Portland Mortgage Market Update — July 12, 2024

Three big ticket items over the past two weeks have brought some optimism to the mortgage market:

FIRST- Fed Chair Powell testified in front of the Senate Banking Committee this week and (once again) affirmed that the Fed will not make any moves on rates until they see more data and "have gained greater confidence that the inflation is moving sustainably toward 2%". He acknowledged the current policy seems to be working in bringing down inflation, and that the labor market, while still strong, has softened a bit. This is significant because he spent a good amount of time highlighting the fact that the Fed operates under a dual mandate, meaning they are charged with keeping prices stable and promoting maximum employment.

Employment you say? If you have been following along, I have been beating the drum that unemployment will likely be the trigger that causes the Fed to start cutting rates. Here he is paving the way for that to happen. Last week was jobs week and the report was more or less "stable" for June's employment figures, but there was yet another downward revision for May's numbers which reduced the figure from 272K to 215K. Year to date, they are averaging an over-estimation of about 50K jobs per report, and the Fed has taken notice that these numbers can't be trusted at face value and the labor market may be softening more than it appears. Unemployment has risen steadily to 4.1% and the number of laid off workers collecting benefits is now at the highest level since 2018 (pandemic years omitted).

What about Inflation? This week we got the CPI and PPI reports, which measure inflation at the Consumer level and Wholesaler level respectively. The CPI report was cooler than expected by .2%, which was great for rates. The bulk of the inflation of the CPI report was being propped up by shelter costs and that pesky motor vehicle insurance. However, as used car pricing has come down, insurance has started to cool as well. Unfortunately, the PPI came in a bit hotter than expected today but the market is not reacting as much since the CPI gets most of the spotlight.

Bottom line, the past two weeks have been VERY encouraging for the market and mortgage rates. The Fed meets again at the end of July and while a rate cut then is unlikely, September's meeting is looking like the best chance for our first rate cute. That means our clients have about 2 months to get ahead of the rest of the buyers that are sitting and waiting on the sidelines.