Portland Mortgage Market Update — January 31, 2025

DeepSeek Drama started the week by upending the stock market. This caused a "flight to safety" on Monday, meaning investors that had their money in tech stocks like Nvidia pulled their money and parked it in more bonds which are generally more stable. As more money came into the bond market, their prices increased causing yields to drop which helped mortgage rates.

The Fed meeting adjourned on Wednesday, with them leaving their rate unchanged and revising their outlook on inflation. Previously they had commented on making improvements on inflation, but in their meeting they decided to change their message removing any indication of improvement. This led many to believe today's PCE report was going to come in hotter than expected, because often times the Fed gets a sneak preview of the final data during these meetings.

But today's PCE report was a big fat nothing-burger! It came in right where analysts expected, which is increasing from 2.4% from last month to 2.6% this month. But why would an increase be no big deal? Because the way the PCE is calculated is taking a total sum of the previous 12 month-over-month readings, and the reading from last January was exceptionally high so it is still bolstering that number up. The upcoming report in February will finally remove that number, and we may see inflation readings back below 2.5% (interesting note- the shelter component is still the dominating contributor coming in at a year over year reading of 4.7%. If we use the real-time readings from corelogic of 1.5% the core PCE would come in at 2.2% which would be amazing for rates.)