Portland Mortgage Market Update — December 22, 2023

Happy Holidays and I hope you have had a great week!

Rates are basically even in a pretty quiet trading week. There wasn't a ton of data being dropped so there wasn't an opportunity for big shifts in rates. The biggest report dropped today with the PCE report, which is the Fed's favorite metric to monitoring inflation. It showed inflation dropping .1% in November vs the expected flat reading. Fed Chair Powell mentioned last week that they would have to start cutting rates before inflation hit the 2% target and it feels like we are getting close. Currently, futures markets are placing an 88% chance the Fed starts cutting rates at their March meeting.

That feels about right, given the Fed has been consistent on two fronts: 1) that their decisions to cut or increase rates will be "data- dependent" and 2) that the economy is being bolstered by a strong labor market. However, the past few weeks have full of news of large companies looking to downsize their workforce. Locally, Nike announced they are instituting a $2Billion cost cutting plan that will include layoffs (which anecdotally it seems like they started doing a couple months ago). The Tech industry is seeing continued downsizing in Q4 and Wells Fargo layed off 11,000 employees this year with plans to cut more in the new year. As the job market weakens, the Fed will be forced to look in the mirror and start doing what it can to mitigate any potential recession.

Speaking of the "R" word, the Leading Economic Indicators report released today was down .5% in November. Historically, once this report turns negative there is about a 22-month lag before the economy "officially" hits a recession. This is the 20th consecutive month it has been a negative number. Depending on who you are listening to there is between a 25-50% chance of a recession in 2024, but the consensus is if there is a one it will be short and shallow. Bottom line- everything going on right now and coming down the pike looks like it will be good for mortgage rates. 2024 will be a much better year than 2023, and I am predicting this shift will happen sooner rather than later.

I am around throughout the holidays so feel free to reach out anytime with any questions!