Oh, boy, that's gonna be a big week for anybody out there looking
to buy their first home or maybe their first investment property.
Here's why this week the Federal Reserve is going to meet.
And they're gonna tell us what they're gonna do at interest rates? But before
we get there, because I'm gonna go over that here shortly, and I'm gonna
give you my expectations on what they're gonna do at this meeting.
The next meeting and even the next meeting, the last one of 2022 to
let you guys know where I think rates are gonna be by the end of the year.
And then my expectations are going into 2023, but you can see
all over the headlines right now.
Stocks slip ahead of rates
continue to March higher ahead of the
Fed meeting this week.
So they're meeting this week.
Another piece of the agenda right here is more home builders, lower prices as
sentiment falls to nine straight month.
Why is all this really going on?
Why is the stock market falling and why are home prices coming down?
Let me put this in a little more of a microscope for you guys, so you can
completely understand what's going on.
The first piece of this puzzle, is this, what is actually, what
is the definition of inflation?
You can probably get 50,000 different views of this, but I wanna take you to
Investopedia so we can define it via this.
So at least it gives us the, that in context so we can move forward from there.
So what is inflation?
Inflation is a rise in prices which can translate as
a decline in purchasing power.
The rate at which purchasing power drops can be reflected in the average
price increase of a basket of goods and services over a period of time.
Okay.
So what they do, here's how inflation is monitored.
They take a basket of goods and in there is food and energy and housing
and all this stuff, and they measure it.
They take a snapshot.
And they look at it next month and say, okay, from the today to next
month, how much has prices adjusted?
That's the inflation rate.
So when you see, the core CPI and the CPI and all that. It
takes all that data into account.
And then it gives us a percentage.
Okay.
So on how much the prices increase month over month and year over year.
So inflation down through here, you can see inflation.
Is the rate that prices rise or it could also be declined, but
that wouldn't be called Inflation.
The most commonly used inflation index are the Consumer Price Index
and the Wholesale Price Index.
So remember, last week we went over the Consumer Price Index.
It was at a record high it's coming off the record high, but we're still
at 8.1 that was more aggressive than a lot of analysts expected.
So what is, or how does the Federal Reserve
what they're doing make really sense when it comes to housing?
Let's look at just some basic supply demands.
All right.
This is just saying, if you have excess demand, which we have in today's
market because of the policies of the government and the Federal Reserve,
putting way too much stimulus in the system, thus creating people with
too much money, too much assets.
And what are they doing with
those assets?
We're not a nation of savers, so we spend. So here's the chart.
If you have excess demand, meaning we have more money.
So we wanna spend that money.
So we have excess demand for units.
What happens to that?
It pushes up the prices of things that's in its basic terms.
The next piece of this puzzle is how much does housing account for the CPI number?
Because if we go and take the biggest component of the inflation index and
we really drive down that number, we're gonna drive down that number pretty
much, pretty quick, pretty fast in a big way
if we control the biggest component of that factor or that index and the
big biggest component in the index is
housing or shelter, which makes up 32.7% of the CPI number.
So you have one industry, one segment of the industry controlling
a third of the inflation numbers.
If I'm on the Federal Reserve and I really wanna bring down inflation, what do I do?
Why increase mortgage rates thus bringing down the housing or shelter cost thus
dramatically bringing down inflation.
That's what the Federal Reserve is going to do.
And they're in the process of doing that right now.
How do we know?
Here's where mortgage rates are, where they started the
year and where we are today.
Look where we started back in January.
We were about three and a quarter.
Where are we today?
I gotta get my head outta the way.
We're six and a quarter.
I'm gonna show you those numbers next.
So that's the reason why the Federal Reserve is really focused in on the
housing piece of the puzzle, because it's the biggest part of the inflation index.
So if they can drive down that number, it's gonna drive down the core number.
Or I'll say the overall CPI number dramatically and fast.
So why are you really here?
It's in context of this. Let's get over to how this news is affecting us
today in the regards of mortgage rates.
So what we want to do first is go to the headlines.
What is out today?
The other thing out today so far is building permits, and we know that
probably is gonna start coming down.
It should at least stabilize.
To start deteriorating from here and then the rest of the week, all we're
really considering right now are all we really care about is like every
other market right now is the Fed.
So that's what we're gonna focus in on.
So between today and Wednesday, all we're gonna do is talk about
the Fed, what they're gonna do and why they're going to do that.
So the reason why you're here basically is to figure out where
mortgage rates are going today.
So to do that, let's look at our crystal ball.
So this is the Mortgage Backed Security Market.
This is the bond that trades on wall street that gives me.
By tick analysis is what's going on with mortgage rates.
This is what's happening to the price of the bond.
So as this price goes down, what you're seeing on the screen and what
you've seen on this chart for months and months, and even coming up on
a year, other than this little blip right here, we see nothing but down.
When this number goes down, the price of a Mortgage Backed Security bond
goes down, rates go up.
There's an inverse relationship.
So again, if this number goes down, rates go up. The bigger, this number
goes down, the higher the rates go. Well, let's see where mortgage rates ended last
week because mortgage news daily hasn't posted yet today. With these numbers,
I'm expecting rates to go up at least in eighth from these numbers right here.
So these numbers are where we
ended Friday.
So we're gonna even hit more record highs on mortgage rates throughout
this week. But it should subside tomorrow because I think tomorrow
we'll have a pretty much of a stagnant market as well as Wednesday until the
Federal reserve actually announces.
But these are where mortgage rates are today.
These are the top six products people use when they're buying a home and you
can see them right across the board.
This analysis of here, what you have on here on.
It is not my rate.
It is in a single lender's rate.
It's a national average.
What you're focusing in on here is if somebody was looking to buy a $500,000
home with a 740 credit score, it was gonna be their primary home.
And it was a single family home, what would be the interest rate?
Okay. So here's what you see across the board.
The 30-year fixes at three point or 6.35.
It is up 0.02 from the day before.
And again, guys, these are Friday's.
These are not Monday's numbers.
So I'm expecting these to go up at least in eighth.
So don't be surprised between today and tomorrow, if rates don't peak out
at six point a half percent, but we're gonna see after the Federal Reserve
announcements, how things go from there.
So we are not locking in clients right now.
We're waiting for this to subside because I think the markets
are overreacting a little bit.
They're pricing in that the Federal Reserve might raise
rates a hundred basis points.
I think that is off the table, but Wednesday is the
day that we're gonna find
that out.
That's where mortgage rates are today.
My name is Dan Frio.
I do this every day.
If you enjoy my videos and you enjoy my podcast, check out the podcast, go
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Anywhere in the country as well as Puerto Rico.
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