Portland Mortgage Market Update — February 21, 2025

It was an abbreviated week with trading closed on Monday for President's Day, but we still saw some good movement. This was mainly due to some comments made this week by current Fed Members. On the holiday Fed Governor Waller spoke and on Wednesday Philly Fed President Patrick Harker spoke, and both of them talked down the spike that the CPI showed in its January report, saying it was very typical to see hotter seasonal inflation data in the beginning of the year. In the last decade, there has been a surprise to the upside 9 times out of 10. Then another St Louis Fed President James Bullard said he anticipated inflation to continue to cool through the rest of this year. It sounds like they were all pretty much on the same page, I wonder if they discussed this at their last meeting?

Then the minutes from the last Fed Meeting were released Wednesday afternoon. Lo and behold- it confirmed that they all were pretty optimistic with the inflation figures (even though the meeting took place before the January inflation report came out). Beyond that, the minutes revealed they are also planning to end their balance sheet run-off in mid 2025 due to liquidity concerns. The Fed's balance sheet ballooned during the 2008 Financial Crisis and the COVID pandemic as they tried to cushion the economic blow buying up Treasury Notes and mortgage-backed securities. By slowing/ending their firesale of these assets, the supply lowers which pushes their values up and should lower the yields that will be tied to them. Since 30-year mortgage rates are tied to the 10 year treasury yield, this will help lower interest rates.

Existing Home Sales are expected to increase this year as well, which dovetails nicely with falling interest rates. The media seems to be focusing a miss in the new home sales numbers, highlighting a 4.9% drop month over month, but are mainly ignoring the fact that they increased 2% year over year. Beyond that, recent comments by a Chief Economist with the National Association of Realtors forecasted a growth of existing home sales of 7-12% this year and another 10-15% growth in 2026.