond market reaction to follow as rates do threaten to move to the highest levels of the year.

3. Supply Chain Disruption

We are seeing shortages of many goods as the globe struggles to ramp up production to meet demand. Apple just announced they expect to sell far less of their iPhone 13s this holiday because of chip shortages.

On top of this, we currently have nearly 200 cargo ships floating in our waters waiting to be unloaded and shipped throughout the country. The problem?

We do not have enough people working in the ports and driving trucks to help move the goods throughout the country. It has been reported that we may need an additional 80,000 truckers here in the US just to get past this current supply chain disruption and meet demand.

What will be the effect? Scarcity and higher prices. It now appears the supply chain disruption is going to last well into 2022 and that means higher prices (inflation) will be more persistent.

Just this past week, the National Association of Home Builders said the supply chain problems have caused shortages in cement, drywall, and many other materials required to build homes. This will lead to even higher new home prices in the year ahead.

Inflation is the archenemy of bonds. If inflation remains stubbornly high, it will put upward pressure on rates, especially if the Fed is buying fewer bonds.

Bottom line: Home loan rates are testing the highest levels of the year. A price to move lower from here would usher in even higher rates.

Tagged Market Trends

10/23/2021

Love these reviews
Rates are still low if you are looking to buy or refinance let me help you

09/14/2021

Thank you for the referral.
Another happy client.
Are you interested in purchasing a home.
Refinancing to lower your interest rate, your payment your years or taking out cash?
Buy and flip
Buy and hold
I can help you.
Call me for a free consultation.

09/10/2021

Congratulations to my buyers for closing on their home 🏠🔑
In the market to buy or refinance. Let me help you.
516-658-1646. There is no size fits all in this market.
Lender turned you down. We have different options. Low credit we can help.
Looking for solutions and results I can help you.

07/04/2021

Happy July 4th to you all
Jeacqueline Melendez, Senior Loan Officer

06/23/2021

https://www.nysar.com/covid-19-resources/faq-soe-cold-calling/

Cold calling is now permitted right in time for summer
Get ready, set and call.

The FAQs being provided by NYSAR are based upon what we believe to be true through ongoing communications with various state agencies for the current State of Emergency and cold calling. NYSAR’s role is to provide information in the best interest of all of our members in every part of New York, an...

06/23/2021

Great news for those of you that are in the process of buying a home and could not qualify because of high student debt. Some of your DTI was way off unless you got a cosigner. FHA new guidelines will allow you to make it easier for you to possibly qualify for more. Call me to see how much you qualify for now.