If you can't see the newsletter, or would like to view it online, use this link If you have received this newsletter indirectly and would like to be added to our weekly distribution list, use this link
American Property Financial<br>NMLS # 227251
TDSML and NMLS Lic # 229981
Provided to you Exclusively by
The Most Creative Lender
in San Antonio
Joe Mays
NMLS: 229981
American Property Financial
NMLS # 227251
Office: 210-614-8951
Fax: 210-614-8952
E-Mail: hjmays@aol.com
Website: www.saloans.com
Joe Mays
For the week of Aug 08, 2022 --- Vol. 20, Issue 31

A Look Into the Markets

This week home loan rates continued to gradually improve since the Fed hiked rates by .75% in both June and July. The elevated chance of a recession and the Fed hiking rates into the slowing economy has pushed rates to the best levels since April. Let's break down what is happening and what to look for next week.

"Won't Get Fooled Again" - The Who

Don't Be Fooled

The media will talk about the Fed hiking rates and allow viewers to believe that it includes home loan rates. The Fed can only control short-term rates with the Fed Funds Rate.

Since the Federal Reserve began raising rates in June home borrowing costs have declined. Why? Don't higher rates from the Fed equal higher borrowing costs? Not necessarily. The Fed controls short-term rates like credit cards and car loans and the like, not long-term rates such as mortgages. As we said in the past, Fed rate hikes are intended to cool inflation, slow economic growth and slow down the labor market. If inflation cools, the economy slows, and the unemployment rate ticks up...long-term rates move lower.

Long Term Rates are Talking

The 10-year note is at 2.67%...pricing in a slowing economy and less inflation. Bank of America was out last Wednesday saying they see the 10-yr yield going to 2.00% as economic conditions slow.

When we think about higher rates, the only way long term rates like the 10-year note and mortgages move higher is if the economy can absorb those rate hikes. With that said, if the economy was performing strongly and inflation was going to be a long-term problem, long-term rates would already be higher.


High energy prices have played a large role in slowing down the economy. This has consumers paying much more at the pump and for daily essentials. Oil prices have come down with a barrel at $90. Why? There are only two ways energy prices move lower. 1 - we create more supply or 2 - fears of a recession emerge. We are now staring at the latter. If energy prices break beneath $90, there is room that it will lead to further relief at the pump and less inflationary pressures which is good for long-term rates like mortgages.

Sliding Home Prices

The onset of a recession has impacted the housing market. Housing has finally seen some relief from skyrocketing home price gains in recent days as the CoreLogic Home Price Index in June saw a 18% year-over-year increase, down from the 20% plus gain seen in May. Another report showed that home prices cooled at a record pace in June. Big gains are not sustainable with historical percentage gains at 3.5% - 5%. CoreLogic is forecasting a 4.3% gain in home prices from June 2022 to June 2023. But low inventories are still plaguing the sector with the number of homes for sale on the market now 49% below levels seen in July 2019.

Volatility Remains

The next Fed meeting is in September. Up until that time, there will be several inflation readings and key economic reports for the Fed to consider. How these reports go may very well determine if and how much the Fed will hike rates. This will make the next few weeks very volatile in the bond market and interest rates. Again, if the Fed continues to hike rates into a slowing economy, it is likely we may see another downtick in home loan rates.

Labor Markets Slowing?

In the labor markets, The JOLTS report showed that there are 10.7 million jobs available across the nation, down from the recent number of 11.5 million as the job market is starting to flow. However, there are still 1.8 million open jobs per available worker with almost 6 million Americans unemployed. Outplacement firm Challenger, Gray & Christmas reported this week that job cuts in July were up 37% from July 2021.

"The job market remains tight, and large-scale layoffs have not begun. There are some indicators that hiring is slowing after months of growth, however." said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.

Bottom Line: Home loan rates have appeared to make their peak back in mid-June. With more housing inventory coming to market, now is a great time to capture the home of your dreams with prices and rates off the highest levels of late.

Looking Ahead

This week the markets will receive the inflation reading Consumer Price and Producer Price Index to measure if consumers and wholesalers have seen the worst of surging prices for goods and services; however there will be Fed speakers on tap who could disrupt the markets further.

Mortgage Market Guide Candlestick Chart

Mortgage-backed security (MBS) prices are what determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 4.5% coupon, where currently closed loans are being packaged. As prices move higher, rates decline and vice versa.

You can see the right side of the chart; prices have surged since the June lows but are stalling at a key level of $102 - meaning borrowing costs have improved since the last two Fed rate hikes in mid-June.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Aug 05, 2022)
Japanese Candlestick Chart

Economic Calendar for the Week of August 08 - August 12

Economic Report
Tue. August 09
Wed. August 10
Consumer Price Index (CPI)
Wed. August 10
Core Consumer Price Index (CPI)
Thu. August 11
Core Producer Price Index (PPI)
Thu. August 11
Producer Price Index (PPI)
Thu. August 11
Jobless Claims (Initial)
Fri. August 12
Consumer Sentiment Index (UoM)

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: hjmays@aol.com

If you prefer to send your removal request by mail the address is:

Joe Mays
4242 Medical Dr., Ste. 4150
San Antonio, TX 78229

Vantage Production, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Vantage Production, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

Equal Housing Lender